Oil prices skidded, and stocks wobbled on Monday as hopes of a peace deal in the Middle East grew, while the yen jumped suddenly again after the U.S. and Japan confirmed joint intervention to prop up the frail currency.
Crude oil prices tumbled more than 5% on Monday as markets reacted to signs of a possible diplomatic breakthrough between the United States and Iran. The sharp decline came after US President Donald Trump said talks with Iran were expected to take place.
Brent crude futures slid 5% to around $83.6 a barrel while WTI crude fell 5.7% to around $80 per barrel. The sell-off came as traders responded to the prospect of easing tensions in West Asia and a potential improvement in the flow of oil through key shipping routes.
S&P 500 futures rose 0.5% while Nasdaq futures gained 0.8%. European futures were 0.7% higher.
Asian stocks, though, struggled at the start of the week after a turbulent July that saw wild swings due to worries over the AI trade as investors fretted about the massive capital spending and whether it will provide returns quickly enough.
Japan's Nikkei dipped nearly 2%, while South Korea's KOSPI slid over 4%. MSCI's broadest index of Asia-Pacific shares outside Japan was down about 1%.
YEN BEARS COWER AFTER JOINT INTERVENTION
The Japanese yen firmed 0.5% to 156.47 per U.S. dollar after a sudden move earlier in the day put traders on alert for another bout of intervention.
Japan and the U.S. conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan's finance ministry said on Monday, confirming a rare bilateral action to halt the yen's slide to fresh 40-year lows.
U.S. Treasury Secretary Scott Bessent also said the United States would consider increasing in coming months the size of the Federal Reserve's repurchase facility providing temporary dollar liquidity, calling the tool an "important backstop".
"Bessent's comments arguably carry more weight than the intervention itself," said Matt Simpson, senior market analyst at StoneX. "It feels like a safe bet that the Japanese yen has troughed for the year. The words 'joint intervention' carry a lot of weight in these markets and is a term rarely used."
Preceding the announcement on the joint action, Trump said on Sunday the United States was helping Japan to prop up the yen as a sign of friendship and to help the world economy.
"They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan," Trump said.
Tokyo's solo intervention conducted between late April and early May caused only a brief yen rebound, while a rate hike in June by the Bank of Japan provided little boost, underscoring the challenge facing policymakers amid rising oil prices and a wide interest rate differential against other major economies.
The yen had been rooted near 40-year lows of 163.99 per U.S. dollar in recent weeks before the latest bout of interventions, with net short positions on the yen of roughly $12.5 billion, the highest in two years, data from a U.S. regulator showed.
"They are clearly determined to make a solid effort in strengthening the yen as the billions of dollars they have spent and joint moves have proved," said Nick Twidale, chief market strategist at ATFX Global.
"However, there will need to be a change in the underlying fundamentals for these moves to be sustainable. The market will challenge these moves once they feel the action has been completed."
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