Oil prices up after Trump warns U.S. to hit Iran ‘extremely hard’ in weeks ahead

Oil prices surged on Thursday and equities markets around the world were mixed in volatile trade as traders weighed conflicting developments and remarks related to the Iran ‌war.

European shares trimmed losses, as some major Wall Street indexes and U.S. bond prices clawed back gains on news that Iran was drafting a protocol with Oman to monitor traffic in the Strait of Hormuz.

But world oil prices surged nearly eight per cent and U.S. crude soared more than 11 per cent the day after U.S. President Donald Trump said in a prime-time address ​that the U.S. would hit Iran “extremely hard” in the coming weeks and “bring ​them back to the Stone Ages where they belong.”

On Wall Street, stocks ended mixed in a choppy last trading day of the week ahead of the Good Friday holiday.

Gold prices fell as the U.S. dollar gained. Government bond ​yields jumped on expectations that an inflation spike would force central banks to raise interest rates or at ⁠least keep them on hold.

The dollar ⁠index — which measures the greenback against a basket of currencies, including the ‌yen and the euro — climbed 0.44 per cent.

“Over the past 48 hours, Tehran and Washington have exchanged a cacophony of statements, some suggesting rising odds of de-escalation,” BCA Research’s Felix-Antoine Vezina-Poirier, based in Montreal, said.

“Our GeoMacro strategists offer simple guidance for weighing volatile headlines: Stick to the facts. First, shipping through Hormuz has picked up over the past few days. Second, Iran is deliberately shifting away from ⁠GCC [Gulf Cooperation Council] targets toward Israeli ones.”

U.S. finance company MSCI’s gauge of stocks across the globe fell 0.35 per cent to 993.18.

On Wall Street, the Dow Jones Industrial Average fell 0.13 per cent to 46,504.67, the S&P 500 reversed course to gain 0.11 per cent to 6,582.69 and the Nasdaq Composite added 0.18 per cent to 21,879.18.

In a closely ‌watched address on Wednesday night, Trump said U.S. attacks on Iran would be intensified over the next two to three weeks. His statement came just a day after he told Reuters the U.S. would be “out of Iran pretty quickly.”

The pan-European STOXX 600 index and Europe’s broad FTSEurofirst 300 index both lost 0.2 per cent.

South Korea’s Kospi index slid 4.7 per cent.

Hormuz status key: analyst

“The only thing that really matters is ​whether the Strait of Hormuz will open soon,” said Prashant Newnaha, a senior rates strategist at TD Securities.

Trump earlier said on Wednesday that the U.S. did not need the key oil gateway.

Spot gold fell ⁠1.85 per cent to $4,669.05 an ounce, and U.S. gold futures settled down 2.8 per cent at $4,679.70.

India’s central bank moved to ban trading of so-called non-deliverable forwards in ⁠an effort to halt the rupee’s run of record lows. The move sent the currency up two per cent, although analysts questioned how long ⁠the rebound ⁠would last.

Brent futures rallied to end up 7.78 per cent ​at $109.03 a barrel, as U.S. West Texas Intermediate settled up 11.41 per cent to $111.54.

“The fact that we can expect two to three more weeks of action, boots on the ​ground were not ruled out [during Trump’s TV ⁠address], and that threats to hit infrastructure were reiterated, will put the market back on the defensive,” Pictet Asset Management’s Jon Withaar said.

The yield on benchmark U.S. 10-year notes fell 1.6 basis point to 4.305 per cent. The two-year note yield, which typically moves in step with interest rate expectations for the U.S. Federal Reserve, was flat at 3.803 per cent.

Eurozone benchmark Bund yields snapped a three-day decline, and traders raised bets for interest rate hikes. The yield on the benchmark German ⁠10-year rose 0.1 basis points to 2.996 per cent.