- US futures rise, oil prices moderate
- Investors focus on inflation risks
- Traders rapidly cut Fed rate cut wagers for year
- Markets grapple with uncertainty over duration of war
- Dollar stands tall, pushing yen to 20-month lows
Key Points
SINGAPORE/LONDON, March 13 (Reuters) – Stocks rose on Friday after recent heavy selling, helped by lower oil prices, although uncertainty over the Iran war continues to disrupt energy supplies which is driving concerns over fuel inflation and interest rates.
The price of oil fell below $100 per barrel, but remains about 37% higher than when the United States and Israel launched strikes on Iran almost two weeks ago.
President Donald Trump said the U.S. was going to be hitting Iran “very hard over the next week”, shortly after issuing a partial 30-day waiver for purchases of sanctioned Russian oil, hoping to ease prices fuelled by the U.S.-Israeli war on Iran.
U.S. futures pointed to gains with S&P 500 e-minis rising 0.4%, following steep declines on Thursday that saw the S&P 500 (.SPX), opens new tab close 1.5% lower.
“It could simply be the case we’ve had two if not three days of pretty aggressive selling across the board, and there’s simply a degree of exhaustion coming in,” said Michael Brown, senior research strategist at Pepperstone
“Crude benchmark is a touch softer, and everything on the whole is still taking its lead from where oil is trading,” he said.
Europe’s STOXX 600 (.STOXX), opens new tab reversed course after falling during morning trading and was last 0.3% higher. But the index remains on track for a 5.4% fall in March so far – its biggest two-week decline in a year.
Meanwhile the dollar has become the safe-haven of choice during the tumult, putting most other currencies under pressure. The U.S. currency was set for a second consecutive week of gains and is up 2.5% since the war began at the end of February.
Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin in Zurich, said there was a sense of urgency in markets over the duration of the conflict.
“If we don’t make any progress and just have a status quo for a prolonged period … that would obviously mean that oil prices stay higher for longer, and we have a more pronounced impact on the economy and on inflation,” he said.
OIL PRICE DRIVING MARKET
Brent crude oil futures fell 1.3% to $99.19 a barrel, while West Texas Intermediate crude was at $93.68 a barrel. Both had hovered around $60 at the start of 2026.
Traders are trying to predict how long the disruption to oil supplies will last.
“Headlines are coming at the market like water from a fire hose, which is impacting the price of oil, and consequently, financial markets,” said Mitch Reznick, group head of fixed income at Federated Hermes.
With Iran stepping up attacks across the Middle East as its new Supreme Leader Mojtaba Khamenei vowed to keep the Strait of Hormuz shipping lane closed, investors are bracing for a prolonged conflict and higher oil prices.
The spectre of rising inflation has led markets to rapidly reprice what they expect from central banks this year, with traders now anticipating just 20 basis points of easing from the Federal Reserve compared to 50 bps of cuts priced in last month.
Two-year Treasury yields, which typically move in step with Fed interest rate expectations, hit a six-month high on Thursday.
Elsewhere, the Personal Consumption Expenditure index, the Federal Reserve’s preferred inflation gauge, rose 0.3% in January, on a monthly basis, in line with economists’ estimates of a 0.3% rise.
SHIFTING RATES OUTLOOK
Jose Torres, senior economist at Interactive Brokers, said the impact of rising oil prices on corporate margins, inflation expectations, rate-cut prospects and yields is sparking volatility, leaving participants with few places to hide.
“Indeed, sinking optimism about Fed rate reductions amid strengthening cost pressures is weighing on traditional safe havens such as silver, gold, and government debt.”
The two-year note yield fell 4 bps to 3.72% after hitting its highest level since August 22 on Thursday. The yield has gained about 35 bps in the two weeks since the war started.
Investor focus will switch to a slate of policy meetings next week with the Fed, the Bank of Japan, the European Central Bank and the Bank of England all due to meet, with most expected to keep rates unchanged. The Reserve Bank of Australia is broadly expected to hike rates next week.
The yen hit its weakest level since July 2024 at 159.69 per U.S. dollar on Friday as Japan warned that it was ready to take action to protect against yen declines. It was last at 159.39.
Analysts said the bar for intervention is higher this time around as any intervention now could prove futile in the face of the relentless dollar buying.
In currencies, the euro fell 0.4% to $1.146525, on course for a weekly decline of 1.3%. The dollar index was at 100.7, set for about a 1% weekly advance.
Gold was 0.7% higher at $5,114.32 per ounce on Friday but set for a 1.1% drop for the week.
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