Markets on edge, with U.S.-Iran cease-fire at risk of collapse

Oil eased but markets remained on edge as tensions flared in the Strait of Hormuz and the U.S.-Iran cease-fire looked increasingly fragile.

Iran fired at American warships amid a U.S. effort to help vessels transit the crucial waterway. The U.S. said it fired on Iranian small boats, while Tehran’s foreign minister warned the U.S. against reigniting the conflict.

In equity markets, U.S. stocks rallied premarket after slipping Monday. The dollar rose and bitcoin hit a three-month high.

U.S. Treasury yields fell slightly, tracking moves in oil. Investors watch for the release of the March Jolts report later Tuesday for insight into the health of the U.S. labor market.

—In early European trading, Brent crude for July delivery was down 1% to $113.24 a barrel after rallying nearly 6% in the previous session, while WTI futures for June fell 2.3% to $104.1 a barrel. “The flare-up in tension is likely to halt any moves by ship owners to consider transiting the Strait,” analysts at ANZ said. Meanwhile, the U.A.E. confirmed a strike sparked a fire at the oil hub of Fujairah, threatening around 1.9 million barrels a day that the country has been exporting via the route since the effective closure of Hormuz.

—In the U.S., both the S&P 500 and the Dow Jones Industrial Average climbed 0.3% in premarket trade. Futures for the tech-heavy Nasdaq were up 0.5%.

Palantir Technologies slipped 2% premarket despite reporting record quarterly profits after the closing bell Monday. Advanced Micro Devices will report earnings after market close Tuesday.

—Asia markets were largely lower. Hong Kong’s Hang Seng Index was down 0.9%, weighed by sports apparel makers and lender HSBC. Singapore’s FTSE Straits Times Index fell 0.6%, while the FTSE Bursa Malaysia KLCI edged 0.1% lower. India’s Sensex declined 0.7%.

Markets in South Korea, Japan and China were closed for public holidays.

—European indexes were largely higher at the open, with the Europe-wide Stoxx 600 nudging up 0.1% after sliding sharply Monday. London’s FTSE 100 fell 1% as it caught up with market sentiment after a break in trading Monday. HSBC dragged on the index, falling 5.1% after earnings missed market forecasts.

Germany’s DAX was up 0.2% as energy-sensitive stocks edged higher. In Paris, the French CAC 40 edged 0.1% higher as technology gains counter slipping banking stocks. The Italian FTSE MIB rose 0.5%, pushed higher by gains for UniCredit. The bank gained 3% after its earnings beat expectations. The Spanish IBEX 35 was 0.3% higher.

—The dollar rose as renewed fighting in the Middle East boosted safe-haven flows. The greenback is also supported as the U.S. is a net oil exporter. The DXY dollar index rose 0.1% to 98.487.

—U.S. Treasury yields fell slightly in European trade as oil eased. The U.S. Treasury signaled increased borrowing needs in its quarterly refunding announcement on Monday, while additional details relating to the refunding plans will be released on Wednesday. The two-year Treasury yield declined 0.8 basis points to 3.953%, while the 10-year yield fell 0.4 basis points to 4.441%. The 30-year yield remained above 5%, last trading at 5.019%.

Eurozone government bond yields were stable. Government bond issuance is set to be light on Tuesday, with bond auctions only from Austria and Germany. The 10-year Bund yield last traded at 3.071%, up just 0.1 basis point.

—Bitcoin rose to a three-month high of $81,272. The cryptocurrency’s sustained rise above the key $80,000 level encourages buyers despite escalating tensions in the Middle East. “We see this level as important because it shows whether buyers are strong enough to defend bitcoin during a week shaped by geopolitical risk, inflation pressure, and limited fresh economic data,” said Naeem Aslam at Zaye Capital Markets.

—Gold prices rebounded. In early European trading, futures in New York rose 0.6% to $4,560.50 a troy ounce. Meanwhile, silver futures rose 0.4% to $73.80 an ounce and platinum was up 1.3% to $1,987.50 an ounce.

Write to Barcelona Editors at barcelonaeditors@dowjones.com