GLOBAL MARKETS-Stocks rise, bonds steady, oil on track for record monthly gains
By Elizabeth Howcroft
PARIS, March 31 (Reuters) - European shares rose on Tuesday but were still on track for their worst month since 2022, while oil prices were set for a record monthly increase, as traders came to the end of a tumultuous March dominated by the Iran war.
Iran attacked a fully-loaded oil tanker off Dubai early on Tuesday after President Donald Trump warned the United States would obliterate Iran's energy plants and oil wells if it does not open the Strait of Hormuz. Still, markets got a lift from a Wall Street Journal report that Trump had told aides he is willing to end the military campaign even if the strait remains largely closed.
The war, which began with the U.S. and Israel launching coordinated strikes against Iran on February 28, has sent shockwaves across global markets and raised the risk of a worldwide recession.
At 1119 GMT, Europe's STOXX 600 was up 1% on the day .STOXX, as was the FTSE 100 .FTSE. But the STOXX 600 remained on track for its steepest monthly loss since June 2022, a break from its previous eight months in a row of gains.
U.S. stock futures also rose, with S&P 500 and Nasdaq e-minis both up around 1% on the day EScv1, NQc1.
Equity markets are "taking the U.S. administration at their word, that they’re going to end the war," said Colin Graham, head of multi-asset strategies at Dutch asset manager Robeco.
"They haven’t moved to day-two where the Strait of Hormuz could still be closed.”
As prices were moved by contradictory reports about the U.S. plans, interpreting Tuesday's moves was complicated by it being the last day of the month and quarter, when large asset managers typically rebalance their portfolios back to their target allocations.
INFLATION AND GROWTH FEARS
Brent crude futures were up 2.4% on the day at $115.50 a barrel LCOc1, on track for their biggest monthly gain on record, and U.S. West Texas Intermediate futures were up 1.4% at $104.34 CLc1.
Oil prices have surged as a result of the war, due to Iran's effective closure of the Strait of Hormuz, which carries about a fifth of the world's oil supply. The average U.S. retail price of gasoline hit $4 a gallon on Monday.
The oil shock meant euro zone inflation soared past the European Central Bank's 2% target in March, data showed.
Euro zone government bond yields were steady, with the German 10-year yield at 3.0292% DE10YT=RR.
Government bond yields had retreated from multi-year highs on Monday after rising sharply this month because of the conflict, with investors appearing to refocus on the risk of weaker growth stemming from the energy shock.
The European Union's energy chief has told governments to prepare for "prolonged disruption" to energy markets as a result of the war, ahead of an emergency meeting on Tuesday.
“If the Strait of Hormuz remains closed for the next week or two, then I think we’ll be raising our probabilities of recession in our scenario analysis," Robeco's Graham said, adding that this was not yet the case.
Developed market currencies were broadly steady, but the dollar was still on track for its biggest monthly gain since July =USD, having held up as a safe-haven currency. The euro was up 0.1% at $1.1474, still on track for its worst month since July EUR=EBS.
Japan's finance minister said that the government was ready to respond "on all fronts" against foreign exchange volatility, underscoring Tokyo's alarm over the yen's recent slide.
Gold was up 1.5%, at $4,578.67 XAU=, on track for its biggest monthly drop since 2008. Goldman Sachs said it continued to expect gold prices will reach $5,400 per troy ounce by end‑2026.
