Breaking Shock! Trump Announces Ceasefire Collapse, Oil Prices Soar Over 6%, Stocks and Bonds Both Slump, Korean Stocks Fall Into Bear Market

On Wednesday (July 8), oil prices surged by more than 5%, while global stock markets and bond prices declined. This followed comments by U.S. President Donald Trump, who stated that the memorandum of understanding signed with Iran, which aimed to end the Gulf conflict, was “over,” prompting investors to flee risk assets.

Trump’s “Ceasefire Is Over” Shakes Markets

Speaking ahead of the NATO summit in Ankara, Turkey, Trump added that he no longer wanted to engage with Tehran. He said, “In my view, dealing with them is just a waste of time.”

Brent crude rose 6.4%, trading at $79 (UTC+8), the highest level since June 22. Previously, at the annual NATO summit in Ankara, Trump said the ceasefire was "over" and called it a “waste of time.”

Violeta Todorova, Senior Research Analyst at Leverage Shares, stated that Trump’s announcement “marks the most severe breakdown so far in an agreement that has been eroding for weeks.”

She said, “The market had previously regarded the June memorandum of understanding as a lasting de-escalation arrangement. Now, it appears this complacency is fragile.”

Chris Beauchamp, Chief Market Strategist at IG, commented: “This is clearly not what the market wanted to see, and it has indeed seriously impacted market sentiment.”

Khoon Goh, Head of Asia Research at ANZ Bank Singapore, stated: “The key issue is whether the Strait of Hormuz remains open, whether we will continue to see ships passing through, and whether oil can keep flowing.”

Supply Concerns Reignite

Shortly before Trump’s remarks, the U.S. had just launched a new round of strikes against Iran and revoked waivers allowing Iran to sell oil. However, despite little progress in peace talks, Trump had not shown a clear willingness to return to full-scale war in recent weeks. He stated that he would not prevent negotiators from continuing to engage Iran, although he expressed a pessimistic outlook on this strategy.

Joachim Klement, Head of Strategy at Panmure Liberum, said: “Trump is known for his volatility, and we expect the current escalation to be temporary in nature until both sides return to the negotiating table.”

He added: “There is no motive to reignite war before the midterm elections in November.”

Analysts at ING said: “The escalation in the Persian Gulf has reignited supply concerns.” They also noted: “The curve structure has also strengthened; after increased Gulf supply briefly turned the curve into contango, the front end has moved back into spot premium.”

Bloomberg Macro Strategist Skylar Montgomery Koning said: “Oil prices would need to be even more volatile to overpower other factors affecting equity performance. The escalation of U.S.-Iran tensions represents downside risk, but unless commodities prices see a more significant spike, substantial impacts on equities are unlikely.”

Risk Asset Exodus

Wednesday’s escalation is prompting money to leave risk assets. Earlier, the April ceasefire and the subsequent U.S.-Iran memorandum of understanding had convinced investors that both parties wanted to avoid a prolonged conflict. Since the end of March, the stock market had continued to rise, and a strong earnings season boosted confidence in the AI economy’s potential.

Europe’s major stock indices fell across the board in early trading. Bank shares and energy-intensive industries weakened, with the pan-European Stoxx 600 Index dropping 0.7% (UTC+8).

U.S. stock futures slipped, with S&P 500 futures down 1% (UTC+8). The tech-heavy Nasdaq 100 futures fell 1.6% (UTC+8). U.S. stocks are expected to extend Tuesday’s losses; Tuesday's decline was mainly driven by a selloff in chip manufacturing companies due to market concerns over whether large-scale AI investments can support high valuations.

The VIX volatility index jumped nearly 13% (UTC+8), its biggest one-day rise in over a month, though still below the March highs.

Recently, the U.S. stock market has experienced significant volatility. Investors both buy the dip and also reduce their exposure amid concerns over how long gains in semiconductor and other AI-related stocks can last; the market is oscillating between these two forces.

Korea Enters Technical Bear Market

Earlier on Wednesday, related trades became the focus in Korea. The KOSPI index fell 5.35% (UTC+8), entering a technical bear market, having dropped 23% from its June peak. Memory chip makers Samsung Electronics and SK Hynix extended recent declines, closing down 6.25% (UTC+8) and 5.7% (UTC+8), respectively. As one of the best-performing major indices this year, the KOSPI has recently been hit by elevated volatility. Tech sector rotation has intensified, with investors pulling out of semiconductor stocks in search of more attractively valued tech assets.

In Hong Kong, Alibaba Group’s share price rose 12% (UTC+8), tech sector overall strengthened, and the Hang Seng Tech Index was up 5.2% (UTC+8). The broader Hang Seng Index rose 3% (UTC+8). Jialong Shi of Nomura Securities said the broad rally in China's internet sector could be due to capital rotating out of outperformed AI hardware into lagging sectors.

Michael Field, Chief Equity Strategist at Morningstar, commented: “Multiple streams of negative news are dragging markets lower, and with no major earnings reports due in the coming days to turn the trend, it seems unlikely the market will get a breather.”

Focus on Federal Reserve Minutes

Although oil prices remain well below the highs over $120 (UTC+8) per barrel seen during the most intense fighting, they are now sufficient to inject inflation risk back into the bond market, especially after several months of conflict have depleted global oil inventories.

The benchmark 10-year U.S. Treasury yield rose for the seventh consecutive session to a one-month high of 4.56% (UTC+8).

In Europe, German and Italian 10-year government bond yields saw their biggest one-month rise, reaching one-month highs of 3.06% (UTC+8) and 3.9% (UTC+8) respectively. The UK 10-year yield jumped 10 basis points to 4.94% (UTC+8), the highest in nearly a month. European bonds fell as traders increased bets that central banks would have no choice but to hike rates this year.

The Federal Reserve’s June meeting minutes will be the most important macro event of the session. After Fed Chair Kevin Warsh shortened the policy statement and refused to participate in rate forecasts, the importance of these minutes is even higher.

Bloomberg economist Andrew Sacher noted that the minutes “could bring back the hawkish tilt that has receded since the jobs report, as they will reflect the hawkish dot plot released at that time.”

He said, “We expect the minutes to highlight concerns over inflation being above target and officials’ desire to retain some tightening bias.”

Steve Englander of Standard Chartered said in a report that Warsh clearly avoided giving policy guidance, so he is unlikely to allow such guidance to be released through the minutes. He said, “Avoiding any discussion of rate hikes may be interpreted by the market as a reluctance to act.”

European natural gas rises

European natural gas prices rose above 48 euros per megawatt hour (UTC+8). In early trading, benchmark Dutch TTF gas futures rose 2.9% (UTC+8) to 48.12 euros per megawatt hour (UTC+8), bringing the week’s gains to more than 10% (UTC+8). The latest escalation between the U.S. and Iran has intensified market concerns over Europe’s fuel supply ahead of the heating season.

Ewa Manthey and Warren Patterson at ING said: “As we enter injection season, the European gas market still looks tight.”

Currently, EU gas storage is at 50% (UTC+8), well below the five-year average of 66% (UTC+8).

Gold Breaks Below 4100

Gold prices have dropped sharply, now breaking below the $4,100 (UTC+8) support. Investors are awaiting the release of the Federal Reserve minutes for more clues on the monetary policy outlook.

ING analysts said: “Gold’s movement is still primarily driven by changes in U.S. interest rate expectations.”

Meanwhile, the People’s Bank of China is continuing to buy gold, and ongoing reserve diversification by global central banks is also providing fundamental support for gold prices.