U.S. President Donald Trump used a 19-minute prime-time address to make clear that Washington plans to strike Iran "extremely hard" within the next two to three weeks. The remarks extinguished nascent investor hopes that the U.S.-Israeli confrontation with Iran could wind down soon.
Markets reacted swiftly. Traders reverted to positions seen in March: selling equities, buying U.S. dollars and bidding up oil. The Strait of Hormuz remains closed, and Trump reiterated calls for nations dependent on Gulf oil to "take the lead" in reopening the waterway - a route that Iran has a chokehold on, creating what some market watchers have called the worst global energy shock in history.
Sentiment had been improving over the past two trading sessions after a brutal March when soaring oil pushed risk assets into a tailspin. Those gains were unwound on Thursday as investors who had added risk earlier in the week rapidly exited positions amid fears that a prolonged energy disruption will fuel stagflation - rapid inflation combined with slow growth.
Brent crude futures moved back well above $100 a barrel following the speech. U.S. stock futures and European futures signaled a weak open, both pointing to declines of more than 1 percent. In Asia, where economies are particularly exposed to Middle Eastern energy, nearly all bourses slid sharply, producing a broad sea of red.
U.S. Treasuries fell as well. With most major Western markets scheduled to be closed tomorrow for the Good Friday holiday, investors appeared to be de-risking aggressively to avoid being caught by any weekend escalation.
Market participants will also be watching domestic data releases that could shape near-term trading. Key developments likely to influence markets on Thursday include U.S. jobless claims and the U.S. Energy Information Administration's weekly estimate of natural gas in underground storage.
Context and market dynamics
The speech removed the immediate prospect of a ceasefire or a swift easing of tensions. That shift in the geopolitical outlook has re-tightened energy market conditions and reintroduced a risk-off impulse across asset classes. Investors appear intent on protecting capital ahead of a market holiday where the potential for news over the weekend could trigger sharp moves on Monday.
What to watch next
- U.S. jobless data as a barometer for domestic economic resilience.
- The EIA weekly natural gas storage report for supply and demand signals.
- Any further statements or military developments that could extend the disruption to shipping through the Strait of Hormuz.