Stock markets fell sharply early Monday, with traders nervous after another weekend with no real sign of an easing of tensions or rising energy prices in Iran or the broader Gulf region due to the conflict.
Several major Asian markets fell 3% or more, while all of Europe’s major indexes fell around 2% in morning trading. Government bond yields rose and even traditional safe haven gold and silver fell more than 6% and 7% of their values.
However, an apparent change in tone from US President Donald Trump as he woke up in the US boosted European markets and a positive start to trade in the US.
Where were the major stocks and prices early Monday?
Markets in Asia had a tough time, with trading halted ahead of Trump’s expected start of bilateral talks with Iran, but Tehran has yet to confirm the location. This was the brief story of the morning’s trade:
- Germany’s DAX fell during the morning, and was down just over 2% as of noon local time
- France’s CAC 40 was also down about 2%, while the FTSE 100 in London recorded similar numbers, until a small bounce in the late morning recovered most of the losses.
- Japan’s benchmark Nikkei 225 fell 3.5% to 51,515.49, having fallen further during the day.
- South Korea’s Kospi fell nearly 6.5% to 5,405.75
- Hong Kong’s Hang Seng was down 3.5%, while the Shanghai Composite Index fell 3.6% in a single day
- Taiwan’s TAIEX fell 2.5%, while Australia’s A&P/ASX 200 fared somewhat better, falling only 0.7%.
- Gold and silver, which have been major gainers in recent years, both declined 7% and 8% respectively.
- Crude oil prices were one of the few to rise, but only marginally.
- Western governments’ 10-year bond yields also saw a modest rise across the board
When and where did the afternoon rally take effect?
Around midday in Europe, as Donald Trump began singing a different tune to his weekend threats, the main indexes moved back into positive territory for the day and started recording cautious gains. As trading in Europe approached and Wall Street opened for trading, the mood of the always volatile market had changed:
- The DAX moved past the 23,000 mark, at one point close to a 3% gain before closing up 1.22%.
- France’s CAC 40 was briefly more than 2% in the green and rose 0.8% for the day.
- The FTSE 100 in London ended in the red, but only up 0.25%
- By late morning in New York the Dow Jones was up 2.22%, and the S&P 500 was not far behind with up 1.78%; This lead diminished slightly as the day progressed.
- Gold recovered some of its worst morning losses, while silver briefly returned to positive territory
- Crude oil prices fell nearly 9% to below $90 a barrel
- Various cryptocurrencies also moved back from losses to gains, above all the uncertainty of the volatility, high volumes of fast-moving trading.
Tough march for traders despite Monday’s rally
Germany’s DAX, like most major Western markets, has fallen significantly throughout the month since the US and Israeli attacks on Iran that began on February 28, which killed Supreme Leader Ayatollah Ali Khamenei and several other senior officials.
The main German index slipped below 22,000 points early Monday, having traded above 25,000 before the first attacks on Tehran. That’s a peak decline of more than 12%, but it recovered to 9.3% before the close of trading. The market is at its lowest level since early April last year, following panic caused by the so-called “Liberation Day” tariffs imposed by US President Donald Trump on much of the world, including Europe.
Despite Monday afternoon’s gains, France’s CAC 40 has also lost 9% of its value in a month.
The UK’s FTSE 100 has fared slightly better, falling 7.4% in a month, perhaps due to the UK’s own oil resources. US markets have fallen more or less in line with those seen in the UK, with the Dow Jones losing about 5% and the S&P 500 losing about 3.4% of its value over that period.
Strait of Hormuz still blocked, few signs of regional tensions easing
Trump’s weekend threat on Monday that the US would “destroy” Iran’s power plants if the Strait of Hormuz is not fully opened within 48 hours prompted Tehran to say it would respond to any such attack by targeting US and Israeli energy and infrastructure assets in the region.
Earlier on Monday, Fatih Birol, executive director of the International Energy Agency, also warned that the current economic instability caused by a war with Iran has the potential to prove more serious than the combined consequences of the two oil shocks of the 1970s and Russia’s 2022 invasion of Ukraine.
Birol described the situation as a “major, major threat” to the global economy, saying, “As things stand, this crisis is now two oil crises and one gas disaster.”
Rising energy prices are also confounding investors’ expectations of a possible interest rate cut that they had expected earlier this year, as higher fuel costs apply inflationary pressure that makes it riskier for central banks to reduce borrowing costs.
Edited by: Elisabeth Schumacher