Asian stock markets are poised for a lower open Thursday, continuing a week of volatility as a coordinated release of strategic oil reserves failed to quell rising crude prices. The move by the International Energy Agency (IEA) and individual nations, including Japan, has so far proven insufficient to alleviate concerns about global stagflation fueled by ongoing conflict in the Middle East.
Equity index futures for Japan, Australia, and Hong Kong all indicated declines in early Asian trading. The S&P 500 closed down 0.1% Wednesday, although the Nasdaq 100 remained largely unchanged. Futures contracts for US equities also fell in early Thursday trading, signaling continued investor apprehension.
Despite the IEA’s agreement to discharge 400 million barrels of emergency oil reserves – the largest release in its history – US crude topped $91 a barrel. Japan will contribute 80 million barrels from its strategic reserves. Brent and West Texas Intermediate (WTI) crude had earlier traded near $110 a barrel, levels not seen since the height of the Russia-Ukraine war in 2022, before retreating slightly to around $107 and $102 respectively.
Economists warn that oil prices above $100 a barrel could add 0.7 percentage points to global inflation while simultaneously reducing global growth by 0.4 percentage points. Stephen Innes, a managing partner at SPI Asset Management, described the market reaction to rising oil prices as an immediate exit, stating, “When crude spikes, it moves straight through the corporate bloodstream. Input costs surge, inflation expectations climb and earnings estimates get marked down faster than analysts can rewrite their notes.”
Geopolitical tensions remain central to market concerns. US President Donald Trump stated that the US and Israel would collaborate on determining when to end the current conflict, while also suggesting the war would conclude soon. However, Iranian officials, speaking through regional intermediaries, have reportedly demanded a guarantee from the US that neither it nor Israel will strike Iran in the future as a condition for a ceasefire.
The yen touched its weakest level against the US dollar since January on Wednesday, settling at around 159 per dollar early Thursday. Economists predict the Bank of Japan will raise its benchmark interest rate in April, after holding policy settings steady next week, in response to increasing inflationary pressures.
February’s US inflation data showed some easing of price pressures before the escalation of the Middle East conflict, but renewed concerns about energy costs are raising fears of amplified affordability issues. Economists at Principal Asset Management note that the Federal Reserve has historically overlooked energy-driven price spikes, but acknowledge that with inflation remaining above target for nearly five years, it may be more difficult to do so this time.
Corporate activity includes Netflix’s potential acquisition of InterPositive, an AI moviemaking company founded by Ben Affleck, for as much as $600 million. Morgan Stanley has capped redemptions from one of its private credit funds, returning approximately half of the requested capital. Oracle’s stock surged following strong sales figures and a positive outlook driven by demand for AI computing, while Nvidia will invest $2 billion in Nebius Group NV to develop AI data centers. Salesforce’s $25 billion bond sale faced lukewarm demand amid concerns about its debt-funded share buybacks and exposure to the AI sector.
Data scheduled for release Friday is expected to present continued inflationary pressure, with economists forecasting a 0.4% increase in the Fed’s preferred core personal consumption expenditures price index in February, and a 3.1% increase year-over-year.
