Oil jumps as Trump eyes longer blockade; Fed divided over easing bias

Oil prices jumped as US President Donald Trump said he won’t lift a naval blockade of Iran until he secures a deal on the Islamic Republic’s nuclear programme, stoking expectations that the Strait of Hormuz will stay closed for an extended period.

Stocks on Wall Street were subdued and bond yields held gains after the Federal Reserve kept its key rate unchanged in Jerome Powell’s final review as chair, with three dissenting voices over the central bank’s easing bias.

The tech-heavy Nasdaq Composite’s decline was more modest than the other major indices, with Intel and Qualcomm rallying ahead of earnings from four of the Magnificent 7 megacap companies, which are driving investment in artificial intelligence infrastructure.

The kiwi dollar dropped and Australian futures are pointing to a soft start to the day for the ASX, while ANZ is due to release its monthly gauge of New Zealand business confidence.

Roiling markets

Brent crude oil futures climbed 6.8% to US$118.86 a barrel at 7am in Auckland amid news US President Trump has discussed ways to prolong the blockade of Iran as he seeks to extract concessions from the Islamic Republic over its nuclear programme in the protracted Middle East conflict.

The Polymarket prediction market is pricing in a 26% chance of a permanent peace being negotiated by the end of May and a 42% chance by the end of June.

“Risk sentiment has weakened after signs that the Strait of Hormuz will likely remain closed for an extended period, with the US naval blockade in place until there’s a deal on Iran’s nuclear programme,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Brent crude surged towards US$120 per barrel, exceeding the March peak.”

Meanwhile, the Fed kept the federal funds rate in a range of 3.5%-to-3.75% as expected in the last meeting chaired by Jerome Powell, who said he’ll stay on the federal open market committee for the time being.

Three members voted against keeping an easing bias in the statement, while governor Stephen Miran again voted for a cut in the most divided policy meeting since 1992. The yield on US 10-year Treasurys rose 6 basis points to 4.41%.

Earnings loom

Stocks on Wall Street were weaker, with the Dow Jones Industrial Average down 0.7% in late trading, with Boeing, Travelers Cos and Sherwin-Williams leading the blue-chip index lower. The S&P 500 dipped 0.2%, while the Nasdaq was marginally weaker ahead of earnings from Amazon, Alphabet, Meta Platforms and Microsoft after the bell.

Corporate earnings were mixed as Robinhood tumbled 14% after softer-than-expected crypto trading disappointed analysts, while Teradyne sank 19% despite beating expectations as investors remain on edge after reports this week that OpenAI missed its internal targets. SoFi Technologies sank as its earnings growth lagged behind forecasts.

Starbucks advanced 8.7% as its sales recovery picks up pace.

Stock markets were weaker on the other side of the Atlantic, with the UK’s FTSE 100 dropping 1.2% with GSK and AstraZeneca among decliners despite posting strong quarterly earnings. Germany’s DAX slipped 0.3% and France’s CAC 40 declined 0.4%, with Pernod Ricard sliding after ending its merger talks with Jack Daniel’s owner Brown-Forman.

That subdued tone is set to continue into the antipodes, with Australian futures pointing to a 0.8% decline for the S&P/ASX 200 index, which is heading for a 2.4% gain this month. New Zealand’s S&P/NZX 50 index is down 1.1% so far in April.

The kiwi dollar dropped to 58.28 US cents at 7am from 58.63 cents yesterday ahead of ANZ’s business outlook survey.

Reporting by Paul McBeth. Image from Patrick Hendry on Unsplash.