Stocks opened lower in Japan and Australia, indicating a headwind to sentiment after two days of advances for a gauge of the region’s stocks. Markets were also set to reopen in Hong Kong after the Lunar New Year holidays, while those for mainland China remained shut. The dollar was poised to notch its best week since mid-November.
Crude rallied as President Donald Trump said the US has to “make a meaningful deal” with Iran, adding that the next 10 days will tell whether there will be an accord. Treasuries edged higher on Thursday and gold hovered around $5,000 an ounce. US stocks also fell, with alternative asset managers facing sharp declines after a private credit fund halted redemptions.
Caution has resurfaced in markets as US moves on Iran introduced a fresh layer of geopolitical risk, halting a tentative rebound in equities and dampening broader risk appetite. The renewed tensions threaten to derail a nascent recovery that had begun to take hold after weeks of volatility driven by concerns over AI-related disruption across sectors and companies.
With Iran’s military proxies greatly weakened and the economy in crisis, the country doesn’t find itself in a very strong negotiating position, so the markets likely expect a diplomatic resolution, according to Dennis Follmer at Montis Financial.
“Right now, stocks have not priced in the tensions between the US and Iran,” he said. The US military is stationing a vast array of forces in the Middle East, including two aircraft carriers, fighter jets and refueling tankers, giving Trump the option for a major attack against Iran as he pressures the country to strike a deal over its nuclear program.American military buildup in the Middle East means Iran’s window to reach a diplomatic agreement over its atomic activities is at risk of closing, according to the head of the United Nations nuclear watchdog. A potential war would put flows at risk from a region that pumps about a third of the world’s oil.
“Crude oil prices are rising on the anticipation of possible military action in Iran,” said Louis Navellier at Navellier & Associates. “The US and Iran are expected to meet again, and those negotiations are expected to be closely watched.”
West Texas Intermediate traded below $67 a barrel, after adding about 7% in the prior two sessions, while Brent closed near $72.
Some traders also attributed the risk-off mood to caution ahead of Friday’s readings on the economy and inflation, particularly after minutes of the Federal Reserve’s latest meeting showed renewed concerns about price pressures. Also, the US Supreme Court has scheduled Friday as its next opinion day amid a global wait for a ruling on Trump’s signature tariffs.
Also dimming sentiment among investors was Blue Owl Capital Inc.’s decision to restrict withdrawals from one of its private credit funds that raised concerns over the risks bubbling under the surface of the $1.8 trillion market. Its shares sank about 6% Thursday, dragging down industry peers like Apollo Global Management Inc., Ares Management Corp. and TPG Inc.
Traders also kept an eye on the latest US economic readings.
On Friday, the government will issue its first estimate of gross domestic product for the fourth quarter, a period that included the longest-ever federal government shutdown. The latest report card on the economy is projected to show growth cooled to a still-solid annualized pace after expanding in the prior quarter at the quickest rate in two years.
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