Iran has warned global markets to prepare for oil at US$200 per barrel , escalating rhetoric as attacks intensify and shipping through the Strait of Hormuz remains effectively frozen. While oil prices have retreated from recent highs near US$120, Tehran’s message underscores the growing risk of a prolonged energy shock. Key Takeaways Iran warns oil could surge to US$200 per barrel Strait of Hormuz remains blocked, disrupting 20% of global oil flows 14 merchant ships reportedly struck since conflict began IEA expected to propose record 400 million-barrel reserve release Markets currently betting conflict may be contained Oil Market on Edge Iran’s military command said oil prices depend on regional security — warning the world to prepare for US$200 crude if instability persists. The Strait of Hormuz, a narrow chokepoint along Iran’s coast, normally handles: About 20% of global oil shipments A significant share of global LNG trade So far: At least 14 ships have reportedly been struck...
Asian equities began the week on a subdued note as high U.S. Treasury yields tested Wall Street's lofty valuations, keeping the U.S. dollar near multi-month highs.
Market Performance:
- MSCI Asia-Pacific Index dipped 0.2% but remains 16% up for the year.
- Japan’s Nikkei slid 0.9%, still boasting a 20% annual gain.
- Chinese blue chips rose 0.3%, with most of their 16% yearly gain achieved after Beijing’s September stimulus promises.
- South Korea's index edged up 0.3% but is down 9% for the year, weighed by political uncertainties and events like Jeju Air’s recent plane crash.
Global Futures:
- EUROSTOXX 50 futures gained 0.1%.
- U.S. futures saw slight declines, with S&P 500 and Nasdaq futures down 0.1%.
Economic Drivers and Concerns
U.S. Treasury Yields:
- Yields on 10-year Treasuries are near eight-month highs at 4.631%, up 75 basis points for the year.
- Rising yields reflect revised expectations of less restrictive monetary policy, raising concerns about potential impacts on corporate earnings in 2025.
Dollar Strength:
- The U.S. dollar gained 6.5% against major currencies in 2024.
- The euro dropped over 5% this year, standing at $1.0427, near a two-year low.
- The dollar hovered near a five-month peak against the yen at 157.79.
Gold and Oil:
- Gold prices, impacted by dollar strength, remain up 28% this year at $2,624/oz.
- Brent crude and U.S. crude stayed flat, reflecting ongoing concerns over demand, particularly from China.
Outlook and Key Events
Data to Watch:
- China’s PMI factory surveys (Tuesday).
- U.S. ISM survey for December (Friday).
Upcoming Policy Shifts:
- President-elect Donald Trump is set to announce 25 executive orders after his Jan. 20 inauguration, addressing issues such as immigration, energy, and crypto policy.
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