By Kevin Buckland
TOKYO (Reuters) – Asian stock and bond yields fell on Friday, while safe-haven currencies, gold and crude oil jumped on reports that Israel has attacked Iran in an ongoing series of attacks that fueled concerns about a wider conflict in the Middle East have increased.
However, the scope of the market moves softened somewhat as details emerged: the Israeli strike was limited and Iranian officials denied that missiles had been launched against it.
MSCI’s broadest index of Asia-Pacific shares fell 2%, following an earlier plunge of as much as 2.6%, and US stock futures settled 1% lower, paring some of an initial 1.7% decline displays.
Iran said it shot down several drones and that no missile attack occurred after explosions were heard near the central city of Isfahan, close to several nuclear sites. Those reactors were not damaged, state television reported.
ABC News previously reported that Israeli missiles hit a site in Iran.
Fears of an Iranian response eased after the Israeli military said warning sirens sounded early Friday in northern Israel were false alarms.
Long-term U.S. Treasury yields last fell 9 basis points (bps) to 4.5567%, after previously falling as much as 15 basis points. The safe-haven yen was up as much as 0.7% against the dollar, but was last up about 0.3%. The Swiss franc was up about 0.6% against the dollar, surpassing previous gains of as much as 1.2%.
Gold added 0.6%, but previously rose as much as 1.7% to $2,417.59, leaving it just below last week’s record high of $2,431.29.
“The lack of clarity on what Iran might do next will keep investors nervous and the market volatile for the time being, at a time when investors also face significant inflation and interest rate uncertainties,” said Vasu Menon, managing director of investments . strategy at OCBC.
Brent futures rose as much as 4.2%% on concerns that supply in the Middle East could be disrupted, but were last up 2.4% at $89.22. Iran is the Organization of the Petroleum Exporting Countries’ third-largest oil producer, according to Reuters data.
Bitcoin fell as much as 6.2% to a 1-1/2 month low of $59,590.74, before last trading about 2.7% lower at $61,842.
Israeli Prime Minister Benjamin Netanyahu had vowed retaliation earlier this week after Iran launched hundreds of drones and missiles in an unprecedented direct attack on Israel on April 13.
That attack was in response to a suspected Israeli attack on an Iranian embassy in Syria on April 1, which killed senior Iranian military commanders.
A source familiar said that Israel had informed the United States in advance of its attack on Iran.
Japan’s Nikkei was last down 2.4%, while Taiwan’s stock benchmark fell 3.5%. Hong Kong’s Hang Seng lost 1.2%.
Stock markets were already heading lower before the headlines emerged in the Middle East, as more robust U.S. economic data prompted additional Federal Reserve officials to signal there was no rush to cut rates.
Chip stocks were hit particularly hard by both the prospects for prolonged tight monetary policy and investor disappointment over Taiwan Semiconductor Manufacturing Co’s decision to leave capital spending plans unchanged. The stock fell as much as 6.6%.
A day earlier, ASML, the largest supplier of equipment to computer chip manufacturers, reported moderate new bookings.
“A triple whammy for markets as the Fed’s hawkish stance goes a step further every day and semiconductor revenues are lagging year to date,” said Charu Chanana, head of currency strategy at Saxo.
“To top it all off, geopolitical risks have once again escalated… and risk sentiment could remain weak as we await more details on damage and casualties.”
(Reporting by Kevin Buckland; additional reporting by Ankur Banerjee; Editing by Sam Holmes and Christian Schmollinger)
