Adedokun Waliyu 
Crude oil prices jumped more than two per cent and have risen around 10 per cent this week after the United States struck an Iranian island in the Strait of Hormuz, sparking a series of retaliatory attacks in which Tehran targeted American interests in several regional countries.
Stocks fell while bond yields remained at multi-decade highs as investors increased their expectations of interest rate hikes.
The latest military action came after weeks of relative calm during which peace talks made little progress, while Washington said it would pursue the “economic asphyxiation” of the Islamic Republic.
With the Strait of Hormuz, through which about one-fifth of the world’s oil and gas passes, effectively closed for the foreseeable future and energy costs unlikely to decline, concerns about inflation are growing.
These concerns, combined with worries over government spending and a flood of corporate debt sales, have caused expectations of interest rate hikes to surge, putting upward pressure on government borrowing costs.
The yield on 30-year UK government bonds reached its highest level since 1998, while yields on 10-year debt climbed to levels last seen during the global financial crisis of 2007–08.
Japan’s 10-year bond yield reached a 30-year high, while 30-year US Treasuries came close to their 2007 levels. The US 10-year yield also remained around financial-crisis levels.
“Bond yields were already rising, and the renewed US-Iran attacks and their impact on oil prices have made investors more concerned about bonds,” said Rajeev De Mello of Gama Asset Management.
“At these levels, higher yields are clearly a headwind to Asian equities, especially longer duration tech stocks.”
Markets across Asia declined, with technology firms, which rely heavily on low borrowing costs to finance investments, dragging down markets in Tokyo and Seoul.
Hong Kong, Shanghai, Sydney, Singapore, Wellington, Taipei and Manila also recorded significant declines.
The losses followed declines across all three major indexes on Wall Street.
Investors are preparing for the release of important jobs and inflation data over the coming week, which could determine whether the Federal Reserve raises interest rates at its next meeting.
Traders are pricing in a 70 percent probability of a rate hike.
Federal Reserve Governor Michael Barr also increased expectations of a hike, saying policymakers should be prepared to raise rates if inflation remains stubbornly above the bank’s two percent target.
“If trends in the data give me some confidence that inflation is moderating on a path to two percent, then I think we can take a bit more time to assess our policy stance,” he said.
“However, if inflation appears not to be moderating sufficiently, then I think we should act decisively to raise rates.”
Key Market Figures
– West Texas Intermediate: Up 1.5% at $91.60 per barrel
– Brent North Sea Crude: Up 1.9% at $96.45 per barrel
– Tokyo Nikkei 225: Down 2.6% at 64,473.16
– Hong Kong Hang Seng Index: Down 1.1% at 25,053.02
– Shanghai Composite: Down 1.1% at 3,934.36
– Dollar/Yen: Up at 160.34 yen from 160.24 yen
– Euro/Dollar: Down at $1.1578 from $1.1589
– Pound/Dollar: Down at $1.3503 from $1.3511
– Euro/Pound: Down at 85.73 pence from 85.77 pence
– Dow Jones: Down 0.8% at 52,766.88
– London FTSE 100: Down 0.3% at 10,789.28
Iran Strikes US Interests
Iran struck US interests across the Middle East, vowing “severe” consequences following renewed American attacks on the Islamic Republic.
The latest fighting over the Strait of Hormuz once again expanded to US military bases in the region and drew Washington’s Gulf allies deeper into the six-month conflict.
US President Donald Trump had earlier warned of “much harder and higher” attacks if Iran retaliated against the US strikes, which Iranian state media said had killed 11 people in the country’s south and southwest.
Tehran said it launched ballistic missile attacks on two US bases in Jordan.
The Jordanian army said it intercepted 10 ballistic missiles fired from Iran but did not confirm any injuries or direct hits. Three other missiles landed in remote areas.
Missile and drone attacks were also reported in Kuwait, where the army said it was responding to Iranian hostilities. Air raid alerts were also heard in Bahrain.
Iran’s army said it launched drone attacks targeting US forces at an air base in Bahrain, a key Washington ally in the Gulf.
In Iraq’s autonomous Kurdistan region, Iran’s Revolutionary Guards said they struck US bases with missiles and drones, destroying a maintenance centre, warehouses and equipment.
The latest round of conflict began when Washington struck Iranian targets, marking the first known US strikes in several weeks. Tehran subsequently targeted US troops in Jordan and the United Arab Emirates, while projectiles struck two oil tankers in separate incidents.
More US strikes followed, with Iranian state television reporting explosions in the country’s south along the Hormuz Strait and on an island in the Gulf. US forces also reportedly struck an airport in the southern province of Kerman.
Iranian state media reported that four projectiles hit areas within the counties of Chabahar and Konarak, without specifying the extent of any damage.
Seven people were killed and eight others wounded in a missile attack in the southern Khuzestan province, according to Iranian state media.
Earlier, Iran’s Red Crescent said shrapnel from a US missile killed four people, including a child, and wounded more than 50 people in Kuhestak, Hormozgan province.
The US military did not directly address the reported attack on a wedding gathering.
US Central Command spokesman Tim Hawkins said the US military “never targets civilians,” contrasting this with Iran’s Revolutionary Guards.
‘Large, Powerful Strikes’
Trump said the “large and powerful” strikes were carried out in retaliation for Iran’s alleged attempt to place sea mines in the Strait of Hormuz and its missile attack on a US military base in Jordan.
Revolutionary Guards spokesman Hossein Mohebi warned that Washington would regret its latest attacks, saying that “severe punishment awaits the aggressors.”
Ebrahim Zolfaghari, spokesperson for Iran’s Khatam-al Anbiya central military command, also warned that any country cooperating with the US military would face more severe, widespread and destructive responses.
After six months of war, the two sides remain at an impasse, with Iran keeping the Strait of Hormuz closed and the United States maintaining a counter-blockade of Iranian ports.
Washington said its forces attacked Iranian rocket launchers on the island of Larak to prevent Tehran from planting mines in the strait’s key shipping lanes.
The Middle East war began in late February with US-Israeli attacks on Iran that killed its supreme leader, Ayatollah Ali Khamenei.
A fragile ceasefire between the United States and Iran subsequently collapsed following attacks on commercial ships in the Strait of Hormuz, through which about one-fifth of the world’s oil supplies passed before the war.
Trump warned on Tuesday that if Iran retaliated, it would face attacks at a “much harder and higher level,” while suggesting that an even larger attack remained possible.
He said there would be very little left of the Islamic Republic of Iran after such an attack.
Trump also said he was not trying to force Iran to the negotiating table and questioned when the Iranian people would rise up against their government.
Meanwhile, Greek maritime risk management firm Marisks said two crude tankers were hit by “unknown projectiles” late the previous day.
The United Kingdom Maritime Trade Operations agency registered one of the incidents and said there were no reported casualties or environmental damage.
Despite the diplomatic deadlock, Iranian President Masoud Pezeshkian vowed to match any US move to return to an agreement aimed at ending the war.
He also warned that a return by the United States to a policy of pressure and threats could derail diplomatic efforts.
