Good morning and welcome back. In today’s newsletter:
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Energy prices soar for a second day
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Inside the operation to assassinate Ayatollah Ali Khamenei
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Blackstone’s flagship private credit fund hit by outflows
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And can looking at paintings slow dementia?
We begin today with the market reaction to day four of the US-Israeli military operation in Iran, as energy prices soared for a second day and equities tumbled after Iran vowed to close the Strait of Hormuz, a vital shipping route. Here’s what you need to know.
Energy markets: European natural gas prices soared as the market continued to reel from Qatar’s decision to stop production after Iran targeted energy infrastructure in the Gulf state. Europe’s gas benchmark, the TTF, was up about 35 per cent at €56.5 per megawatt-hour, extending a 33 per cent increase on Monday.
Qatar produces a fifth of the world’s production of liquefied natural gas and is the biggest supplier to Asia, triggering a renewed round of competition with Europe for scarce cargoes of the fuel. The Gulf’s energy infrastructure is in the crosshairs of Tehran as the regime retaliates against the US-Israeli strikes that began on Saturday. Yesterday, Iran targeted Qatar’s LNG facility in Ras Laffan.
There were fresh gains for energy benchmark contracts. Brent crude, the international standard, added $3.56 to $81.30 a barrel and WTI, the US benchmark, rose $3.24 to $74.47 a barrel.
Equities and bonds: The benchmark Stoxx Europe 600 was down 2.5 per cent, its steepest daily drop since the aftermath of US President Donald Trump’s trade war last April, as European gas prices surged a further 20 per cent.
In Asia, the Nikkei 225 index in Tokyo closed 3 per cent lower, while in South Korea, a big energy importer, the Kospi plunged 7.2 per cent.
Futures tracking the S&P 500 and Nasdaq indicated that the Wall Street benchmarks would drop 1.4 per cent and 1.7 per cent, respectively.
Government bond prices also fell as investors scaled back bets on interest rate cuts. The yield on 10-year Treasuries, which move inversely to prices, rose 0.03 percentage points to 4.06 per cent. The dollar rose for a second day against a basket of currencies and gold prices fell more than 1.2 per cent to $5,266 an ounce, with analysts suggesting that traders could be liquidating other positions to cover their losses.
The conflict latest: The Israeli military said its forces were “operating in southern Lebanon” as it “simultaneously” bombed Beirut’s densely populated southern suburbs and Iran’s capital Tehran.
Israel’s defence minister said he and Prime Minister Benjamin Netanyahu ordered Israeli forces to “advance and take control of additional strategic positions in Lebanon” in order to prevent attacks by the Iran-backed militant group Hizbollah.
Earlier, the US embassy in Riyadh was attacked by two drones, according to the Saudi Arabian defence ministry, as the conflict continued to spread across the region. Saudi Arabia condemned Iran’s attack on the embassy, calling it “cowardly and unjustified”.
Meanwhile, the US urged its citizens in 14 countries across the region, including Bahrain, Egypt, the United Arab Emirates and Kuwait, to leave due to “serious safety risks” as the administration in Washington struggled to clearly articulate its war aims.
China, the world’s largest oil and gas importer, criticised the US-Israeli strikes on Iran for the first time since the war began on Saturday and warned of a worsening spillover into the global economy.
“China urges all parties to immediately cease military operations, avoid escalating tensions and safeguard the safety of the Strait of Hormuz,” foreign ministry spokesperson Mao Ning told reporters in Beijing.
Middle Eastern airlines started returning stranded travellers as the three-day airport shutdown across the region slowly eased. Emirates flights have taken off from Dubai to the UK, France and Germany today, while Etihad flew a handful of services from Abu Dhabi. For the latest news on the conflict, go to our live blog.
Here’s more coverage of the conflict:
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Khamenei’s retaliation plan: Strikes on energy facilities across the Middle East were part of a strategy designed to sow chaos in response to US-Israeli attacks.
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Maga on Iran: A group of ultra-hawkish politicians, commentators and social media personalities have lent their support to President Trump.
