Stocks Slip as Asia Rebounds; Energy Prices Climb on Iran War Disruption

Key Takeaways

• US equities dipped Thursday, following declines in Europe, while Asian markets staged a comeback led by South Korea.
• After several volatile sessions, traders adopted a wait-and-see approach as details on the true extent of energy supply disruption emerge.
• Brent crude oil prices extended their climb past the $84 mark.

US stocks moved slightly lower Thursday, following declines in Europe, as skittishness returned to the market as traders continued to assess the impact of energy supply disruptions due to the war between the US, Israel and Iran.

The Morningstar US Market Index was down 0.3% at the start of trading, with similar declines for the S&P 500 and Nasdaq 100 benchmarks.

European equities had traded in the green early Thursday, following gains seen in Asia, before turning negative in the afternoon session.

“The situation remains incredibly fragile, and we are surprised by the market being too optimistic on outcomes,” Neil Wilson, investor strategist at Saxo UK, says.

The conflict, now in its sixth day, has brought tanker traffic through the crucial Strait of Hormuz to a near standstill despite US efforts to assist maritime traffic through escorts and insurance guarantees. Brent crude oil resumed gains to USD 84, while the Dutch TTF natural gas price extended gains to a one-year high of EUR 52 per MWh.

On Wednesday, Reuters reported that Qatar’s LNG facility, the origin of nearly 20% of global supplies, will be fully shut down.

This would rule out a restart within a few days, Morningstar analyst Adam Baker says. ”It will now take weeks from the decision to restart, but no major damage has been reported either.”

Asian stocks rebounded by nearly 11% from the prior session’s steep selloff, with Korean stocks recouping most of their losses after marking their worst one-day performance since 2008. On Thursday, the South Korean government announced a market stabilization package worth about USD 68 billion, driving the rally.

“Korean market moves are mind-blowing, and the amplitude alone signals that things are not going well,” Ipek Ozkardeskaya, senior analyst at Swissquote, says. “Price action therefore remains extremely jittery, and large gains are themselves signs of extreme volatility.”

The major oil-importing nation had been hit hard by concerns over energy prices amid the virtual closure of key transit route the Strait of Hormuz. The critical maritime route accounts for 31% of the world’s seaborne crude exports, according to market intelligence firm Kpler.

What If The Iran War Is Not Short-Lived?

Those concerns appeared to abate later Wednesday after the Trump administration said the US would provide risk insurance and possible naval convoys to help resume trade through the route. White House spokesperson Karoline Levitt said more details were due in the coming days.

The region’s broader Morningstar Asia Index closed 2.6% higher in dollar terms.