Key facts
- Oil and gas prices surged due to escalating conflict in the Gulf.
- Brent crude exceeded $90 a barrel, and European gas prices hit €60.00.
- Higher energy costs revived inflation fears, leading to increased bond yields.
- Markets are pricing in potential Fed rate hikes by year-end.
- Major tech earnings from companies like Alphabet and Tesla are expected this week.
- Andy Burnham faces challenges including a sluggish economy and fiscal discipline concerns.
Oil, not artificial intelligence, is currently driving global markets as investors grapple with conflicting signals from the Middle East. Brent crude futures eased from a one-month high as traders latched onto hopes of a resolution in the escalating conflict, though the risk of disappointment remains. Yemen's Iran-aligned Houthis threatened a naval blockade on Saudi Arabia, which could lead to further oil supply shocks. However, markets are focusing on news that Tehran received a proposal from mediators for a 10-day ceasefire. The easing of oil prices lifted sentiment, allowing traders to invest in Asian chip stocks, with South Korea's KOSPI rising nearly 5% on the day. Global stocks, particularly chipmakers, have experienced significant volatility recently due to concerns about high valuations, profit growth, and the tangible results of AI infrastructure investments. European futures were lower, indicating fragile sentiment as the conflict's escalation revived inflationary worries, which have lifted yields and strengthened the U.S. dollar. Meanwhile, Britain's incoming Prime Minister Andy Burnham faces challenges including a sluggish economy and fiscal discipline concerns. Burnham stated he would adhere to the previous government's fiscal rules, but use any flexibility within them, a move that led to a sharp drop in sterling and British government bonds.