By Ankur Banerjee SINGAPORE, March 26 (Reuters) - Asian stocks struggled for direction while the dollar held firm on Thursday as investors treaded cautiously amid dizzying developments in the Middle
Nasdaq confirms correction, bond prices fall as Iran crisis pushes oil to $108
Market Reactions to Middle East Crisis and Economic Impacts
By Caroline Valetkevitch and Marc Jones
Stock Market Performance
NEW YORK/LONDON, March 26 (Reuters) - Stock indexes fell sharply on Thursday, with the Nasdaq dropping more than 2% to confirm a correction, and Brent oil jumped to more than $105 a barrel as hopes diminished for a quick resolution to the nearly one-month-old Middle East war.
Political Tensions and Market Sentiment
U.S. President Donald Trump said Iran must make a deal or face a continued onslaught, while a senior Iranian official told Reuters on Thursday that a U.S. proposal for ending the fighting is "one-sided and unfair."
Global debt markets also sold off, pushing yields higher, while safe-haven buying boosted the U.S. dollar.
Nasdaq Correction and Wall Street Declines
On Wall Street, the Nasdaq Composite dropped 2.4%, leaving the tech-heavy index down nearly 11% from its record-high close on October 29 and confirming it has been in a correction - typically defined as a fall of 10% to 20% - since then. The day also marked the biggest one-day decline for the Nasdaq and the S&P 500 since January 20.
Stock futures trimmed losses after the bell as Trump said he was pausing attacks on Iran's energy plants for 10 days until April 6 at the Iranian government's request.
Investor Sentiment
“This war has really been punishing investor psyches," said Ryan Detrick, chief market strategist at Carson Group. The move in the Nasdaq "is further confirmation that the weakness we've been seeing across the board continues."
Energy Markets and Oil Price Surge
Oil and Gas Price Movements
Prospects of a prolonged war in the Middle East fanned worries about energy supply disruptions. Oil and European natural gas rose, with Brent futures settling at $108.01 a barrel, up $5.79. U.S. crude CLc1> settled at $94.48.
The war, triggered by U.S.–Israeli strikes on Iran, has rattled global markets and effectively shut the Strait of Hormuz, a conduit for a fifth of global oil and liquefied natural gas flows.
Expert Commentary
"Unfortunately, we're in a market that's being driven by oil prices. The rhetoric back and forth is continuing, and until talks begin, the market is going to be subject to the price of oil," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Global Indices and Central Bank Actions
Major Index Performance
The Dow Jones Industrial Average fell 469.38 points, or 1.01%, to 45,960.11, the S&P 500 fell 114.74 points, or 1.74%, to 6,477.16 and the Nasdaq Composite fell 521.74 points, or 2.38%, to 21,408.08.
MSCI's gauge of stocks across the globe fell 15.90 points, or 1.60%, to 979.56.The pan-European STOXX 600 index fell 1.13%.
Central Bank Responses
The Philippines held an unscheduled central bank meeting due to the turmoil, while Germany's central bank head said a European Central Bank rate hike next month was "an option." Germany's two-year bond yield, sensitive to ECB rate expectations, rose. Bond yields move inversely to prices.
Bond Markets and Currency Movements
Bond Yields and Inflation Concerns
Worries about persistent inflation also drove U.S. Treasury yields higher. The benchmark U.S. 10-year Treasury yield was last up 7.8 basis points at 4.404%. The two-year note's yield was last up 8.6 bps at 3.967%.
Earlier, the yield on Japan's two-year government bond hit its highest level in 30 years at 1.33%, as traders cemented bets on another Bank of Japan rate hike as early as next month. [JP/]
Currency Markets and Safe-Haven Flows
In currencies, the U.S. dollar rose against most major currencies, reviving its safe-haven appeal.
Fears of a 2022-style inflation shock have seen traders fully price out any chance of a Federal Reserve rate cut this year, further supporting the dollar.
In afternoon trading, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.3% to 99.92, with the euro down 0.24% at $1.1529. Against the Japanese yen, the dollar strengthened 0.19% to 159.75.
Commodities Market Update
Gold Prices
Gold fell. U.S. gold futures for April delivery settled 3.9% lower at $4,376.30.
(Reporting by Caroline Valetkevitch in New York and Marc Jones in London; additional reporting by Stephen Culp in New York; editing by Mark Potter, Will Dunham, Arun Koyyur and Lincoln Feast)
