Oil climbed on Monday while US stock futures slipped as stalled US-Iran peace talks prolonged the disruption of Middle East energy exports, unsettling markets and policymakers ahead of a packed week of central bank meetings.
Benchmark Brent crude futures rose more than 2% to touch a three-week high of $107.97 a barrel in early Asia trade, stoking inflation worries that have prompted traders to all but price out rate cuts this year.
S&P 500 futures eased 0.3%, in a modest move after the cash market notched a record closing high on Friday with investors snapping up AI winners.
The dollar was higher although not by much, leaving the euro down 0.15% at $1.1706 and the yen marginally weaker at 159.53 per dollar.
While a ceasefire has frozen most fighting in the war triggered by US-Israeli strikes on Iran two months ago, markets are focused on the shuttered Strait of Hormuz, the key chokepoint behind surging energy prices.
The average LNG price for June delivery into north-east Asia LNG-AS was $16.70 per million British thermal units last week, nearly 61% above pre-war levels.
Goldman Sachs analysts lifted year-end oil price forecasts sharply from $80 to $90 a barrel for Brent, and even that rests on normalisation of Gulf exports by the end of June.
"Non-linear price increases are likely if inventories drop to critically low levels, which we have not seen in the last few decades," they warned in a note.
US President Donald Trump cancelled a trip to Islamabad by US envoys for talks on the weekend, even as Iran`s foreign minister has continued to shuttle between mediating countries.
Early moves in Asia were higher with South Korea`s KOSPI and Japan`s Nikkei rising to record highs, though Australian shares slipped in holiday-thinned trade.
RATES AND HYPERSCALERS EARNINGS
Traders see the supply shock keeping most central banks on hold this week, though aggressive bets on future rate hikes in Britain and Europe could be tested if policymakers strike a cautious tone.
The Bank of Japan is the first off the rank and is expected to keep its short-term policy rate steady at 0.75% on Tuesday.
Markets are wagering on eventual hikes but worry inflation is taking hold, with long-end yields on the rise and the yen under pressure.
The Federal Reserve is expected to leave rates where they are at what`s likely chair Jerome Powell`s final meeting in the chair.
The European Central Bank and Bank of England are likewise expected to hold, but their tone and outlook could challenge market pricing for both banks to make two 25-basis-point hikes later in the year.
"In short, no central bank should be tightening right now simply to prove it isn`t behind the curve or treating current pressures as transitory," said Bob Savage, head of markets macro strategy at BNY.
"If that message lands, rate markets �" which remain extremely aggressive ... face significant front-end repricing."
US tech earnings also headline the week ahead, with 44% of the S&P 500 by market cap due to report. Microsoft, Alphabet, Amazon and Meta Platforms are due on Wednesday, with Apple on Thursday.
"AI is something that people are very optimistic about and very much considered a winner," said Mike Seidenberg, senior portfolio manager for Allianz Technology Trust.
"It`s the top of the portfolio."
