Asian share markets fell on Monday as fresh drone attacks in the Gulf pushed oil prices and bond yields higher. A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones. U.S. President Donald Trump warned Iran must act "fast" to reach a deal. The Strait of Hormuz remains mostly closed, draining global oil inventories. Analysts at Capital Economics warn inventories could reach critical levels by end-June, setting the stage for Brent at $130-140 per barrel. If the strait remains closed through year-end and oil stays around $150 into 2027, inflation could near 10% in the UK and euro zone, leading to global recession. Brent traded up 1.9% at $111.34; U.S. crude climbed 2.3% to $107.84. G7 finance ministers meet in Paris Monday to discuss the crisis.
Bond markets were hammered Friday on inflation fears. Yields on U.S. 10-year notes hit a 15-month high of 4.631%. Japanese yields peaked at levels not seen since 1996.
Japan's Nikkei fell 1.1%; South Korean stocks slipped 0.1%; MSCI's Asia-Pacific index lost 0.9%. Chinese blue chips held steady. Economic data disappointed as April retail sales rose just 0.2%, missing expectations of 2.0%.
S&P 500 and Nasdaq futures fell 0.6% and 0.8%, respectively. Analysts at Citi noted half of recent earnings boosts came from one-time items, warning that broadening is needed for further index upside.
The AI trade faces a major test this week with Nvidia earnings due Wednesday, expectations sky-high for the world's most valuable company. Nvidia shares are up 36% since a March low. Retail earnings from Walmart also due.
In forex, the dollar strengthened on risk aversion. The euro sat at $1.1616 after losing 1.4% last week. The pound wallowed at $1.3311. Gold dipped 0.2% to $4,527 an ounce.