Oil prices surged on Thursday and global equity markets retreated after remarks by U.S. President Donald Trump dashed hopes of a swift resolution to the Iran war.

Still, European shares trimmed losses and U.S. bond prices clawed back gains on renewed hopes of a reopening of the Strait of Hormuz. Iran was drafting a protocol with Oman to monitor traffic in the narrow waterway through which a fifth of global oil and liquefied natural gas is shipped, its foreign ministry said.

Brent crude surged more than 7% a barrel after Trump said in a prime-time address on Wednesday that the United States would hit Iran “extremely hard” in the coming weeks and “bring them back to the Stone Ages where they belong.”

On Wall Street, stocks were lower on the last trading day of the week, with markets closed for the Good Friday holiday.

Gold prices fell as the U.S. dollar gained.

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. [GVD/EUR][US/]

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, climbed 0.48%.

“Over the past 48 hours, Tehran and Washington have exchanged a cacophony of statements, some suggesting rising odds of de-escalation,” 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 (Gulf Cooperation Council) targets toward Israeli ones.”

Wall Street Points Lower

MSCI’s gauge of stocks across the globe fell 0.59% to 990.80.

On Wall Street, the Dow Jones Industrial Average fell 0.39% to 46,383.81, the S&P 500 declined 0.23% to 6,560.04 and the Nasdaq Composite lost 0.28% to 21,780.32.

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 United States would be “out of Iran pretty quickly.”

The pan-European STOXX 600 index and Europe’s broad FTSEurofirst 300 index both lost 0.2%.

South Korea’s Kospi index slid 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.

Trump earlier said on Wednesday the United States did not need the key oil gateway.

Spot gold dropped 2.15% to $4,654.89 an ounce and U.S. gold futures settled down 2.8% at $4,679.70.

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 rallied 7.59% to $108.84 a barrel, as U.S. West Texas Intermediate settled up 11.41% to $111.54.

“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 1.4 basis points to 4.307%. The two-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 0.9 basis points to 3.794%.

Euro zone benchmark Bund yields snapped a three-day decline and traders raised bets for interest-rate hikes. The yield on the benchmark German 10-year added 0.7 basis points to 3.002%.

—

(Additional reporting by Ankur Banerjee in Singapore. Editing by Mark Potter, Will Dunham and David Gregorio)