Gulf ceasefire hopes cool inflation fears as central bank meetings approach.
Oil prices tumbled late on Monday and into early Tuesday after the United States and Iran paused their tit-for-tat strikes, lifting global stock markets at the start of a week dominated by corporate earnings and central bank policy decisions.
International benchmark Brent crude plunged more than 8% to US$88.36 a barrel as the United States and Iran paused hostilities, offering temporary relief to Gulf shipping routes and the oil industry.
The United States and Iran resumed hostilities earlier this month, shattering a fragile truce after Tehran targeted vessels transiting the Strait of Hormuz in Omani waters, triggering a fresh cycle of escalation.
The renewed conflict sent crude prices sharply higher, with international benchmark Brent climbing above US$100 a barrel last week for the first time since May.
“While tensions in the Middle East have eased, the conflict remains unresolved, making it difficult for oil prices to fall below US$85 a barrel for now,” said Kathleen Brooks, research director at XTB.
Alternative (more analytical):
“Although hostilities in the Middle East have subsided, the underlying risks remain, which could make it challenging for Brent to drop below US$85 per barrel at this stage,” said Kathleen Brooks, research director at XTB trading group.
David Morrison, senior market analyst at Trade Nation, said investors were hopeful the pause in hostilities could pave the way for renewed peace negotiations.
The easing of tensions also helped calm concerns about a fresh spike in inflation and the prospect of further interest rate hikes, supporting gains across global equity markets on Monday.
However, Wall Street surrendered most of its early advances, with only the Dow Jones Industrial Average ending the session higher as weakness in technology stocks continued to weigh on the Nasdaq Composite.
“When a de-escalation in Middle East tensions fails to spark a strong rally in equities, it suggests investors remain wary of broader risks,” said Chris Beauchamp, chief market analyst at online trading and investing platform IG.
“Early optimism over the pause in hostilities quickly faded when US trading began, with investors using the initial rally as an opportunity to further reduce exposure to battered technology stocks,” Beauchamp added, citing a sharp decline in AI chip giant Nvidia.
US semiconductor shares also came under pressure following reports that Chinese firm Shanghai Yuliangsheng had achieved a technological breakthrough that could accelerate the development of China’s domestic chip industry.
In Europe, Frankfurt’s benchmark index rose 1%, while London and Paris also finished the day in positive territory.
Attention is now turning to central bank meetings, with the US Federal Reserve widely expected to leave interest rates unchanged on Wednesday, followed by the Bank of England on Thursday.
Asian markets also ended higher, with gains across Tokyo, Seoul, Hong Kong and Shanghai as improved risk sentiment lifted equities.
Investors are now looking ahead to a busy week of corporate earnings, including results from South Korea’s SK hynix and Samsung, Japan’s Kioxia, and US technology giants Microsoft, Meta, Apple and Amazon. Markets will be watching closely for updates on their outlooks and artificial intelligence-related spending plans.
Meanwhile, shares in China’s leading memory chipmaker, CXMT, soared more than 500% on their Shanghai stock market debut, briefly making the Anhui-based company the mainland’s most valuable listed firm before trimming gains to close up 465%.
The spectacular rally followed the company’s US$9.8 billion blockbuster initial public offering, which Bloomberg News said was the largest mainland technology share sale in China’s history.
Brent North Sea crude: Down 8.7% at US$88.36 per barrel
- Nasdaq Composite (New York): Down 0.2% at 24,932.08
- FTSE 100 (London): Up 0.4% at 10,781.75
- CAC 40 (Paris): Up 0.4% at 8,406.06
- DAX (Frankfurt): Up 1.0% at 25,361.03
- Nikkei 225 (Tokyo): Up 0.5% at 64,931.19
- Hang Seng Index (Hong Kong): Up 1.0% at 25,207.18
- Shanghai Composite (Shanghai): Up 1.2% at 3,858.24
- Euro/dollar: Up at $1.1371 from $1.1370 on Friday.
- Pound/dollar: Down at $1.3293 from $1.3325
- Euro/pound: Up at 85.54 pence from 85.33 pence
- Dollar/yen: Down at 163.72 yen from 163.83 yen.
