* Hopes of end to conflict evaporate after Trump speech
* Oil surges as stagflation risks swirl, denting risk
assets
* Stocks sharply lower as Trump speech provides little
clarity
* Investors likely to stay defensive as Trump ramps up
threats
(Updates to Asia afternoon)
By Ankur Banerjee
SINGAPORE, April 2 (Reuters) - Markets recoiled on
Thursday as war jitters over Iran deepened, with stocks sliding,
oil surging well over $100 per barrel and the dollar firming
after U.S. President Donald Trump dashed hopes for clarity on
when the Middle East conflict might end.
Trump said in a prime-time address that the U.S. would hit
Iran "extremely hard" within weeks, arguing that key military
objectives were close to being met and the conflict nearing an
end. He set no timeline for an exit, however, keeping investors
guessing about the scope and duration of the campaign.
The front-month Brent contract for June jumped over
6% to $107.69 per barrel as investors found little reassurance
in the speech, which failed to spell out when or how the Strait
of Hormuz - a critical fuel shipping route - would reopen to
ease supply disruptions hitting Asia hard.
"We have no additional certainty or clarity around timeline
from this address and this is what the market was looking for,"
said Jon Withaar, senior portfolio manager at Pictet Asset
Management in Singapore.
"The fact that we can expect 2-3 more weeks of action, boots
on the ground were not ruled out and that threats to hit
infrastructure were reiterated will put the market back on the
defensive, particularly as we come into the long weekend."
U.S. stock futures slid 1.3% while European futures
sank over 2%. Asian stocks were clobbered, with Japan's
Nikkei down 2.4% and South Korea's Kospi index
sliding 4.7%.
MSCI's broadest index of Asia-Pacific shares outside Japan
was down over 2%, with almost all regional
bourses in the red.
FADING CEASEFIRE HOPES, RISING STAGFLATION RISKS
The prospect of the end to the month-long U.S.-Israeli war
with Iran lifted global stocks and knocked the dollar off its
recent highs in the past two sessions after a brutal March where
soaring oil prices sent risk assets into a tailspin.
In the immediate aftermath of the speech, however, investors
were back to selling almost everything except the U.S. dollar
and sending oil prices higher.
The risk-off mood looks set to deepen ahead of the long
weekend, with many global markets shut on Friday. Investors are
likely to cut exposure quickly, wary that any prolonged
disruption to shipping through the Strait of Hormuz would
deliver a sharp blow to global growth.
"The only thing that really matters is whether the Strait of
Hormuz will open soon. Trump's speech doesn't imply this is
likely to happen as quickly as the markets were expecting," said
Prashant Newnaha, senior rates strategist at TD Securities.
Trump said the United States does not need the key oil
gateway and that it will open naturally once the conflict is
over.
Iran has fired repeatedly on Gulf countries, some of which
are home to U.S. bases, and is using the strait as leverage.
"His comments on the duration of other wars was notable, in
that even if the war with Iran lasts a few months, it's not as
long as prior wars," said Newnaha.
"Expect USD and oil to move higher while risk is shed."
Trump's comments also rekindled concerns over stagflation,
the toxic mix of high inflation and weak growth that roiled
markets in March.
Treasury yields jerked higher in Asia on fears the rising
inflation would close the door to any prospect of easier
monetary policy. Yields on 10-year notes climbed 5
basis points to 4.376%.
The bond market selloff is likely to continue in Europe with
Germany's bund futures and French OAT futures
also pointing lower.
The U.S. dollar has been the haven of choice among investors
during the tumult and the greenback rose against most currencies
following the speech. The euro weakened 0.5% to $1.1533.
The dollar index, which measures the U.S. currency
against six other units, was 0.5% higher at 100.05 after
dropping nearly 1% in the past two days on optimism of an end to
the war soon.