Global financial markets remained highly volatile on March 12 as oil prices surged again following reports of attacks on vessels in the Gulf. The development raises concerns about inflation and higher global borrowing costs, weighing on Asian stock markets.
Oil rose sharply: According to Reuters, oil prices jumped after reports of
fuel-carrying ships attacked near the Strait of Hormuz and off the coast of Iraq. U.S. West Texas Intermediate (WTI) crude rose 7.5% to $93.80 per barrel, continuing a more than 4% gain from the prior session. Brent crude futures rose 7.7% to $99.03 per barrel, nearing $100.
The move came despite IEA intervention efforts, as the agency announced plans to release 400 million barrels from strategic reserves—the largest ever. The U.S. also said it would release 172 million barrels starting next week as part of this plan to cool energy prices.
However, tensions in the Middle East continued to cast a shadow over markets. Iraqi security officials said two fuel tankers in Iraqi waters were attacked early on March 12 by Iran-backed explosive-laden boats. An Iraqi official told state media that the country’s oil ports had “completely stopped functioning.”
The bond market was hit hard as inflation concerns eclipsed demand for safe assets. The 10-year U.S. Treasury yield rose by a further 4 basis points to 4.2472% on March 12, after rising 6 basis points the previous day. Fed funds futures continued to price in only one more rate cut this year amid inflation worries. Markets also expect the European Central Bank to raise rates, possibly as soon as June.
Amid rising uncertainty, investors sought the U.S. dollar as a safe haven. The euro fell 0.3% to $1.1536, the weakest level since November last year. The dollar rose 0.1% to 159.12 yen, the strongest since January, as Fed rate checks prompted caution among traders. The Australian dollar, sensitive to risk, fell 0.4% to $0.7127 after briefly touching a three-year high of $0.7188 on March 11 on expectations the country’s central bank could lift rates soon.
