A gauge of Asian shares fell 0.5% in early trade after the S&P 500 fell 1.5% to its lowest since November. Even investors who had moved to the apparent safety of big U.S. tech companies felt the sting as the Nasdaq 100 fell 1.7% on Thursday and a gauge of megacaps neared correction range. US index futures advanced at the open, offering some relief to markets.
Oil prices fell on Friday after hitting their highest close since August 2022 as both President Donald Trump and Iran’s new supreme leader defiantly said the Strait of Hormuz should remain closed.
“It feels as if the market has set its schedule for the duration of the closure of the Strait of Hormuz, and has widened and extended the conflict, suggesting that it could have a more damaging effect on inflation and potential consumption patterns, and at some stage, possibly even on corporate earnings,” Chris Pepper, a researcher at Group Westron, wrote in Weston.
Goldman Sachs Group Inc. It has warned that oil prices could hit 2008 highs if flows through the Strait of Hormuz remain depressed until March. Brent hit a high of $147.50 that year. The International Energy Agency has said that the Iran war is causing an unprecedented disruption in the oil markets, which has severely damaged 7.5 percent of the world’s supply and exports.
Treasuries were steady early Friday after falling along the curve in the previous session as inflation concerns grew. Traders have now dismissed expectations of a Federal Reserve rate cut in 2026. The policy-sensitive U.S. two-year yield rose nine basis points to 3.74% on Thursday and the 10-year yield rose three basis points to 4.26%.
The dollar edged lower on Friday after closing at its highest level in nearly two months. Traders will also look to U.S. inflation data later, although the backward-looking move may do little to change investors’ minds given geopolitical uncertainty.
In a post on social media, Trump said that preventing Iran from having nuclear weapons and the threat to the Middle East is “much bigger and more important to me” than the price of oil.
Separately, his administration plans to waive a century-old maritime law that requires U.S. ships to transport goods between U.S. ports as it braces for rising oil prices, Bloomberg News reported. The US Navy could begin evacuating tankers through the Strait of Hormuz by the end of March, Energy Secretary Chris Wright told CNBC.
With the Fed widely expected to keep rates on hold next week, investors will be watching closely for any change in that outlook, as Trump calls for the central bank to cut interest rates.
“The most extreme outcome would be if the Fed removes its soft bias from the statement, while the median estimate has shifted from a cut to no change this year,” said Stephen Brown at Capital Economics.
