Oil slides on Iran supply hopes; bond yields pushed lower before Warsh debut

SINGAPORE/MILAN: Crude prices fell on Wednesday on news that Iranian fuel may soon hit the world's markets, bringing inflation relief and pushing bond yields lower, while stocks and currencies were quiet ahead of Kevin Warsh's debut as Federal Reserve chair.
Brent crude futures dove below $80 and are down more than a third from recent peaks following reports that the U.S. will waive sanctions on Iranian oil, under a deal to end the war.
The prospect of extra supply added to optimism about the resumption of Middle East exports and helped push yields on U.S. Treasuries lower ⁠along with a rally in global bonds, even as the conflict has drained strategic oil reserves.
'Iran's total exports could approach around the equivalent of ⁠2% of global demand,' said Luka Belobrajdic, an economist at Westpac, though he cautioned any sanctions relief is unlikely to be immediate and would depend on the durability of peace.
German 10-year government bond yields, the euro zone benchmark, fell for a fifth day, hitting their lowest point since early April; they were last down 1.6 basis points at 2.91%.
British yields fell ‌sharply after May inflation unexpectedly held at a 13-month low of 2.8%, a ​day before the Bank of England is ⁠slated to unveil its next rate decision. U.S. Treasury yields steadied at 4.43%, down around 23 basis points from a ​May peak.
Few details of the U.S.-Iran agreement, due ‌to be signed on Friday, have been publicly confirmed, and a three-month stranglehold on the Strait of Hormuz has U.S. oil reserves at their lowest point since 1983.
Falling oil prices could ease concerns about an economic slowdown in energy-importing Europe, ​whose stock markets have lagged tech-heavy Wall Street indices this year.
'Lower prices could lead to a recovery in manufacturing and consumer sentiment,' wrote Deutsche Bank strategist Maximilian Uleer, dropping his preference for U.S. stocks over Europe.
The pan-European STOXX 600 rose 0.1%, staying close to Monday's record. Shares in BMW fell 8% after the German automaker slashed its 2026 outlook, citing a downturn in China and the impact of the U.S.-Israeli war on Iran.
The FTSE 100 was 0.1% lower.
Wall Street futures pointed to a bounce ‌in tech after heavy losses among U.S. chipmakers, as volatility resurfaced in the sector after a record-breaking run.
Chipmaker-heavy markets in Tokyo and South Korea shrugged off ​a negative lead from U.S. selling in semiconductor shares overnight, though a fall for Taiwan's TSMC capped gains in Taiwan's benchmark.
MSCI's broadest index of Asia-Pacific shares ​outside Japan was up ‌0.4% ⁠and in China, AI gains offset sagging consumer stocks in the wake of weak retail sales data.

FED ON HOLD, WARSH IN FOCUS
Traders are waiting to see how Warsh walks the line between his dovish president and the markets, which expect a hike this year. The anticipation has broadly held the dollar ​in stasis.
The euro has firmed only a little this week to hover around $1.16. Tuesday's rate hike in Japan ⁠failed to lift the yen, ​though the downside was protected by the risk of official intervention, holding it at 160.2 to the dollar.
A change in the Fed funds rate is unlikely, so the focus is on the press conference, Warsh's vote and committee members' projections, which in March showed most expected to cut rates.
'I don’t have either cuts or hikes on my radar in the next 12 months,' said Arne Petimezas, director of research at Dutch broker AFS Group. 'If Warsh is going to ​hike, which is where I think the risks are, it will be more than just one hike.'
Sweden's Riksbank kept its policy ​rate unchanged, but forecast a possible hike ahead.
Gold , down more than 20% from January peaks, has bounced strongly from support at around $4,000 an ounce and was last at $4,325 an ounce on Wednesday. Bitcoin has found support above $64,000 and recently traded just above $65,400.