Oil prices dropped nearly 5% on Monday following President Trump's claims of de-escalation with Iran, while other markets showed a more muted response. The stronger yen also weighed on Japanese stocks
On Monday, oil prices experienced a significant downturn, dropping nearly 5%, with intraday losses reaching up to 6%. This decline was triggered by President Donald Trump's announcement that he had called off planned military strikes against Iran and suggested an agreement could soon reopen the Strait of Hormuz. However, these claims remain unverified and have been disputed in previous instances.
The market reacted swiftly to this news, with oil prices falling as investors anticipated a reduction in geopolitical risks related to global crude supplies through the strait. While US equity markets showed only minor gains, with S&P 500 futures (ES) and Nasdaq futures (NQ) opening up around 0.5%, the crude market's response was more pronounced.
The situation further complicated by reports of Iran firing a cruise missile at an oil tanker in the strait and UK Navy reports of vessels under attack, highlighting the ongoing tensions despite Trump’s optimistic statements. US Treasury Secretary Scott Bessent and Japan's Ministry of Finance officially confirmed Friday's coordinated yen-buying intervention to support the currency.
The stronger yen had significant implications for Japanese markets, as the Nikkei 225 fell sharply due to concerns over export-oriented stocks' profitability in overseas markets. South Korea’s KOSPI also declined amid lingering doubts about AI-related chip demand despite strong earnings reports from Samsung and SK Hynix.
In economic data, China's manufacturing sector saw its slowest expansion rate in four months, with the S&P Global China General Manufacturing PMI falling to 50.9 from June’s 51.7. Output and new orders slowed, but export orders returned to growth after a prior contraction, keeping the headline reading above the critical 50-mark.
These developments underscore the complex interplay between geopolitical events and financial markets. Traders should closely monitor further statements from both sides regarding Iran, as well as any potential follow-up actions that could impact oil prices or other asset classes.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.