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Polymarket users win big: The FT has identified accounts that collectively placed $66,993 in wagers that an attack would come by Saturday.
And what else we’re keeping tabs on today:
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Economic data: Brazil’s statistics agency, the IBGE, is expected to report the country’s fourth-quarter GDP, as the labour ministry prepares to report January employment figures and the IPC-Fipe inflation index for February is published.
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Company results: Retailers Target and Best Buy are expected to post a drop in fourth-quarter revenue, but discount apparel chain Ross Stores is forecast to report a rise in sales. CrowdStrike is anticipated to report robust demand for its cyber security software solutions.
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Fed speakers: Three US central bank policymakers are scheduled to make remarks on the economy and monetary policy. They will be Federal Reserve Bank of New York president John Williams, Kansas City Fed president Jeffrey Schmid and Minneapolis Fed president Neel Kashkari.
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White House: In Washington, German Chancellor Friedrich Merz is expected to hold talks with Trump amid strains between the US and its European allies over the military strikes on Iran.
FT chief foreign affairs columnist Gideon Rachman will be answering readers’ questions tomorrow at 8am EST on the US-led air strikes against Iran, the White House’s policy in the region and more broadly. Submit your question here.
Five more top stories
1. Blackstone’s flagship private credit fund was hit with $1.7bn of net outflows in the first quarter after an exodus from the asset class cut off a crucial source of fundraising for the private investment group. The redemptions will be closely watched across the wider $2tn private credit industry as an early sign of retail investors’ increasing unease with the asset class.
2. OpenAI has amended its contract with the US defence department just days after it was signed, with chief executive Sam Altman saying the rush to make a deal last week “looked opportunistic and sloppy”. The deal came hours after the collapse of negotiations between Anthropic, OpenAI’s rival, and defence secretary Pete Hegseth.
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More tech news: SpaceX expects to have its flagship Starship rocket ready to launch a new fleet of its Starlink satellites by the middle of next year, as the company prepares for a crucial test ahead of an initial public offering.
3. Kevin Warsh’s attempt to shrink the Federal Reserve’s balance sheet would proceed only slowly as Trump’s nominee to chair the US central bank faces resistance from Wall Street and senior Fed officials over his plan to scale back one of its most powerful tools.
4. The head of the US media regulator has signalled that the watchdog will not seek to block Paramount’s $110bn deal to buy Warner Bros and also played down competition concerns over a combination of CBS and CNN, the companies’ TV networks. Read more on Federal Communications Commission chair Brendan Carr’s remarks to the FT.
5. The Trump administration is expected to drop its legal effort to enforce punitive executive orders targeting top law firms. The White House is set to terminate its appeal efforts in four cases involving Jenner & Block, Perkins Coie, WilmerHale and Susman Godfrey, according to people familiar with the matter. Here are more details.
Today’s big read
The ayatollah’s assassination on Saturday at his offices in the Iranian capital was the result of years of meticulous intelligence gathering by Israeli security agencies. Long before the bombs fell, “we knew Tehran like we know Jerusalem”, said one current Israeli intelligence official. After talking to people familiar with the weekend’s events, FT reporters tell the story of the operation to kill Ali Khamenei.
We’re also reading . . .
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Global economy: In moments of extreme uncertainty, investors usually rush to the safety of US government bonds, but not this time, writes Katie Martin.
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EU tech regulation: Brussels’ culture war with the Trump administration in the digital sphere shows no sign of abating.
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Offer to Europe: President Emmanuel Macron’s offer to extend France’s nuclear deterrent is a boost for the continent’s defence, writes the FT’s editorial board.
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Pigs in the sky: Chinese livestock companies are rearing hogs in multistorey buildings in a farming model they are now taking abroad.
Chart of the day
Gas prices in Asia and Europe have surged as the conflict in the Middle East spreads, with shipping through the Strait of Hormuz at a virtual standstill and Qatar’s LNG output halted. FT reporters ask: how serious is the Middle East gas price shock?
Take a break from the news . . .
Can looking at paintings slow dementia? Researchers are reporting surprising discoveries about the impact of art on our health.
