Asia-Pacific markets saw choppy trading on Tuesday, as oil prices reversed course and fell following reports that President Donald Trump wants to avoid a protracted conflict in the Middle East.
The Wall Street Journal reported Monday night that Trump told aides he was willing to end U.S. military hostilities against Iran even if the Strait of Hormuz remained largely closed.
West Texas Intermediate futures for May delivery reversed gains, falling 0.72% to $102.14 a barrel by 10:31 p.m. ET. May Brent crude oil futures also eased, falling 1% to $111.55 a barrel.
Trump and his aides estimated that an operation aimed at reopening the critical point could extend the conflict beyond the initial timeline for war, up to six weeks, according to the WSJ.
“Trump may be forced to wave the white flag to control gas prices and thus inflation before the midterm elections,” said Ben Emmons, chief information officer at Fed Watch Advisors, noting that Trump’s “verbal signals” to end the war with Iran gained value after Brent approached $120 a barrel.
The war has increasingly become an “asymmetric” game, Emmons said, adding that the US now gains more from de-escalation than before, while Iran continues to benefit the most from prolonging the conflict.
Trump has previously threatened to expand attacks on Iran’s civilian energy infrastructure, including water desalination plants, if Tehran does not open the Strait of Hormuz.
Shipping through the Strait of Hormuz, which carried a fifth of global marine oil before the conflict, has been virtually halted since the US and Israel launched attacks on Iran on February 28.
South Korea’s Kospi fell 2.2%, while Kosdaq lost 1.9%. The Korean won depreciated by 0.67% to 1,537.4 against the US dollar, hovering near its lowest level since 2009.
Japan’s Nikkei 225 fell 0.13%, while the broad Topix reversed earlier losses to trade 0.18% higher.
Australia’s S&P/ASX 200 also turned positive, rising 0.9%.
Hong Kong’s Hang Seng index fell 0.3%, while China’s CSI 300 index was little changed.
Overnight in the US, the S&P 500 fell 0.39% to end at 6,343.72, its third straight loss, while the Nasdaq Composite fell 0.73% to end at 20,794.64. The Dow Jones Industrial Average reversed the trend and rose 0.11% to 45,216.
Stocks fell even after Federal Reserve Chairman Jerome Powell said the outlook for inflation remained under control despite rising energy prices and that the central bank did not need to respond with higher interest rates.
