Oil slides as Bessent declares ‘economic D-Day’ for Iran

Oil prices fell and stock markets were broadly weaker on both sides of the Atlantic as US Treasury secretary Scott Bessent outlined plans to further isolate Iran, warning world leaders to end relations with the Islamic Republic or face US punishment.

Tensions between the US and Canada escalated as President Donald Trump eyed a 50% tariff on cars and autoparts for its neighbour, weighing on carmakers such as Ford and Stellantis, while the US is said to be eyeing a new import levy for China ahead of the American president’s meeting with his Chinese counterpart Xi Jinping next month.

Nvidia was on track for its longest losing streak since 2022 ahead of the chipmaker’s quarterly earnings on Wednesday, with the tech-heavy Nasdaq Composite declining in the latest bout of nervousness over the artificial intelligence sector.

Meanwhile, Australian futures are pointing to a modest gain when the ASX opens, with Coles and Woodside Energy among companies reporting across the Tasman, while in New Zealand, earnings from Tourism Holdings and Vulcan Steel are on the calendar and Fisher & Paykel Healthcare holds its annual meeting in Auckland.

Isolation

Brent crude oil futures fell 2.3% to US$92.24 a barrel at 7am in Auckland after US Treasury secretary Bessent stepped up pressure on Iran as the Middle East conflict continued, warning countries they would face consequences for maintaining relations with the Islamic Republic.

Secondary sanctions could be applied on countries and firms doing business in digital assets, technology, gold, aviation and shipping.

“As promised, US Treasury secretary Bessent announced a fresh set of economic measures to punish Iran, as the US pivots away from military action in an effort to win the war,” Bank of New Zealand senior markets strategist Jason Wong said in a note.

Meanwhile, US President Trump threatened a 50% tariff on Canadian cars and autoparts after Canada said it would apply retaliatory levies on its neighbour when trade negotiations fell over last week. Automakers were weaker on Wall Street, with Ford Motor Co and Stellantis down 3.5% in late trading, while Tesla dropped 4%.

Mexican President Claudia Sheinbaum was optimistic her nation could reach a deal with the US.

And Bloomberg reported the US was set to impose a 7.5% tariff on Chinese goods over claims of excess manufacturing capacity in Asia’s biggest economy. That comes ahead of Trump’s meeting with Xi next month.

Tech stocks weighed on Wall Street, with the Nasdaq down 0.6% in late trading, with chipmaker Nvidia falling 2.5% as its losing streak continued ahead of its quarterly earnings.

Alibaba Group’s HK$80 billion share placement and SoftBank Group’s ¥1 trillion bond offering to help fund AI investments kept investors on edge about the sector ahead of Nvidia’s result.

Meanwhile, yields on Broadcom corporate debt have been rising as bond traders see growing credit risk in the sector. The company is in talks to raise more than US$60 billion of debt for an AI chip financing deal.

Concentrated declines

Greg Boland, market strategy consultant at Moomoo, said the declines on Wall Street weren’t as widespread as the headline indices indicated, with 290 gainers on the S&P 500.

“The weakness is concentrated in technology and semiconductor stocks as investors reduce risk ahead of Nvidia's highly anticipated results,” Boland said in a note.

The S&P 500 slipped 0.2% in late trading, while the Dow Jones Industrial Average gained 0.3%, led higher by Visa, Walmart and Walt Disney Co.

Across the Atlantic, the UK’s FTSE 100 rose 0.4%, while Germany’s DAX dipped 0.1% and France’s CAC 40 declined 0.4%.

Temu owner PDD declined yesterday after reporting stronger profit than analysts predicted, while cautioning that upgrading its ecommerce system could introduce some volatility to its bottom line.

Meanwhile, fast-fashion giant Shein filed papers for an initial public offering in Hong Kong, with a valuation of US$27 billion.

Australian futures are pointing to a 0.1% gain for the resources-heavy S&P/ASX 200 index when trading opens across the Tasman, with gold futures up 0.2% at US$4,690 an ounce. The kiwi dollar fell to 59.56 US cents at 7am in Auckland from 59.75 cents yesterday.

Rumours surrounding SkyCity Entertainment Group continued to swirl, with The Australian’s DataRoom reporting that US private equity firm Oaktree Capital Management was in talks with the casino operator about a potential buyout.

The domestic earnings season continues with results due from Tourism Holdings, Vulcan Steel, NZME and Move Logistics, and F&P Healthcare holding its annual meeting having upgraded guidance last week.

Reporting by Paul McBeth. Image from Remington Wigzell on Unsplash.