Oil rises, global stocks diverge as fresh US-Iran clashes hit peace hopes

Global stock markets diverged and oil prices rose yesterday (8 May) as fresh US-Iran clashes in the Strait of Hormuz jolted hopes for a deal to end the Middle East war and reopen the crucial waterway.

While European bourses retreated, the S&P 500 and Nasdaq indices both pushed to fresh records on solid US jobs numbers. The Dow ended flat.

"No negative news sticks to this bull market, and it just keeps working its way higher," said CFRA Research's Sam Stovall. 

A US fighter jet disabled two Iranian-flagged tankers to enforce a port blockade on Friday, prompting retaliatory attacks from Iran. The latest incident came after another flare-up overnight in the strait.

Meanwhile, US data showed the economy added 115,000 jobs in April, more than double the forecast.

But US consumer confidence was at an all-time low according to a University of Michigan survey, with Americans weighed down by concerns about high prices and the fallout of the US-Israel war on Iran.

Stovall cited both the consumer confidence figure and the brittle conditions in the Middle East as headwinds the market has shrugged, but added, "I would not be surprised if we do see some digestion of recent gains take place in the near-term."

Bret Kenwell, eToro's US investment analyst, noted that if the labor market and broader economy continue to hold up as rising energy prices fan inflation, the Fed will have less justification to cut interest rates.

"In other words, good news may actually be good news again -- just not for investors hoping the Fed rides in with quick rate cuts," he said.

Investors often consider bad economic news to be good news in the sense it increases chances of interest rate cuts.

The dollar retreated against its main rivals.

Europe's main stock markets finished the day lower.

Pound holds up

The British pound held up as Keir Starmer vowed to carry on as UK prime minister after his Labour Party suffered big losses to the hard-right in local elections.

Critics say Starmer has swerved from one policy misstep to another, and he has been embroiled in a scandal over Peter Mandelson, who was sacked as ambassador to Washington over his links to US sex offender Jeffrey Epstein.

The prime minister has also failed to fulfil his main promise of spurring economic growth, with impatient Britons still suffering a cost-of-living crisis, including from high energy prices.

Elsewhere on Friday, the yen firmed after Japanese media reported that authorities had spent around $64 billion since last week propping up the currency.

The market interventions reportedly began on 30 April when the yen weakened to near 160 per US dollar, the lowest in almost two years.

Since then there have been several spikes in the value of the Japanese currency, sparking speculation of further moves by the government.

Key figures at around 2010 GMT

Brent North Sea Crude: UP 1.2% at $101.29 a barrel

West Texas Intermediate: UP 0.6% at $95.42 a barrel

New York - DOW: FLAT at 49,609.16 (close)

New York - S&P 500: UP 0.8% at 7,398.93 (close)

New York - Nasdaq Composite: UP 1.7% at 26,247.08 (close)

London - FTSE 100: DOWN 0.4% at 10,233.07 (close)

Paris - CAC 40: DOWN 1.1% at 8,112.57 (close)

Frankfurt - DAX: DOWN 1.3% at 24,338.63 (close)

Tokyo - Nikkei 225: DOWN 0.2% at 62,713.67 (close)

Hong Kong - Hang Seng Index: DOWN 0.9% at 26,393.71 (close)

Shanghai - Composite: FLAT at 4,179.95 (close)

Euro/dollar: UP at $1.1779 from $1.1726 on Thursday

Pound/dollar: UP at $1.3625 from $1.3555

Dollar/yen: DOWN at 156.76 yen from 156.93 yen

Euro/pound: DOWN at 86.45 pence from 86.52 pence