U.S. stock index futures fell in Asia on Monday, and a military conflict in the Middle East boosted oil and Treasury securities after an encouraging U.S. jobs report for September lifted the income for the week.
A holiday in Japan reduced trading volume, but the primary demand was for bonds and safe-haven assets such as the Japanese yen and gold. The euro was the main loser.
“The risk is an increase in oil prices, a fall in equity, and an increase in volatility, which will support the dollar and yen and weaken risky currencies,” CBA analysts said in a note.
“The response from Iran in the Strait of Hormuz is a risk for oil supply and for the reaction of currencies,” he added.
Israel struck the Palestinian enclave of Gaza on Sunday, killing hundreds of people in retaliation for one of the bloodiest attacks in its history, in which the Islamist group Hamas killed 700 Israelis and kidnapped dozens more.
The threat of supply disruptions was enough to push Brent up $2.93 to $87.51 a barrel, while US crude gained $3.04 to $85.83 a barrel.
Gold was also in demand and rose 0.8% to $1,848 an ounce.
In currency markets, the yen was the biggest gainer, although moves were modest overall. The euro fell 0.3% to 157.44 yen, while the dollar fell 0.1% to 149.14 yen. The euro also lost 0.3% against the dollar, to $1.0556.
The cautious environment is a balm for sovereign bonds after the recent fall. The 10-year Treasury future rose 18 points. The yield was around 4.71%, up from 4.81% on Friday.
Any sustained increase in oil prices will act as a tax on consumers and increase inflationary pressure, weighing on equity. S&P 500 futures lost 0.8%, and Nasdaq futures lost 0.7%.
