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NEW YORK, March 17 : Global stocks rose on Tuesday for a second straight session, even as the war in Iran drove up oil prices and ahead of a flurry of policy announcements from global central banks this week.
Israel said it killed Iran's security chief, while a senior Iranian official said the new supreme leader had rejected de-escalation offers conveyed by intermediaries.
U.S. crude rose 1.24 per cent to $94.66 a barrel and Brent climbed to $101.73 per barrel, up 1.52 per cent as Iranian attacks on the United Arab Emirates rekindled supply fears while the Strait of Hormuz remains largely shut. Both Brent and U.S. crude are up more than 40 per cent for the month.
MAJOR S&P SECTORS ADVANCE
On Wall Street, U.S. stocks were higher in early trading, led by a 1.7 per cent rise in the S&P 500 financial index as each of the 11 major S&P 500 sectors advanced.
The Dow Jones Industrial Average rose 432.97 points, or 0.92 per cent, to 47,379.38, the S&P 500 gained 44 points, or 0.66 per cent, to 6,743.38 and the Nasdaq Composite rose 146.77 points, or 0.66 per cent, to 22,520.95.
MSCI's gauge of stocks across the globe rose 8.7 points, or 0.86 per cent, to 1,016.85 and was on track for its first consecutive daily gains in three weeks, while the pan-European STOXX 600 index rose 0.92 per cent.
The jump in oil prices and its potential to boost inflation have led markets to adjust expectations for easing policies from global central banks this year.
Markets are pricing in about 27 basis points of cuts from the U.S. Federal Reserve by the end of the year after pricing in more than 50 basis points earlier this week, and roughly 35 basis points of hikes from the European Central Bank after pricing in a modest chance of a cut this year as recently as February, according to LSEG data.
While investors were largely not pricing in any cuts from the Fed at Wednesday's policy announcement, the timing of any future cuts has been pushed further out this year.
"There are too many moving parts in a regular economy and then on top of it, we have this tremendously impactful conflict, which will make it even more impossible for the Fed to discern any patterns right now," said Peter Andersen, founder of Andersen Capital Management.
"I would expect the Fed to stay on hold and to have a very unremarkable transcript and press conference."
Operations at the UAE's Shah gas field remained suspended on Tuesday, while a new attack caused a fire in the key oil export terminal of Fujairah, highlighting how Tehran is disrupting energy flows from the region.
Stock markets rallied on Monday as oil prices dipped on hopes shipping flows from the Gulf would improve and optimism about artificial intelligence helped boost U.S. tech companies.
CENTRAL BANKS GRAPPLE WITH ENERGY PRICES
The Reserve Bank of Australia voted on Tuesday to hike interest rates for a second straight month, taking its benchmark rate to 4.1 per cent while warning of a material risk to inflation due to the Middle East war.
It set the tone ahead of policy statements from central banks in the U.S., Britain, euro zone, Japan, Canada, Switzerland and Sweden this week, all of which will hold their first meetings since the start of the Iran war. Investors will look for clues on how rising crude prices could affect the interest-rate path.
The U.S. Fed is largely expected to hold rates steady at its policy announcement, and policymakers are more likely to strike a cautious if not outright hawkish tone this week due to the current oil shock.
The shifts in central bank expectations have led to large moves in government bonds, although moves were subdued on Tuesday.
The yield on benchmark U.S. 10-year notes fell 1.8 basis points to 4.202 per cent but is up about 25 basis points for March. The 2-year note yield, which typically moves in step with interest-rate expectations for the Federal Reserve, fell 1.5 basis points to 3.665 per cent but is up nearly 30 basis points for the month.
The dollar index, which measures the greenback against a basket of currencies, fell 0.33 per cent to 99.53, with the euro up 0.32 per cent at $1.154.
Against the Japanese yen, the dollar weakened 0.21 per cent to 158.72, shy of the key 160 level that has sparked prior interventions from the Bank of Japan, despite verbal warnings from the Japanese authorities on Tuesday.
