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Markets on edge as Trump urges Tehran evacuation

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Crude prices climb as much as 2%, gold prices steady

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BOJ Governor Ueda to brief media at 0630 GMT

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Fed scheduled to start two day policy meet on Tuesday

(Updates with Asia afternoon trading)

By Johann M Cherian

June 17 (Reuters) - Global stocks wavered and oil prices

rose on Tuesday, as conflict between Israel and Iran entered its

fifth day, while the yen was choppy after the Bank of Japan

decided to slow the pace of reduction in its bond purchases from

April next year.

The Bank of Japan (BOJ), which left its short-term interest

rates at 0.5% as expected, decided to leave unchanged its bond

taper plan that runs through March 2026, but set out a new plan

beyond next April.

The yen swung between small gains and losses to stand

at 144.80 against the dollar as investors' focus switches to a

0630 GMT press conference by BOJ Governor Kazuo Ueda to explain

the decision.

Heightened uncertainty and escalating air conflict in the

Middle East drove investors to traditional safe-haven assets, as

a rise in U.S. Treasuries pushed yields lower across the curve,

while gold steadied after a 0.5% rise earlier.

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

edged up 0.2%, while China and Hong

Kong equities slipped 0.1% each.

Markets feared that conflict between Tel Aviv and Tehran

could spill over in the broader oil-rich Middle East. Oil

markets' reactions have been the most volatile, while stocks and

currencies have been more guarded.

U.S. President Donald Trump urged everyone to evacuate

Tehran and cut short his visit to the Group of Seven summit in

Canada, while a separate report said he had asked for the

national security council to be prepared in the situation room.

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

S&P 500 futures fell 0.3%, European futures

dropped 0.6%, while crude prices briefly jumped

more than 2%.

"Suspicion is that we're about to see the United States

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

some risk aversion because it brings another element of

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

Wall Street 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 air war between Iran and Israel, the longtime enemies'

biggest battle ever, escalated on Monday, with Israel targeting

Iran's state broadcaster and uranium enrichment facilities.

FED DECISION AWAITED

In a week filled with central bank meetings, the spotlight

next turns on the Federal Reserve.

The U.S. central bank is expected to hold rates steady on

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

Jerome Powell charts for future rate cuts as policymakers try to

navigate Trump's erratic tariff policies and their global

impact.

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."

Investors also monitored developments on trade deals with

Trump's early July deadline on tariffs fast approaching.

Talks between Japan and the United States on the sidelines

of the G7 summit fell short of a breakthrough to lower or

eliminate tariffs, while a deal with Britain left unresolved the

issue of steel and aluminium duties.

In commodities, crude futures were up about 0.4% at around

$72 a barrel, while gold prices were flat at $3,384.05

per ounce.

In fiscal 2026, the BOJ plans to reduce monthly bond buying

by 200 billion yen each quarter to take the size of purchases

down to about 2 trillion yen by March 2027.

A slowdown in tapering effectively signals a dovish shift

and offers support to the JGB market, shaken by weak demand at

recent auctions and a surge in super-long yields to records last

month.

The next test for markets will be an auction of 20-year JGBs

on June 24.