Oil hits multi-week high, Wall Street slips as Iran tensions reignite

WASHINGTON, July 8 : Stocks were mostly lower and oil prices rose on Wednesday after U.S. President Donald Trump said the interim peace deal with Iran was "over" and the U.S. announced fresh military strikes.

Oil prices settled nearly 5 per cent higher as tensions reignited in the Middle East and worries mounted that global energy supplies could again be upended if vessel movement through the Strait of Hormuz is halted.

Brent futures LCOc1 rose $3.86, or 5.2 per cent, to settle at $78.02 a barrel, the highest since June 19. U.S. West Texas Intermediate (WTI) crude CLc1 rose $3.08, or 4.4 per cent, to $73.52, the highest since June 22.

Data this week showed crude stocks in the U.S. Strategic Petroleum Reserve hit their lowest level since 1983, leaving markets more vulnerable to future supply shocks.

On Wall Street, the Dow Jones Industrial Average suffered the steepest selloff, closing down 1.09 per cent, to 52,348.09. The S&P 500 also ended lower, dipping 0.28 per cent, to 7,482.59, while the Nasdaq Composite eked out a 0.2 per cent gain to 25,870.65.

Stock market pessimism was also deepened on Wednesday by a new warning from the International Monetary Fund that the conflict will cut into global growth this year.

MSCI's gauge of stocks across the globe fell 0.60 per cent, to 1,114.54.

Market reaction was muted to minutes released by the Federal Reserve detailing Chairman Kevin Warsh's first rate-setting meeting, which showed concern about mounting inflation.

More notable to investors was Warsh's desire to limit forward guidance, suggesting that investors may have fewer clues to future Fed moves.

"The Fed is choosing to tell markets less in the post-meeting statement, with forward guidance placed much more firmly in the rear-view mirror," said Russ Brownback, BlackRock's deputy chief investment officer of global fixed income, in a note.

"While the minutes themselves retain a familiar structure, the statement and forward-looking policy language are notably more guarded," he said.

Benchmark 10-year U.S. Treasury note yields rose for a seventh day, last up 4.01 basis points at 4.569 per cent after reaching a one-month high of 4.58 per cent.

In currency markets, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.22 per cent to 100.96. The yen hovered around 162.4, not far from 40-year lows.

Renewed Middle East tensions and ensuing inflation concerns also weighed on gold prices, where spot gold fell 0.52 per cent to $4,084.19 an ounce, and U.S. gold futures dropped 1.45 per cent to $4,085.00 an ounce. Although gold is often viewed as a hedge against inflation, the non-yielding metal tends to lose appeal in a high-interest-rate environment.