(July 8): Oil prices rose and Asian stocks were little changed as investors assessed the implications of renewed geopolitical tensions for energy supplies and risk assets.
Brent climbed 2.3% to trade near US$76 a barrel after the US launched fresh airstrikes in Iran and revoked a waiver that allowed it to sell oil globally after attacks on ships in the Strait of Hormuz. The broader equity-market reaction was relatively contained, with the MSCI Asia Pacific Index steady after losing nearly 1% in opening minutes. S&P 500 futures were up 0.1% and contracts for the Nasdaq 100 rose 0.3%.
The moves came after US benchmarks fell on Tuesday, with a gauge of chip stocks dropping more than 4%. The Nasdaq 100 slid 1.8%.
The latest escalation in geopolitical tensions risks triggering renewed disruption in energy markets and undermining the interim US-Iran peace deal reached last month. It adds another layer of uncertainty in equity markets, where investors have already grappled with sharp volatility in recent weeks amid concern the artificial intelligence-fuelled rally has run too far, too fast.
“After AI and tech sentiment had dominated market moves over the last couple of weeks, investors are now forced to move back to focusing on geopolitical tensions,” said Nick Twidale, chief market analyst at AT Global Markets. “And this should dominate market sentiment, especially if we see a further escalation in the coming sessions.”
Brent oil prices had touched a peak near US$125 a barrel in late April, two months after the US and Israel began the military campaign against Iran. Prices returned toward pre-conflict levels on growing signs of a recovery in supplies after the peace deal.
See also: Asian stocks slip as tech weakness weighs, Samsung falls
American forces concentrated on Iranian air defences and weapons launchers in the attacks, according to a US official. Iran’s Mehr News Agency reported explosions were heard near the strait.
Elsewhere in markets, the Bloomberg Dollar Spot Index rose 0.1%. Treasuries were steady while yields on Australian and Japanese 10-year bonds climbed. Gold rose above US$4,100 an ounce.
“At the margin, the spike in oil prices and the removal of the Iranian oil waiver strengthens the case for central banks to deliver precautionary rate hikes due to the ongoing risk of second round inflation taking hold,” said Sean Keane, chief strategist for Asia Pacific at JB Drax Honore.
See also: Asian shares rise as tech rebound holds, oil slips
Corporate highlights:
- SK Hynix Inc’s US$28 billion US listing is multiple times oversubscribed ahead of pricing on Thursday, according to people familiar with the matter.
- When Amazon.com Inc sold its biggest ever bond earlier this year, it was inundated with investor orders amid hype about the AI boom. This time around, there’s less fanfare.
- Peak demand for its latest US$25 billion offering reached US$62 billion, according to people with knowledge of the matter. That’s about half the orders it attracted for its prior US$37 billion deal in March.
Stocks
- S&P 500 futures rose 0.1% as of 9:46am Tokyo time
- Hang Seng futures rose 0.1%
- Japan’s Topix fell 0.4%
- Australia’s S&P/ASX 200 fell 1.2%
- Euro Stoxx 50 futures were little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1410
- The Japanese yen fell 0.1% to 162.33 per dollar
- The offshore yuan was little changed at 6.8029 per dollar
Cryptocurrencies
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- Bitcoin was little changed at US$63,650.66
- Ether was little changed at US$1,781.64
Bonds
- The yield on 10-year Treasuries was little changed at 4.55%
- Japan’s 10-year yield advanced one basis point to 2.855%
- Australia’s 10-year yield advanced five basis points to 4.87%
Commodities
- West Texas Intermediate crude rose 2.5% to US$72.17 a barrel
- Spot gold rose 0.4% to US$4,121.84 an ounce.
Uploaded by Liza Shireen Koshy
