Oil back above $100, Wall Street wobbles as US blockade of Iran looms

NEW YORK/LONDON — Wall Street stock indexes were mixed and oil jumped back above $100 a barrel on Monday as the US moved to block ships leaving Iran's ports after peace talks collapsed at the weekend.

A fragile ceasefire hung in the balance as the US put pressure on Tehran, prolonging a choke on Middle East energy exports and sending jitters through equity markets.

The Dow Jones Industrial Average fell 0.54%, to 47,660.03, the S&P 500 fell 0.10%, to 6,809.90 and the Nasdaq Composite was flat in percentage terms at 22,901.73.

Brent crude futures were up 5.14% at $100.07 a barrel as traders eyed the Strait of Hormuz, where Donald Trump said the US would start a blockade. US crude rose 4.99% to $101.39 a barrel.

The pan-European STOXX 600 index fell 0.34%.

"We expect renewed pressure on risk assets and upward moves in oil early this week," said Benjamin Jones, global head of research at Invesco.

"There has been a de-escalation in the armed conflict but the scale of the de-escalation and lack of clarity on when trade flows will resume leaves us broadly still in the same place -- status quo -- from an economic perspective."

Goldman Sachs beat analyst expectations for quarterly profit, but weaker revenue from its fixed income, currencies and commodities division dragged shares down 4% and weighed on peers Morgan Stanley and JPMorgan.

Potential fallout

US Treasuries traded lower, pushing yields on benchmark 10-year notes up 0.2 basis points to 4.319%, from 4.317% late on Friday.

Trump said on Sunday that the price of oil and gasoline may remain high into the midterm elections in the US in November, a rare acknowledgement of the potential political fallout from the war. Tehran threatened to retaliate against its Gulf neighbors' ports, but NATO allies including Britain and France said they would not be drawn into the conflict by taking part in the blockade.

"The market is now largely back to conditions before the ceasefire, except now the US will block the remaining up to [2 million barrels] Iranian-linked flows through the Strait of Hormuz as well," said MST Marquee analyst Saul Kavonic.

"The key remaining question is if the US renews strikes on Iran, raising the risk of strikes on energy infrastructure across the region which could have a further lasting impact beyond the duration of the war."

Dollar falls, inflation picks up

In foreign exchange trade, the dollar index measured against a basket of currencies including the yen and the euro, fell 0.3% to 98.80. The euro was down 0.12% at $1.1705.=>

The steep rise in energy prices has prompted investors to prepare for the possibility that central banks including the European Central Bank and Bank of England will lean towards raising rates. Minutes from a meeting of the Federal Reserve last month showed a growing number of policymakers felt rate hikes might be needed.

All of this is a sharp reversal from expectations prior to the war for rate cuts or a prolonged pause.

Last week's US inflation data showed consumer prices rose by the most in nearly four years in March, driven by a record surge gasoline costs. Money markets show traders see less than a 20% chance of the Federal Reserve cutting rates this year.

In emerging markets, the Hungarian forint was up sharply, scaling multi-year highs on the dollar and euro, after Hungary's nationalist leader Viktor Orban lost power after 16 years to an upstart center-right coalition in Sunday's election.

The result is likely to pave the way for European Union funding to flow to Hungary and Ukraine. — Reuters