Oil Prices Surge Amid Global Market Reactions

Oil prices rose sharply, and global stocks showed mixed performance on Monday following U.S. airstrikes and Iran’s response.

Market Reactions in Europe

In early European trading, Germany’s DAX increased by 0.2% to 25,105.55 points, and the CAC 40 in Paris edged up by 0.1% to 8,347.26 points. The UK’s FTSE 100 moved up slightly by 0.1%, reaching 10,506.86 points.

U.S. Stock Futures

U.S. stock futures displayed mixed trends with the S&P 500 dipping 0.3%, while the Dow stayed nearly unchanged. The Nasdaq Composite futures dropped 0.9%.

Oil Price Movements

The international benchmark, Brent crude, jumped nearly 5% early Monday before pulling back. Early in European trading, Brent was up 2.3% at $77.72 per barrel. U.S. benchmark crude gained 2.1% to $72.92 per barrel. Previously, prices had retreated to near pre-conflict levels due to a provisional agreement between the U.S. and Iran that allowed oil shipments to resume through the Strait of Hormuz. However, recent U.S. airstrikes in response to an Iranian attack on a container ship disrupted this balance, resulting in significant tension.

Asian Markets Performance

In Asia, Tokyo’s Nikkei 225 fell 1.9% to 67,242.73, and Seoul’s Kospi dropped 9% to 6,806.93, hitting its lowest point since early May. South Korea’s SK Hynix plummeted 15.4% in Seoul following a 13% surge in its Wall Street debut. Samsung Electronics also decreased by 10.7%. Elsewhere, Hong Kong’s Hang Seng rose 0.2% to 24,212.36, while Shanghai Composite fell 2.1% to 3,913.79. Australia’s S&P/ASX 200 remained stable at 8,808.50.

U.S. Market Summary

On Friday, U.S. stocks had modest gains as investors remained interested in AI industry leaders. The S&P 500 increased by 0.4%, the Dow Jones Industrial Average rose by 0.3%, and the Nasdaq Composite gained 0.3%.

SK Hynix and AI Market Dynamics

SK Hynix shares surged after raising approximately $26.5 billion through U.S. depositary shares at $149 each. Over the past year, SK Hynix stocks in Seoul soared more than 600%, driven by AI demand. This created a perception of sustained growth in a typically cyclic market, as explained by Ipek Ozkardeskaya from Swissquote. Despite plans to expand production capacity, potential advancements in AI technology or reduced infrastructure investment might lead to oversupply.

Similar concerns surround many AI-related stocks now influential on Wall Street due to high valuations. Investors will closely watch corporate earnings to determine if growth supports high stock prices, which are nearing historic peaks.

Focus on Corporate Earnings and Oil Tensions

This week, major U.S. banks such as Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo will release earnings reports. Concurrently, the continuous conflict with Iran threatens global oil supply, affecting energy costs and inflation prospects.

Impact of Bond Yields and Currency Movements

High bond yields are affecting global financial markets, with potential for increased interest rates by the Federal Reserve and other central banks to combat inflation. Higher rates can curb inflation but might slow the economy and depress investment values. On Monday, the U.S. dollar rose to 162.01 Japanese yen from 161.72 yen. The euro increased to $1.1435 from $1.1408.