Iran threatens Gulf neighbours, Asian markets tumble
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- Iran warned it would strike the energy and water systems of Gulf neighbours if Trump follows through on his threat to hit Iran's electricity grid within 48 hours.
- Trump gave Iran a 48‑hour deadline to reopen the Strait of Hormuz, which remains effectively closed for most vessels.
- Asian equity markets fell, with Australia down 1.7% and New Zealand 1.1% in early trade, while Japan's Nikkei futures slipped to 50,850.
- Oil prices were choppy; Brent fell 0.3% to $111.82 a barrel but stayed up 55% month‑to‑month, and U.S. crude slipped 0.2% to $98.01.
- Bond markets saw ten‑year U.S. Treasury yields rise to 4.3856%, up 42 basis points since the war began, wiping out expectations of 50‑basis‑point Fed easing.
- The U.S. dollar strengthened, trading 0.2% firmer at 159.44 yen, while the euro slipped to $1.1545, reflecting heightened demand for liquidity.
- Analysts warned that sustained destruction of energy infrastructure could keep oil prices elevated for weeks, potentially reaching $150 a barrel, and that past oil shocks unfolded over months.
Why it matters: The escalation raises energy costs, lifting jet fuel and LNG prices, while higher bond yields and a stronger dollar increase borrowing costs for deficit‑laden governments and boost inflation for consumers. It also kills hopes for Fed rate cuts, with yields up 42 basis points since the war began, tightening financial conditions.
