GLOBAL MARKETS: Oil jumps, stock futures slip as US-Iran talks stall

SINGAPORE — Oil prices climbed on Monday while U.S. stock futures edged lower as stalled U.S.-Iran peace negotiations extended disruptions to Middle East energy exports, heightening concerns among investors and policymakers ahead of a busy week of central bank meetings.

Benchmark Brent crude futures rose more than 2% in early Asian trading, reaching a three-week high of $107.97 per barrel. The rally has renewed inflation concerns and led markets to largely price out expectations for interest rate cuts this year.

U.S. equity futures dipped modestly, with S&P 500 futures slipping 0.3% following a record closing high in the previous session. The gains had been driven by continued investor enthusiasm for artificial intelligence-related stocks.

Currency markets showed limited movement, though the U.S. dollar held slightly firmer. The euro eased 0.15% to $1.1706, while the Japanese yen weakened marginally to 159.53 per dollar.

Despite a ceasefire that has halted most fighting from the war triggered by U.S. and Israeli strikes on Iran two months ago, markets remain focused on the Strait of Hormuz — a critical shipping route for global energy supplies — which continues to face disruption. That bottleneck has kept oil and gas prices elevated.

Liquefied natural gas (LNG) prices for June delivery into Northeast Asia held at $16.70 per million British thermal units last week, about 61% higher than levels before the conflict.

Goldman Sachs analysts raised their year-end Brent crude forecast from $80 to $90 per barrel, noting that the outlook assumes a normalization of Gulf exports by the end of June. They warned that sharper price spikes could occur if inventories fall to critically low levels not seen in decades.

“Non-linear price increases are likely if inventories drop to critically low levels,” the bank said in a note.

Geopolitical tensions remain elevated, with reports that U.S. diplomatic plans involving talks in Islamabad were canceled over the weekend, even as Iran’s foreign minister continues discussions in mediating countries.

Asian equity markets were mixed in early trading. South Korea’s KOSPI and Japan’s Nikkei index both touched record highs, while Australian shares slipped in thin holiday trading.

Central Banks in Focus

Markets are now turning attention to a packed week of central bank meetings, with expectations that the ongoing energy shock will keep policymakers largely on hold.

The Bank of Japan is expected to maintain its short-term policy rate at 0.75% on Tuesday, though markets are increasingly pricing in future tightening amid persistent inflation pressures and rising long-term yields.

The U.S. Federal Reserve is also widely expected to keep interest rates unchanged at what may be Chair Jerome Powell’s final meeting in the role. Similarly, the European Central Bank and the Bank of England are anticipated to hold steady, although their forward guidance will be closely watched for any shift in tone.

“If that message lands, rate markets — which remain extremely aggressive — face significant front-end repricing,” said Bob Savage, head of macro markets strategy at BNY.

Tech Earnings to Drive Sentiment

Investor focus will also shift to a major week of corporate earnings, with companies representing roughly 44% of the S&P 500 by market capitalization set to report results.

Major technology firms, including Microsoft, Alphabet, Amazon, Meta Platforms, and Apple, are scheduled to release earnings across Wednesday and Thursday.

Market sentiment remains strongly tied to the artificial intelligence sector, which continues to drive investor optimism.

“AI is something that people are very optimistic about and very much consider a winner,” said Mike Seidenberg, senior portfolio manager at Allianz Technology Trust. “It’s at the top of the portfolio.”

-Reporting by Tom Westbrook; Editing by Edmund Klamann and Shri Navaratnam/Reuters