SINGAPORE — Concerns over escalating hostilities in the Middle East stayed front and centre in markets on Wednesday, sending oil prices higher and investors rushing for the safety of US Treasuries and the dollar while dumping stocks.
Investors have grown increasingly nervous over the possibility of a more direct US military involvement as the Israel-Iran air war entered a sixth day, with President Donald Trump calling for Iran’s unconditional surrender and warning US patience was wearing thin.
“Clearly the Middle East issues have not been solved, and comments by President Trump just mean that things could get more dangerous in that part of the world,” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia (CBA).
“The markets are trying to figure out that risk of a big US military intervention. It’s hard to say exactly what the market is thinking, but judging by the oil price and currencies, they’re certainly pricing in at least some risk that something goes very bad there.”
Oil prices extended their climb on Wednesday, with Brent crude futures up 0.33 percent to $76.70 per barrel while US crude rose 0.45 percent to $75.18 a barrel. Both had jumped more than 4 percent in the previous session.
The broad risk-off moves across markets also continued to gather pace.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.26 percent as did EUROSTOXX 50 futures, which declined 0.4 percent.
US stock futures were little changed after the cash session on Wall Street ended in the red overnight.
In currencies, the dollar firmed at a one-week high of 145.445 yen and held to most of its gains against other peers.
The euro struggled to recover from its 0.7 percent fall on Tuesday, and last bought $1.1487. Sterling edged slightly higher to $1.3435, having slid 1.1 percent in the previous session.
