Asian stocks pared early declines while S&P 500 futures rose as the US issued a second temporary waiver allowing purchases of Russian oil to help curb surging energy prices.
A gauge of Asian shares was down 0.7 per cent after dropping 1 per cent earlier. S&P 500 futures advanced 0.4 per cent, suggesting some relief for US markets after the underlying benchmark slid 1.5 per cent to its lowest since November.
Brent was little changed, trading slightly over $100 a barrel after rallying 9.2 per cent on Thursday.
The latest US measure, which is for crude that was loaded onto vessels before March 12th, is broader than a directive earlier this month that only cleared India to boost buying of Russian oil.
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Separately, the US administration plans to waive a century-old maritime law that requires American ships be used to transport goods between US ports.
“It’s not a game changer but the timing is good as it alleviates concerns around near-term tightness ahead of the weekend,” said Tony Sycamore, an analyst at IG Australia, referring to the US waiver on Russian oil purchases.
Investors remained concerned that the Iran war will further crimp energy supplies and stoke inflation. US president Donald Trump and Iran’s new supreme leader have both struck defiant tones, with the latter saying the Strait of Hormuz should remain shut.
Preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil, Trump said in a social media post.
Goldman Sachs Group warned that prices could exceed the 2008 peak if flows via the Strait of Hormuz remain depressed through March. Brent rallied to a high of $147.50 that year.
The Iran war is causing unprecedented turmoil in oil markets, hitting 7.5 per cent of global supply and an even bigger swath of exports, the International Energy Agency said.
As energy costs have surged, a gauge of global equities has fallen more than 5 per cent from a record high on February 25th. The MSCI Asia Pacific Index is on course for a second straight week of declines.
“It feels as though the market has taken its timeline for the duration of the closure of the Strait of Hormuz and the conflict more broadly, and pushed it further out, suggesting this could have a more damaging effect on inflation and potentially consumption patterns,” Chris Weston, head of research at Pepperstone Group, wrote in a note.
Treasuries were steady on Friday after falling across the curve in the previous session as inflation worries grew. The policy-sensitive US two-year yield climbed nine basis points to 3.74 per cent Thursday and the 10-year rose three basis points to 4.26 per cent.
Volatility in Treasuries has jumped to a nine-month high as the Iran war upended traders’ expectations for the Federal Reserve’s policy path. Before the war broke out at the end of February, traders were pricing in about 61 basis points of cuts by year-end, and now that has fallen to just under 20 basis points.
With the Fed widely expected to hold rates steady next week, investors will be closely watching for any shifts in its outlook, as Trump renews calls for the central bank to ease policy.
A gauge of the dollar was little changed after closing at its highest level in almost two months.
Investors will also be on the lookout for US inflation data due later, although the backward-looking measure may do little to alter investors’ thinking given the geopolitical uncertainty.
“Inflation is actually ramping up as a big risk,” Tracy Chen, a portfolio manager for global fixed income at Brandywine Global Investment Management, said on Bloomberg Television.
“Duration of the conflict is key. We have been raising US dollar weighting a little bit just to increase our hedge.” – Bloomberg
