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Geopolitical tensions keep markets on edge as Trump urges

Tehran

evacuation

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Gold prices edge higher, crude prices climb as much as 1%

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Markets await BOJ decision, keen on bond-tapering plans

By Johann M Cherian

June 17 (Reuters) - U.S. stock futures slipped and oil

prices rose on Tuesday, as investors were rattled by U.S.

President Donald Trump's call for everyone to evacuate Tehran

with the fifth-day of Israel-Iran fighting sowing fears of a

broader regional conflict.

Markets were on edge after a separate report said that Trump

had asked for the national security council to be prepared in

the situation room as he cut short his visit to the Group of

Seven summit in Canada.

Trump had earlier urged everyone to immediately evacuate

Tehran, and reiterated that Iran should have signed a nuclear

deal with the United States.

The latest developments sparked a wave of risk-off moves in

early Asian trading. S&P 500 futures fell 0.46%,

European futures slumped 0.69%, while crude prices

briefly jumped more than 2%.

"Suspicion is that we're about to see the U.S. begin some

sort of military action in Iran and we're now seeing some risk

aversion because it brings another element of uncertainty into

the market," said Tony Sycamore, a market analyst at IG.

Wall Street had closed higher on Monday after sources told

Reuters that Iran was seeking a Trump-mediated immediate

ceasefire with Israel, which also cooled a rally in crude

prices.

The Iran-Israel air war - the biggest battle ever between

the two longtime enemies - escalated on Monday with Israel

targeting Iran's state broadcaster and uranium enrichment

facilities.

The heightened uncertainty and fluid Middle East situation

bolstered investor moves towards traditional safe-haven assets

such as gold which rose 0.5%, while a rise in U.S.

Treasuries pushed yields lower across the curve. The yield on

the benchmark 10-year note was down about 2 basis

points at 4.43%.

The dollar firmed against the euro, yen

and sterling as it reprised its role as a safe asset even

as it held to broadly tighter ranges.

MSCI's broadest index of Asia-Pacific shares outside Japan

was a tad higher, while futures tracking Hong

Kong's Hang Seng index were also marginally higher.

Outside of geopolitics, interest rate decisions by a host of

central banks will be the prime focus for investors this week

with the Bank of Japan's verdict expected later in the day.

At the end of its two-day policy meeting, the BOJ is widely

expected to maintain short-term interest rates at 0.5%, but

markets will be keen on the institution's outlook on

quantitative tightening.

Japan's Nikkei edged up 0.5%, while the yen

was slightly weaker at 144.96 per dollar.

Investors are expecting the BOJ to consider slowing

reductions in its bond purchases next year, as the central bank

focuses on avoiding big market disruptions and tries to wean the

economy off a decade-long, massive stimulus.

It would be the first decision since the recent bond

auctions had shown eroding appetite for freshly issued

longer-dated debt and drove the country's bond yields to record

highs. On Tuesday, yields on 30-year and 40-year

bonds were broadly steady.

In a week filled with central bank meetings across the

globe, investors will be looking to comments from officials as

they navigate Trump's erratic tariff policies and their impact

on the global economy.

The Federal Reserve is expected to hold rates steady on

Wednesday but the focus yet again will be on the path Fed Chair

Jerome Powell charts out for future rate cuts. Traders are

pricing in two cuts by the end of the year.

"To be a central banker right now is one challenging job and

on top of the tariff situation, the trade policy and the inking

of deals before deadlines you have this uncertainty from the

Middle East," said IG's Sycamore.

"Macro backdrops don't get any more tricky than what we're

seeing at this point in time."

In commodities, the risks of prolonged unrest in the Middle

East and disruption to oil supply sent prices higher. Brent

crude futures contract was last up 0.34% at $73.47 a

barrel. West Texas Intermediate crude was last up 0.43%

at $72.09.

Gold prices were fetching $3,393.05 per ounce, up

0.3% on the day.