A Double-Edged Sword: US Economy Struggles Amidst Attacks on Iran
The Trump administration’s plan to neutralise Iran through military strikes and economic sanctions continues to backfire on the US economy. Most Asian stock markets weakened on Tuesday following declines on Wall Street, while US Treasury yields halted their upward trend after reaching their highest levels in approximately two decades.
US futures moved slightly lower, whereas oil prices rose amidst uncertainty surrounding US-Iran negotiations and the potential reopening of the Strait of Hormuz, a vital waterway for oil transport.
According to the Associated Press, on Monday US time, the S&P 500 index fell 0.8 per cent, the Dow Jones Industrial Average weakened by 0.7 per cent, and the Nasdaq Composite corrected by 0.9 per cent.
Stock markets are under pressure due to rising US Treasury yields, as investors seek higher returns amidst growing concerns regarding inflation and rising US government debt.
The 10-year US Treasury yield reached its highest level since 2007. The figure hovered around 5.25 per cent on Tuesday morning, after touching 5.27 per cent on Monday, compared to approximately 5.17 per cent last Friday.
Already high oil prices—which have contributed to inflation—rose again on Tuesday morning, even as mediators continue to work alongside the US and Iran to reach an agreement. Over the weekend, US President Donald Trump rejected an offer from Tehran regarding the reopening of the Strait of Hormuz.
Brent crude, the international benchmark, rose 1.8 per cent to US$99.63 per barrel; this figure far exceeds the $72 per barrel range recorded in late February, prior to the illegal US and Israeli attacks on Iran.
Japan’s Nikkei 225 index fell 1.2 per cent to 65,114.64. South Korea’s Kospi index weakened by 0.6 per cent to 6,847.56, and Hong Kong’s Hang Seng Index dropped 0.5 per cent to 24,516.46. Shein shares, traded in Hong Kong, plummeted 11.7 per cent after the fast-fashion online retailer reported that adjusted net profit for the last quarter fell 67 per cent compared to the previous year.
The Shanghai Composite index rose 0.1 per cent to 3,826.51 following a report from China’s official news agency, Xinhua, on Monday night, stating that the State Council discussed efforts to “increase the effectiveness” of macro policies to drive economic growth.