Oil jumps as Middle East tensions hit global stock markets

Global markets came under pressure as Brent crude climbed following renewed tensions in the Middle East. Rising oil prices and losses in AI-related technology stocks weighed on Wall Street, while investors awaited major US corporate earnings and monitored inflation concerns.

New York: Oil prices climbed on Monday following weekend attacks in the Middle East, while losses in computer chipmakers and other artificial intelligence (AI)-related stocks weighed on global markets.

Brent crude, the international benchmark, rose 5.2 per cent to $79.98 a barrel after the United States and Iran each said the Strait of Hormuz was under its control. Fighting in the region has disrupted oil tanker movement through the strategic waterway, affecting crude supplies from the Persian Gulf and pushing up global fuel prices.

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Brent crude briefly approached $80 a barrel after US President Donald Trump said he was reinstating a blockade on Iranian ships in the strait. He also called for a 20 per cent levy on all cargo shipped through the route to reimburse the United States for providing security in the region.

Despite the gains, Brent crude remained well below its wartime peak of nearly $120 a barrel.

On Wall Street, the S&P 500 fell 0.7 per cent after posting its fourth weekly gain in the past five weeks. The Dow Jones Industrial Average was down 201 points, or 0.4 per cent, while the Nasdaq Composite declined 1.4 per cent.

Chip stocks led the losses, with Micron Technology falling 5.2 per cent after gaining more than 243 per cent this year. The rally had been driven by surging demand for computer memory and other components used in AI applications.

However, investors are increasingly concerned that AI-related stocks have risen too sharply and that demand may not remain strong if AI fails to deliver the expected gains in profitability and productivity.

Nvidia slipped 2.8 per cent, making it the biggest drag on the S&P 500 because of its large market value.

The sell-off began in Asia, where South Korea’s Kospi index dropped 8.9 per cent. SK Hynix plunged 15.4 per cent, marking its steepest single-day fall since its listing in 1997.

The South Korean chipmaker had listed its shares in the United States on Friday, raising about $26.5 billion. The stock had surged 13.1 per cent on its debut before falling 7.6 per cent on Monday.

Elsewhere in the AI sector, Taiwan Semiconductor Manufacturing Co (TSMC) reported that its June revenue jumped nearly 68 per cent year-on-year, taking its revenue growth for the first half of the year to 35.6 per cent. However, its US-listed shares declined 2.2 per cent.

Investors are also closely watching the earnings season, with Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo scheduled to announce quarterly results on Tuesday.

According to FactSet, analysts expect S&P 500 companies to report earnings growth of 23.6 per cent year-on-year. If achieved, it would mark the second consecutive quarter of earnings growth above 20 per cent.

In the bond market, the yield on the benchmark 10-year US Treasury rose to 4.61 per cent from 4.56 per cent on Friday, reflecting concerns that higher oil prices could fuel inflation and delay interest rate cuts by the US Federal Reserve.

European markets traded with modest losses, while Asian markets witnessed sharper declines. Shanghai’s benchmark index fell 2.1 per cent and Japan’s Nikkei 225 dropped 1.9 per cent.