Shares steady, oil turbulence deepens over Middle East war fears

The International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices, providing some relief to battered global stocks

Shares steadied on Wednesday following a retreat ​in oil prices, but contradictory signals from the US-Israeli war on Iran kept investors anxious over the risks to inflation and global growth.

A ‌pullback in oil came after the Wall Street Journal reported that the International Energy Agency has proposed the largest release of oil reserves in its history to bring down crude prices, providing some relief to battered global stocks while currencies and bonds were little changed.

Brent crude futures swung between gains and losses in volatile trade, falling 0.4% to $87.45 per barrel, while US ​crude was up 0.3% at $83.67 a barrel.

"Markets are presently trading on the news flow and the here-and-now rather than being forward-looking," said Chidu ​Narayanan, head of APAC macro strategy at Wells Fargo.

"The measures announced aiming to offset oil supply declines might be insufficient. ⁠It is likely to help on the margin to assuage some of the fears, but as long as the conflict continues, risk aversion is likely to ​remain elevated."

Still, regional stocks found some reprieve, with MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab up 1.4%, while the Nikkei (.N225), opens new tab rose 1.7% and South Korea's ​Kospi (.KS11), opens new tab advanced 1.75%.

US stock futures also pushed higher after a mixed cash session overnight, with Nasdaq futures and S&P 500 futures adding about 0.2% each.

EUROSTOXX 50 futures slipped 0.12%, while FTSE futures lost 0.14%.

Investors remain on edge as the Middle East conflict threatens to freeze global energy trade and ignite a price shock - a risk that world leaders are scrambling to address.

Still, energy ​markets remain hostage to how long - and how intense - the conflict becomes.

"Several major questions loom over the oil market's trajectory. Chief among them is the ​timing of safe passage for vessels through the Strait of Hormuz, a critical chokepoint for global oil supply," said Kerstin Hottner, Vontobel's head of commodities.

"Another concern is the possibility of ‌infrastructure damage... ⁠Even if major hostilities subside, the prospect of ongoing low-level Iranian drone attacks on energy infrastructure could prolong market instability into next year."

U.S. Treasuries steadied on Wednesday, with the yield on the benchmark 10-year note little changed at 4.1440%, while the two-year yield was at 3.5757%.

"The general tone of central banks will remain hawkish so long as ⁠the threat ​of the war's inflationary implications persist," said Thierry Wizman, global FX and rates strategist at Macquarie ​Group.

"We would expect that this more hawkish disposition persists even after hostilities end, largely because the data may continue to point to inflationary pressures throughout the period in which inflation may show ​up in the data."

February's US inflation reading is due later on Wednesday.

In precious metals, spot gold was up 0.17% at $5,200.35 an ounce.

- Reuters