Oil Falls, Risk Sentiment Rises as U.S. Avoids Iran Escalation

By Dow Jones Newswires Staff

Oil prices fell and U.S. stocks looked set to extend record highs after President Trump walked back an effort to guide commercial ships through the Strait of Hormuz, easing concerns of a near-term escalation in the U.S.-Iran war.

The U.S. moved to cool rising tensions with Iran, playing down Tehran's attacks in recent days. Meanwhile, President Trump said that there had been "great progress" toward a complete and final agreement with Iran.

The avoidance of further escalation saw U.S. Treasury yields move lower, while Brent crude oil slipped to just over $108 a barrel. The dollar fell as the yen strengthened amid suspected currency intervention from Japanese officials.

Tech stocks rallied in Asia, boosting the South Korean Kospi to a record high. Investors' artificial-intelligence exuberance continued in the U.S. premarket, with the tech-heavy Nasdaq set to extend gains from its own record close in the last session.

Federal Reserve-watchers will look to U.S. private payrolls data for April due for release later Wednesday.

--In early European trading, front month Brent crude was down 1.1% to $108.68 a barrel, while WTI futures for June fell 1.1% to $101.16 a barrel. The U.S. said Iranian attacks on oil facilities in the United Arab Emirates didn't constitute a cease-fire breach, easing concerns of further attacks on oil supply from the U.A.E., ANZ analysts said. However, prices remain elevated as the two sides appear no closer to a deal to reopen the strait, the analysts said.

--U.S. futures for the S&P 500 were up 0.3%, while futures for the Dow Jones Industrial Average climbed 0.2%. The tech-heavy Nasdaq rose 0.7% premarket.

Shares in Advanced Micro Devices jumped 16% premarket after the semiconductor company posted a sharp rise in sales for its data-center segment in the first quarter.

--Asian markets rose, tracking chip maker-fuelled gains in the U.S. South Korea's Kospi closed 6.5% higher at a record, topping 7000 for the first time thanks to a rally by its heavyweight chip stocks. Memory chip maker Samsung Electronics jumped close to 15%, nudging its market value above $1 trillion for the first time.

China's Shanghai Composite ended 1.2% higher, while the Shenzhen Composite finished up 2.2%. The country's tech-heavy ChiNext Price Index closed 2.75% higher after touching a near 11-year intraday high. Hong Kong's Hang Seng Index rose 0.9%, while its tech gauge gains 0.5%. Japan's market remains closed on a public holiday.

--European blue-chip stock indexes gained strongly at market open as banks across the continent rallied. Germany's energy-sensitive DAX index rose 1.2% as automakers gained, with BMW up 5.6% after reporting earnings. London's FTSE 100 was up 1.5%, boosted by a 4.85% jump for Guinness-owner Diageo, which reported surprise sales growth in the first quarter. Gains for miners also supported the index. France's CAC 40 was 1.3% higher, while the Italian FTSE MIB and Spanish IBEX 35 rose 1.4% and 1.3%, respectively. Banks gained across indexes. UniCredit was up 3.6% in Milan, while Santander gained 2.6%. The Dutch AEX edged up 0.45% as AI stocks gained, with ASML rising 2%.

--The dollar fell reflecting hopes for a U.S.-Iran peace deal and a stronger yen amid intervention speculation. The prospect of further peace talks dented the dollar as a safe haven and America's position as a net oil exporter. Meanwhile, there is market chatter that Japanese authorities used currency interventions to bolster the yen earlier Wednesday after taking possible action last week. The yen is the second largest component in the basket of currencies used to calculate the DXY dollar index after the euro. The DXY fell 0.4% to 98.076.

--Treasury yields declined in opening European trade. The two-year Treasury yield fell 2.3 basis points to 3.913%, while the 10-year yield was down 3 basis points at 4.385%.

Eurozone government bond yields fell in early trading. Supply is limited to Germany, which auctions 3.5 billion euros in the November 2032 Bund and aims to sell 3.5 billion euros in the syndicated tap of the August 2056 Bund. The 10-year German Bund yield fell 4.1 basis points to 3.035%, according to Tradeweb.

--Bitcoin edged lower after hitting a three-month high overnight, falling 0.2% to $81,475.

--In early European trading, gold futures in New York rose 2.2% to $4,668.80 a troy ounce. Fears of further conflict help maintain gold's safe-haven appeal, ING's Warren Patterson and Ewa Manthey said. However, a more durable truce would lower inflation risk and in turn limit the chance of Federal Reserve rate hikes, supporting nonyielding gold, they said.

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(END) Dow Jones Newswires

05-06-26 0434ET