Oil prices tumbled and stocks jumped on Monday after President Trump backed away from a threat to strike Iranian energy infrastructure, saying the United States and Iran had held “productive” talks.
Investors had been braced for a fourth week of market turmoil caused by the war in the Middle East as a wave of strikes on Iran knocked out power across large parts of Tehran on Monday. Before Mr. Trump’s announcement of talks, stocks were heading lower and oil prices higher, as they have been for weeks.
Mr. Trump had said over the weekend that U.S. forces would start attacking Iranian power plants on Monday unless Iran fully reopened the Strait of Hormuz. On Monday, he promised a five-day moratorium on any U.S. attacks on the energy sites.
Despite Tehran responding to Mr. Trump by saying that no such talks were taking place, the gains in stocks and drop in oil mostly held.
For some investors, this will be further evidence of the power of markets over this administration. While Mr. Trump may try to portray himself as unrestrained, the sharp rise in oil prices and interest rates in recent weeks is being seen by some market watchers as pushing the president to try to ease investors’ worries.
However, for other investors, Tehran’s pushback will also serve as a sign that the war in Iran — unlike Venezuela, for example — is not entirely under Mr. Trump’s control. That’s particularly important when it comes to the price of oil, worries about inflation, and the potential for that to push up interest rates in the United States.
Earlier Monday the 10-year Treasury yield, which reflects government borrowing costs over 10 years and underpins the cost of debt across the economy, rose past 4.40 percent for the first time this year, and came close to crossing 4.5 percent. This is around the same level that prompted Mr. Trump to explicitly reference the bond market when he pulled back from his initial tariff announcement last April. The yield retreated from those highs after Mr. Trump announced talks were underway.
Oil prices tumble.
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The price of Brent crude, the global benchmark, fell to just above $100 a barrel. Brent settled at $112.19 a barrel on Friday.
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West Texas Intermediate crude, the U.S. benchmark, declined to about $90 a barrel. W.T.I. settled at $98.23 on Friday.
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Investors and analysts across the world are focused on the Strait of Hormuz, a vital trading route for oil and natural gas that normally carries as much as one-fifth of the world’s oil supply. Shipping traffic exiting the Persian Gulf through the strait has been effectively halted because of the risk that vessels could be attacked.
Global stocks recover.
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The S&P 500 opened nearly 1.5 percent higher. On Friday, the index had closed 1.5 percent lower.
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Stocks in Europe reversed earlier declines, with the Stoxx 600, a broad European index, rising more than 1 percent in afternoon trading. The DAX in Germany jumped nearly 2 percent, and the FTSE 100 in Britain was up slightly.
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Stock markets in Asia, where economies are especially vulnerable to the shock of rising energy costs, tumbled on Monday.
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The worst performer was the Kospi index in South Korea, which plummeted 6.5 percent. The Nikkei index in Japan dropped 3.5 percent, and the Hang Seng Index in Hong Kong traded 4 percent lower. But Asian markets closed before Mr. Trump’s comments.
U.S. gasoline prices continue to climb.
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Gas prices rose again on Monday, with the national average at $3.96 a gallon, according to the AAA motor club. The increase has raised the cost for drivers almost 33 percent since the war began.
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Diesel prices have increased even more quickly, reaching $5.29 a gallon, up 41 percent since the start of the war, on Sunday.
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders.
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