The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
10:01 ET – The oil rally triggered by the conflict in the Middle East is a key driver of the recent dollar rise, Monex USA’s Juan Perez writes. Since crude invoices are mostly denominated in dollars, “the struggles in shipment traffic in the Strait of Hormuz will lead to higher prices and thus force more USD-borrowing,” he says. Markets worry the conflict could be longer than previously thought. Perez notes that emerging market currencies, which were doing well until last week, are now weakening against the dollar. “We keep an open mind to expect the unexpected,” Perez says. The WSJ Dollar Index rises 0.7%. (paulo.trevisani@wsj.com; @ptrevisani)
10:01 ET – Bitcoin faces additional downward pressure if the U.S.-Iran conflict escalates, ActivTrades analyst Carolane De Palmas says in a note. “If tensions broaden significantly and trigger sustained volatility across global markets, investors are likely to intensify their flight-to-quality behavior.” In that scenario, bitcoin could fall as investors reduce exposure to volatile assets to manage overall risk, she says. However, bitcoin could benefit if the conflict truly disrupts oil supply and pushes energy prices sharply higher, causing inflation expectations to rise and altering monetary policy expectations, she says. Some investors view bitcoin as a hedge against inflation and monetary policy changes. Bitcoin falls 3.3% to $67,070, LSEG data show. (renae.dyer@wsj.com)
09:35 ET – The U.K. spring statement had little impact on sterling or U.K. government bonds as the market’s focus is on the Middle East conflict, Convera strategist George Vessey says in a note. The fiscal update was already expected to be low key and it was drowned out further by geopolitical tensions, he says. The accompanying forecasts are “already stale” due to the conflict. The U.K. faces higher inflation from rising energy prices, complicating the Bank of England’s interest rate-cutting path and potentially putting renewed strain on the public finances, he says. Moves in sterling and gilts are global in nature rather than U.K.-driven. Ten-year gilt yields rise 16 basis points to 4.526%, according to Tradeweb. Sterling falls 0.7% to $1.3304. (renae.dyer@wsj.com)
09:31 ET – CBOT grain futures are taking strength from surging crude oil. “The Strait of Hormuz now closed is helping rally energy prices,” says AgMarket.net in a note. Grains are often tied to movements in crude oil, due to their usage in renewable fuels that can be mixed with motor fuel. Crude oil futures are up 8.8%, to $77.50 a barrel. CBOT corn futures are up 1.1%, soybeans rise 1%, and wheat climbs 0.7%. (kirk.maltais@wsj.com)
09:23 ET – Damage to energy infrastructure in the Middle East and the near standstill of tanker traffic through the Strait of Hormuz raise the prospect of oil, natural gas and refined product prices remaining high and pressuring inflation, Fawad Razaqzada of Forex.com says in a note. “For now, markets are trading headline-to-headline. Energy is bid, equities are uneasy, and volatility is back on the agenda,” he says. “Much will depend on whether tensions stabilize–or whether this proves to be the start of a more prolonged disruption to global supply.” The bias for Brent crude, which tested a near two-year high $85 a barrel, remains to the upside, he says. Brent is up 8.2% at $84.11 a barrel. (anthony.harrup@wsj.com)
09:20 ET – Rising energy prices have dampened expectations for further U.K. interest-rate cuts and fuel speculation of a possible eurozone rate rise but this doesn’t offer much support to sterling or the euro, Rabobank’s Jane Foley says in note. The “fact that the U.K. and the eurozone are energy importers is likely a more pressing concern currently,” she says. Sterling and the euro are unlikely to perform well given uncertainty over the potential damage to their economies from an inflation bout as the Middle East conflict pushes up energy prices, she says. Sterling falls 0.8% to $1.3299 after hitting a three-month low of $1.3259 earlier, according to LSEG. The euro falls 0.8% to $1.1598 after reaching a six-week low of $1.1579 earlier.(renae.dyer@wsj.com)
09:12 ET – Yields on U.K. government bonds stay high after U.K. Treasury Chief Rachel Reeves’s presentation before lawmakers as the Middle East war overshadows the statement. The U.K. fiscal headroom improved to nearly 24 billion pounds ($32.2 billion) from around 22 billion pounds at the November budget. The good news is “unlikely to receive much recognition in the current environment,” MUFG’s Henry Cook says in a note. Inflation risks have risen due to surging energy prices as a result of the Middle East conflict, reducing rate-cut prospects, he says. Ten-year gilt yields are up 16 basis points to last trade at 4.526%, after hitting a three-week high of 4.552% earlier, Tradeweb data show. (miriam.mukuru@wsj.com)
09:05 ET – The U.K. government has a bit more money to play with following the spring statement, but this could be offset by rising energy prices, says Paul Dales at Capital Economics in a note. Treasury Chief Rachel Reeves noted an uptick in fiscal headroom, likely due to lower gilt yields and higher equity prices, Dales says. But with events in the Middle East potentially raising U.K. inflation and weakening growth, there is a risk that this wiggle room could be wiped out. Tax hikes might be required at the next budget, but political pressure will likely keep government spending elevated in the near term. “The Chancellor may need to raise some money… But tax hikes for the third budget in a row could bring down the curtain on Starmer’s premiership,” Dales says. (don.forbes@wsj.com)
09:00 ET – U.S. natural gas futures are rising on soaring LNG prices after Qatar halted production at the world’s largest export facility, and forecasts for a late-season cold shot later this month. “U.S. exports are already near maximum capacity in the short run, meaning soaring global prices cannot increase short-term physical demand for U.S. gas,” Eli Rubin of EBW Analytics says in a note. “While a colder mid-to-late March and Iran war risks may align with supportive technicals to drive short-term upside, the medium-term fundamental picture remains weak.” Nymex natural gas is up 5.3% at $3.117/mmBtu.(anthony.harrup@wsj.com)
08:42 ET – Concerns about the inflationary consequences of the conflict in the Middle East are the key drivers of U.K. government bonds, or gilts, says Aberdeen’s Matthew Amis in a note. This means U.K. Treasury Chief Rachel Reeves’s spring statement on public finances and the gilt remit for fiscal 2027 have little influence on gilt yields, which remain higher on the day, he says. “The geo-politics and the surge higher in energy prices are the only game in town and Chancellor Reeves’ spring statement will not be changing that,” Amis says. The 10-year gilt yield is last up 16.9 basis points at 4.535%, lifted as sharp rises in energy prices stoke inflation worries. (jessica.fleetham@wsj.com)
08:32 ET – Sterling shows little reaction after U.K. Treasury chief Rachel Reeves announced no further changes to fiscal policy in her spring statement. The focus was instead on updated economic and fiscal forecasts from the Office for Budget Responsibility. Real GDP growth is expected to slow this year to 1.1% before rising to 1.6% in 2027 and 2028, and then 1.5% in both 2029 and 2030. Inflation is expected to fall to 2.3% this year and to the Bank of England’s 2.0% target from 2027 onwards. However, the OBR noted “significant risks” around its forecasts due to the Middle East conflict. Sterling falls 0.7% to $1.3311 and the euro falls 0.1% to 0.8711 pounds, both little changed from levels before the statement. (renae.dyer@wsj.com)
08:29 ET – A full-blown oil crisis is unlikely with a well supplied market in a position to manage the impact from the Middle East conflict, Oxford Economics’ head of energy forecasting Bridget Payne says in a note. Iran is unlikely to sustain a severe and prolonged disruption, she says. “We now assume oil supply is disrupted by an average of 4 million barrels a day over the next quarter and expect Brent to average $79 per barrel in Q2, $15 above our February baseline, before easing as supply resumes by the end of the quarter.” Spare capacity in Saudi Arabia and the UAE can cover for lost Iranian production, “but alternative trade routes can reroute only around a third of normal Strait of Hormuz oil flows,” Payne adds. Brent is up 7% at $83.21 a barrel and WTI is up 6.8% at $76.10.(anthony.harrup@wsj.com)
