Stock markets ticked higher on Friday while oil skirted close to its biggest daily drop since April after President Donald Trump pushed back a decision on US military involvement in the Israel-Iran conflict.
Rising risks from the Middle East have loomed large on the world’s top indexes again this week.
Europe’s main bourses all rose between 0.5 per cent-1 per cent after similar gains across Asia, although it was touch and go whether it would be enough to prevent a second straight weekly loss for MSCI’s main world index.
Israel bombed targets in Iran, and Iran fired missiles at Israel overnight as the week-old war continued although Friday’s markets moves, which also included a modest drop in the dollar, showed an element of relief.
That was largely pinned on Thursday’s statement from the White House that Trump will decide in the next two weeks – rather than right away – whether the US will get involved in the war.
European foreign ministers were to meet their Iranian counterpart in Geneva on Friday, seeking a path back to diplomacy over its contested nuclear programme.
The relief the US wasn’t charging into the conflict sent oil prices down as low as $76.10 per barrel, although they were last at just over $77 and still up 4 per cent for the week and 20 per cent for the month.
“Brent crude is down 2.5 per cent today in the clearest sign that fears over an imminent escalation in the Israel/Iran conflict have eased,” MUFG strategist Derek Halpenny said.
Gold, another traditional safe-haven play for traders, was also lower on the day although Nasdaq, S&P 500 , and Dow futures were all in the red after US markets had been closed on Thursday.
Asian shares had gained 0.5 per cent overnight thanks to a 1.2 per cent jump in Hong Kong’s Hang Seng and as newly elected President Lee Jae Myung’s stimulus plans saw South Korea’s Kospi top 3,000 points for the first time since early 2022.
China’s central bank held its benchmark lending rates steady as widely expected in Beijing, while data from Japan showed core inflation there hit a two-year high in May, keeping pressure on the Bank of Japan to resume interest rate hikes.
That in turn lifted the yen and pushed down the export-heavy Nikkei in Tokyo.
Oil retreats
The dollar was ending an otherwise positive week lower on the day, with the euro up 0.3 per cent against the US currency at $1.1527 and the pound 0.2 per cent higher at $1.3494.
The US bond market, which was also closed on Thursday, resumed trading with the key 10-year Treasury bond yield flat at 4.39 per cent, while German 10-year yields , which serve as Europe’s borrowing benchmark rate, fell 2.5 basis points to 2.49 per cent.
Gold prices eased 0.5 per cent to $3,354 an ounce, but were set for a weekly loss of 2.3 per cent.
But the main commodity market focus remained oil. Brent crude futures were last down $1.60, or around 2.2 per cent, at $77.28 a barrel in London although they were still on track to end the week 4 per cent higher.
PVM analyst John Evans said the big market risk of the Middle East troubles was “unintended action that escalates the conflict and touches upon oil infrastructure”.
“The world has more than adequate supply for 2025, but not if the nightmare scenario of 20 million (barrels per day) being blocked in the seas of Arabia, however briefly that might be,” he said.
