GLOBAL MARKETS: Oil hits multi-week high, Wall Street slips as Iran tensions reignite

WASHINGTON — Global markets turned lower on Wednesday as oil prices climbed after U.S. President Donald Trump said the interim peace deal with Iran was “over,” while the United States announced new military strikes.

Oil prices settled nearly 5% higher as renewed tensions in the Middle East raised concerns that global energy supplies could be disrupted, particularly if vessel traffic through the Strait of Hormuz is affected.

Brent crude futures rose $3.86, or 5.2%, to settle at $78.02 a barrel, marking their highest level since June 19. U.S. West Texas Intermediate (WTI) crude gained $3.08, or 4.4%, to close at $73.52 a barrel, its highest since June 22.

Market concerns were further fueled by data showing that crude stocks in the U.S. Strategic Petroleum Reserve fell to their lowest level since 1983, leaving global markets more exposed to potential supply disruptions.

On Wall Street, the Dow Jones Industrial Average recorded the biggest decline among major indexes, falling 1.09% to close at 52,348.09. The S&P 500 dropped 0.28% to 7,482.59, while the Nasdaq Composite edged higher by 0.2% to 25,870.65.

Investor sentiment was also pressured by a warning from the International Monetary Fund that the escalating conflict could weigh on global economic growth this year.

MSCI’s global stock index fell 0.60% to 1,114.54.

Markets showed a limited reaction to minutes from the Federal Reserve’s latest policy meeting, which highlighted concerns among officials about rising inflation pressures.

Investors focused more on Federal Reserve Chair Kevin Warsh’s approach of limiting forward guidance, suggesting that future policy signals may become less predictable.

“The Fed is choosing to tell markets less in the post-meeting statement, with forward guidance placed much more firmly in the rear-view mirror,” said Russ Brownback, BlackRock’s deputy chief investment officer of global fixed income.

Treasury yields continued to climb, with benchmark 10-year U.S. Treasury note yields rising for a seventh straight session. The yield increased 4.01 basis points to 4.569% after reaching a one-month high of 4.58%.

In currency markets, the U.S. dollar weakened against major currencies. The dollar index, which measures the greenback against a basket of currencies including the euro and yen, fell 0.22% to 100.96.

The Japanese yen traded near 162.4 per dollar, remaining close to its weakest level in about 40 years.

Renewed Middle East tensions and concerns over inflation also affected gold prices. Spot gold fell 0.52% to $4,084.19 an ounce, while U.S. gold futures declined 1.45% to $4,085.00 an ounce.

Although gold is traditionally viewed as a hedge against inflation, higher interest rates can reduce demand for the non-yielding asset. -Reporting by Pete Schroeder in Washington; additional reporting by Amanda Cooper in London and Tom Westbrook in Singapore; Editing by Kevin Buckland, Jan Harvey, Hugh Lawson and Edmund Klamann/Reuters