Image Credit : REUTERS
SINGAPORE/LONDON: Global markets faced renewed volatility on Wednesday as oil prices surged following fresh military strikes in the Middle East, while technology stocks weakened amid rising concerns that the artificial intelligence-driven rally may be losing momentum.
Brent crude futures climbed 3.3% to $76.54 per barrel, marking their biggest single-day gain since late May. The rise came after renewed conflict in the region and tighter U.S. sanctions targeting Iranian oil exports raised fears of supply disruptions and added fresh inflation concerns.
The United States launched strikes against Iranian air defense systems, coastal surveillance facilities, and drone launch sites. In response, Iran’s Revolutionary Guards said they targeted U.S. military installations in Bahrain and Kuwait, where air raid sirens were reported. Washington also withdrew a waiver that had allowed Iran to continue selling oil internationally, a move Tehran described as a violation of the framework agreement aimed at ending hostilities.
Despite the sharp increase in crude prices, analysts said markets were not yet showing signs of widespread panic.
“Markets are reacting negatively to the renewed attacks, but the situation has not reached panic levels,” said Jason Wong, Senior Strategist at BNZ.
The rebound in oil prices added pressure to global bond markets. The yield on the benchmark 10-year U.S. Treasury rose to 4.56%, its highest level in a month, while German and Italian 10-year government bond yields also reached one-month highs.
Market strategists warned that geopolitical risks remain elevated despite previous hopes that tensions in the Middle East were easing.
David Chao, Asia-Pacific Global Market Strategist at Invesco, said current Brent prices may not fully reflect the possibility of further disruptions in the region. He also noted that the U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1983, leaving global energy markets more exposed to future supply shocks.
European and Asian Stocks Under Pressure
European equities opened lower, with the STOXX 600 index falling 0.8% as declines in healthcare and consumer shares outweighed gains in energy stocks. U.S. and European stock futures also slipped between 0.2% and 0.3%.
Asian markets also moved lower after Samsung Electronics shares declined for a second consecutive session despite the company reporting a 19-fold increase in quarterly profit.
Investor sentiment has shifted as analysts question whether demand for memory chips could soften during the second half of the year. In recent weeks, investors have rotated out of high-performing semiconductor stocks and into sectors such as financials, consumer companies, and major cloud computing firms.
Samsung’s earnings highlighted growing uncertainty surrounding AI-related valuations, particularly as supply constraints in areas such as memory chips and data centres begin to ease and future pricing for AI services becomes less predictable.
Marieke Blom, Chief Economist and Global Head of Research at ING, said investors are increasingly focused on whether AI companies can sustain their pricing power. She added that rising capital expenditure relative to earnings could reduce financial flexibility for shareholder returns, including share buybacks, potentially placing additional pressure on valuations across parts of the AI sector.
Currency Markets Await Federal Reserve Minutes
In currency trading, the U.S. dollar remained broadly stable, with the euro holding just above $1.14, while the Japanese yen traded near 162 per dollar, close to its weakest level in four decades.
Investors are also awaiting the release of the latest Federal Reserve meeting minutes later on Wednesday, looking for further clues on the outlook for U.S. monetary policy under new Chair Kevin Warsh. Traders expect the minutes to offer limited guidance as policymakers seek to avoid sending strong signals about future interest rate decisions.
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