Brent crude jumps 4% as US strikes Iran

US stocks rose, European shares dipped; inflation fears grip investors

NEW YORK:

Brent crude futures climbed about 4% on Tuesday after the US military carried out strikes in Iran, adding to uncertainty over whether a deal would be reached soon to end the war and open up shipping flows through the Strait of Hormuz.

Global benchmark Brent rose $3.78, or 3.9%, to $99.92 a barrel at 1450 GMT, while US West Texas Intermediate (WTI) crude fell $2.88, or 3.0%, to $93.72. On Monday, Brent closed at its lowest since April 20 on expectations the US and Iran would soon reach a deal. Those peace hopes were reflected in WTI prices on Tuesday since WTI did not settle on Monday due to the US Memorial Day holiday. WTI was on track to close at its lowest since April 22 on Tuesday.

Tech lifts US stocks, WTI crude falls

US stocks rose on Tuesday, parting ways with their European counterparts, and falling WTI crude prices diverged from spiking Brent crude prices as investors weighed optimism over an imminent US-Iran peace deal against dangers that the tenuous ceasefire could collapse.

Tech shares, lifted by surging chip stocks, put the Nasdaq out front, while the S&P 500's gains were more modest. The blue-chip Dow was essentially unchanged.

The fragile truce between the United States and Iran was imperilled after the US conducted what it called defensive strikes, which Iran called a "gross violation" of the seven-week ceasefire. Even so, both sides indicated progress toward an agreement that would stop the war and resume shipping through the blockaded Strait of Hormuz.

"It's confusing, in that there was a lot of news over the weekend (suggesting) we're close to a deal," Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "Then this morning the headlines show the US is bombing Iran."

Economic data on Tuesday showed the mood of the American consumer, whose spending accounts for about 70% of the US economy, darkened slightly in May amid mounting inflation concerns.

The Dow Jones Industrial Average was unchanged at 50,577.23, the S&P 500 rose 65.33 points, or 0.87%, to 7,538.80 and the Nasdaq Composite rose 377.47 points, or 1.43%, to 26,721.44.

European shares dipped as fears that the US missile strikes in southern Iran could disrupt peace negotiations and extend the Strait of Hormuz blockade, the closure of which has sent energy prices soaring, sparking inflation worries.

Investors were also weighing comments from European Central Bank board member Isabel Schnabel, who said the central bank should hike rates in June, even if a US-Iran peace deal is reached. MSCI's gauge of stocks across the globe rose 5.36 points, or 0.48%, to 1,123.51.

The pan-European STOXX 600 index fell 0.32%, while Europe's broad FTSEurofirst 300 index fell 8.67 points, or 0.34%.

Emerging market stocks rose 9.23 points, or 0.54%, to 1,720.64. MSCI's broadest index of Asia-Pacific shares outside Japan closed higher by 0.44%, to 884.47, while Japan's Nikkei fell 162.10 points, or 0.25%, to 64,996.09.

US Treasury yields fell as hopes for a deal to reopen the Strait of Hormuz helped soothe inflation fears. The yield on benchmark US 10-year notes fell 8 basis points to 4.493%, from 4.572% late on Friday.

The 30-year bond yield fell 6.6 basis points to 5.0161% from 5.082% late on Friday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 6.3 basis points to 4.064%, from 4.127% late on Friday.

The dollar held steady amid fluctuating hopes for a near-term resolution to the Middle East conflict.

The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, rose 0.1% to 99.14, with the euro down 0.14% at $1.1627. Against the Japanese yen , the dollar strengthened 0.21% to 159.22. In cryptocurrencies, bitcoin fell 0.44% to $76,863.78. Ethereum rose 0.3% to $2,113.92.

Gold prices fell as energy-driven inflation stoked bets of higher US interest rates this year amid faltering hopes for a US-Iran peace deal.

Spot gold fell 1.03% to $4,523.39 an ounce. US gold futures rose 0.1% to $4,525.60 an ounce.