Oil surges, stocks ease from record highs on tenuous US-Iran ceasefire

By Stephen Culp

NEW YORK, April 20 (Reuters) – Wall Street eased from record highs on Monday and oil prices spiked as increasing tensions over the crucial Strait of Hormuz gave rise to concerns that the fragile U.S.-Iran ceasefire might not hold.

All three major U.S. stock indexes were modestly lower, putting the Nasdaq on course to snap a 13-day winning streak, its longest since January 1992.

The losses were shallow, held in check by hopes that a deal will eventually be reached, and optimism over solid first-quarter corporate earnings.

“We’re not seeing a lot of selling pressure develop because the action that the market saw last week highlighted the importance of staying invested,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “The opportunity potentially missed by being out of the market is probably keeping a lid on the losses today.”

“Everybody knows that the war could change on a dime,” Pavlik added.

The ceasefire agreement between the United States and Iran appeared to hang in the balance after the U.S. announced it had seized an Iranian cargo ship, prompting vows of retaliation from Iran, which for now is refusing to engage in a new round of peace talks.

With no major economic data and a short roster of first-quarter earnings reports on Monday, geopolitical tensions in the Middle East were the primary market catalyst.

The Dow Jones Industrial Average fell 60.54 points, or 0.13%, to 49,386.89, the S&P 500 fell 19.73 points, or 0.28%, to 7,106.33 and the Nasdaq Composite fell 87.30 points, or 0.36%, to 24,380.45.

European shares slid on growing concerns that the U.S.-Iran ceasefire agreement could collapse after Iran responded to the U.S. seizure of a cargo ship by refusing to participate in a second round of negotiations.

MSCI’s gauge of stocks across the globe fell 2.75 points, or 0.26%, to 1,072.01.

The pan-European STOXX 600 index fell 0.82%, while Europe’s broad FTSEurofirst 300 index fell 19.66 points, or 0.79%.

Emerging market stocks rose 5.20 points, or 0.33%, to 1,602.33. MSCI’s broadest index of Asia-Pacific shares outside Japan closed higher by 0.55%, to 819.41, while Japan’s Nikkei rose 348.99 points, or 0.60%, to 58,824.89.

Fears of ceasefire collapse also sent crude oil prices spiking as traffic through the Strait of Hormuz remained largely halted.

U.S. crude rose 6.87% to settle at $89.61 per barrel, while Brent settled at $95.48 per barrel, up 5.64% on the day.

U.S. benchmark Treasury yields edged higher in subdued trading, suggesting traders were confident that the escalating conflict in the Middle East would be contained.

The yield on benchmark U.S. 10-year notes rose 0.6 basis points to 4.25%, from 4.244% late on Friday.

The 30-year bond yield fell 0.3 basis points to 4.8816% from 4.885% late on Friday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.4 basis points to 3.714%, from 3.7% late on Friday.

The dollar reversed earlier gains on growing optimism that the ceasefire will hold despite renewed tensions.

The dollar index, which measures the greenback against a basket of currencies, including the yen and the euro, fell 0.41% to 98.05, with the euro up 0.19% at $1.1784.

Against the Japanese yen, the dollar strengthened 0.09% to 158.75.

In cryptocurrencies, bitcoin gained 1.96% to $76,121.98. Ethereum rose 2.15% to $2,330.58.

Gold prices fell to a one-week low before recovering slightly. Spot gold fell 0.29% to $4,814.31 an ounce. U.S. gold futures fell 1.04% to $4,807.20 an ounce.

(Reporting by Stephen Culp; Additional reporting by Sophie Kiderlin in London and Tom Westbrook in Singapore; Editing by Nick Zieminski and Aurora Ellis)