NEW YORK/LONDON, April 2 (Reuters) - Oil prices surged, U.S. bond yields spiked on Thursday, and global equity markets gave back gains after remarks from U.S. President Donald Trump dashed hopes of a swift resolution to the Middle East war.
Brent crude surged more than 7% to around $110 a barrel after Trump said in a prime-time address on Wednesday that the U.S. would hit Iran "extremely hard" in the coming weeks and "bring them back to the Stone Ages where they belong".
On Wall Street, stocks opened lower on the last trading day of the week, with markets closed for the Good Friday holiday.
European shares also sank and Asian markets closed lower.
Government bond yields jumped on expectations that an inflation spike would force central banks to raise interest rates, or at least keep them on hold.
The dollar index climbed 0.39%.
"Over the past 48 hours, Tehran and Washington have exchanged a cacophony of statements, some suggesting rising odds of de-escalation. At the same time, kinetic action has continued unabated," BCA Research's Felix-Antoine Vezina-Poirier said.
"Our GeoMacro strategists offer simple guidance for weighing volatile headlines: Stick to the facts. First, shipping through Hormuz has picked up over the past few days. Second, Iran is deliberately shifting away from GCC targets toward Israeli ones."
WALL STREET POINTS LOWER, ASIA CLOBBERED
MSCI's gauge of stocks across the globe (.MIWD00000PUS), fell 0.43% to 992.44.
On Wall Street, the Dow Jones Industrial Average (.DJI), fell 0.12% to 46,511.17, the S&P 500 (.SPX), eased 0.02% to 6,574.05 and the Nasdaq Composite (.IXIC), lost 0.10% to 21,818.35.
In a closely watched address on Wednesday, Trump said U.S. attacks on Iran would be intensified over the next two to three weeks. That came just a day after he told Reuters the U.S. would be "out of Iran pretty quickly".
The pan-European STOXX 600 (.STOXX), index fell 0.2%, while Europe's broad FTSEurofirst 300 index (.FTEU3), fell 5.30 points, or 0.22%.
Asian equities bore the brunt of the subsequent reaction (.MIAPJ0000PUS), opens new tab, with Japan's Nikkei (.N225), closing down 2.4% and South Korea's Kospi index (.KS11), sliding 4.7%.
"The only thing that really matters is whether the Strait of Hormuz will open soon," said Prashant Newnaha, senior rates strategist at TD Securities, referring to the narrow chokepoint through which a fifth of global oil and liquefied natural gas is shipped.
"Trump's speech doesn't imply this is likely to happen as quickly as the markets were expecting."
Trump said on Wednesday the U.S. did not need the key oil gateway and that it would open naturally once the conflict was over.
Spot gold fell 1.48% and spot silver fell 3.17%.
There were growing signs of urgency in oil-importing emerging markets.
India's central bank moved to ban trading of so-called non-deliverable forwards in an effort to halt the rupee's run of record lows. The move sent the currency up 2% , although analysts questioned how long the rebound would last.
Brent futures rose to $106.43 per barrel, up 5.21%, as U.S. West Texas Intermediate soared 8.43% to $108.56.
"The fact that we can expect 2-3 more weeks of action, boots on the ground were not ruled out (during Trump's TV address) and that threats to hit infrastructure were reiterated, will put the market back on the defensive," Pictet Asset Management's Jon Withaar said.
The yield on benchmark U.S. 10-year notes fell 2.8 basis points to 4.293%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.1 basis points to 3.792%.
Euro zone benchmark Bund yields snapped a three-day decline and traders raised bets for interest-rate hikes.
German borrowing costs were still on track for their first weekly decline since the start of the war. The 10-year government bond yield fell 0.7 basis points to 2.989%.
Additional reporting by Ankur Banerjee in Singapore. Editing by Mark Potter and David Gregorio
