US stocks cut losses after Trump announces steps to safeguard Hormuz Strait

NEW YORK, March 4 — US equities joined a global equity rout yesterday due to surging oil prices, but cut their losses after President Donald Trump announced steps to safeguard commerce in the Strait of Hormuz.

The waterway, which accounts for the transport of about one-fifth of global crude supplies, has been mostly devoid of traffic since the United States and Israel launched military attacks on Iran Saturday.

Crude prices continued to surge early yesterday, with Brent futures topping US$85 (RM334) a barrel for the first time since July 2024 amid talk of US$100 oil due to a lengthy outage of Strait of Hormuz activity.

But Brent instead finished at US$81.40 per barrel, still up 4.7 per cent, after Trump announced that the US navy would escort oil tankers through the Strait of Hormuz if needed, and ordered Washington to provide insurance for shipping.

Art Hogan of B. Riley Wealth Management said the moderation in oil prices also buttressed the stock market. The broad-based S&P 500 finished down 0.9 per cent at 6,816.63, more than 100 points above its level earlier in the day.

“Higher energy prices are a drag on the economy,” Hogan said. “Any sort of alleviation in the short-term is going to be a relief for markets.”

Earlier, European markets endured a bruising session. London fell 2.8 per cent but both Frankfurt and Paris dropped by more than three per cent.

“European markets are being hit hard as the full inflationary impact of the war in Iran truly comes home to roost,” said Joshua Mahony, chief market analyst at Scope Markets.

Data showed an unexpected rise in eurozone core inflation, adding to concerns.

The European Central Bank’s chief economist Philip Lane said in an interview with the Financial Times published Tuesday that a lengthy Middle East conflict could trigger a “spike” in eurozone inflation and hit regional growth.

The Dutch TTF natural gas contract, considered the European benchmark, shot up more than 40 per cent to over €60 (RM275) yesterday — its highest level since January 2023, in the wake of the price spike triggered by the Ukraine war.

European natural gas prices had surged 50 per cent on Monday after Qatar’s state-run energy firm said it had halted liquefied natural gas production due to strikes.

On Tuesday, US and Israeli strikes pummelled targets across Tehran.

Drones and missiles crashed into oil facilities and US diplomatic missions in the Gulf as the Islamic republic retaliated, and Israel pushed troops deeper into Lebanon to battle the Tehran-backed militia Hezbollah after it entered the fray.

The rise in energy costs could give most central bankers a headache as they look to bring down inflation while also cutting interest rates to support their economies.

Capital Economics economists Jennifer McKeown and William Jackson said the US Federal Reserve, ECB and Asian central banks would likely delay interest rate cuts.

But the Bank of England and central banks in parts of Latin America and Central Europe could be forced to hike rates.

The dollar, seen as a safer bet in times of economic unrest, extended gains against major rivals.

Asian equities extended Monday’s losses.

Key figures at around 2115 GMT 

West Texas Intermediate: UP 4.7 per cent at US$74.56 per barrel

Brent North Sea Crude: UP 4.7 per cent at US$81.40 per barrel

New York — Dow: DOWN 0.8 per cent at 48,501.27 (close)

New York — S&P 500: DOWN 0.9 per cent at 6,816.63 (close)

New York — Nasdaq Composite: DOWN 1.0 per cent at 22,516.69 (close)

London — FTSE 100: DOWN 2.8 per cent at 10,484.13 (close)

Paris — CAC 40: DOWN 3.5 per cent at 8,103.84 (close)

Frankfurt — DAX: DOWN 3.4 per cent at 23,790.65 (close)

Tokyo — Nikkei 225: DOWN 3.1 per cent at 56,279.05 (close)

Hong Kong — Hang Seng Index: DOWN 1.1 per cent at 25,768.08 (close)

Shanghai — Composite: DOWN 1.4 per cent at 4,122.68 (close)

Euro/dollar: DOWN at US$1.1617 from US$1.1688 on Monday

Pound/dollar: DOWN at US$1.3358 from US$1.3407

Dollar/yen: UP at 157.59 yen from 157.39 yen

Euro/pound: DOWN at 86.98 pence from 87.18 pence — AFP