Risks around the Strait of Hormuz and the lack of any significant development signaling an end to tensions between the US and Iran led investors in global markets to pull away from risky assets. Oil prices rose, while stock markets generally followed a negative course.
A senior Iranian official allegedly said that Iran could shift from a defense-focused policy to an offense-focused policy if diplomatic efforts failed. US President Donald Trump also answered "No" when asked in the Oval Office whether the expired 60-day framework agreement would be extended.
Trump said the United States would bomb Oman if it blocked US activities in the Strait of Hormuz, where tensions with Iran remain high. The statements heightened concerns about the impact of regional tensions on energy supplies and global investment conditions.
Oil rises as selling pressure builds in bond markets
October Brent crude futures rose 0.6% to $91.4 a barrel. The rise in energy prices increased inflationary pressures and intensified selling pressure in bond markets.
The US 10-year Treasury yield rose 6 basis points to 4.73% after falling as low as 4.67% the previous day, and stabilized at 4.74% today. The US 30-year Treasury yield reached 5.32%, its highest level since 2007.
As geopolitical risks increased demand for safe-haven assets, the dollar index rose 0.1% to 99.7. Gold fell 0.5% to trade at $4,394 an ounce.
US stock indexes decline
The New York branch of the US Federal Reserve's manufacturing index rose to 20.6 in August, reaching its highest level in more than four years. The index exceeded market expectations.
US chipmaker Nvidia announced that it would invest $1.5 billion in SB Energy under an agreement related to the artificial intelligence factory OpenAI plans to establish in Ohio. Nvidia shares nevertheless fell 0.9% in after-hours trading.
On the New York Stock Exchange, the Dow Jones index fell 0.51%, the S&P 500 declined 0.52% and the Nasdaq dropped 0.32%. US index futures also opened lower.
Sell-offs intensify in Europe and Asia
Rising energy prices and geopolitical tensions created a selling-heavy picture in European stock markets. The FTSE 100 fell 0.28% in the UK, the CAC 40 declined 0.66% in France and the DAX 40 dropped 0.38% in Germany, while Italy's FTSE MIB 30 rose 0.01%. European index futures opened lower.
Selling pressure also deepened in Asian markets amid geopolitical risks and rising bond yields. Japan's 10-year Treasury yield rose to 2.94%, its highest level since 1996.
Near the close, the Nikkei 225 fell 1.9%, South Korea's Kospi declined 0.9%, China's Shanghai Composite dropped 0.4% and Hong Kong's Hang Seng index fell 0.7%.
Borsa Istanbul closes lower
The BIST 100 index at Borsa Istanbul ended the session, which was dominated by selling, down 0.28% at 14,132.06 points. The August futures contract based on the BIST 30 index also fell 0.03% in the evening session compared with the regular session close.
Dollar/Turkish lira ended the previous day up 0.1% at 47.9150. The exchange rate traded at 47.9200 at the opening of the interbank market.
Turkey's July housing price index will be monitored domestically. Abroad, a busy data agenda will include Germany and the eurozone's August ZEW economic sentiment indexes and US July industrial production. In the BIST 100 index, 14,000 and 13,900 points stand out as support levels, while 14,300 and 14,400 points are resistance levels.
Key data on the economic calendar
- 10:00: Turkey's July housing price index
- 12:00: Germany and the eurozone's August ZEW economic sentiment indexes
- 15:30: US July housing starts and building permits
- 16:15: US July industrial production and capacity utilization rate
- 17:00: US July pending home sales
