Brent crude approached the $100 per barrel mark on Thursday (July 23) after Tehran-backed Houthi rebels attacked shipping in the Red Sea, raising fears that the conflict in the Middle East could expand into new areas.
The international oil benchmark Brent rose by 5%, surpassing $98 per barrel, following the Houthi rebels’ claim of an attack on two Saudi oil tankers in the Red Sea. Iran has vowed to continue its strikes in the region as long as it faces attacks from the United States.
“Investors are in a cautious mood… as new concerns about the current energy crisis affect sentiment,” said Susannah Streeter, chief investment strategist at Wealth Club. She added that “with the Strait of Hormuz and the Red Sea now under increased pressure, markets are preparing for the conflict to disrupt key energy routes and keep oil prices high for an extended period.” Analysts warn that rising oil prices also heighten the risk of accelerating inflation and further interest rate hikes.
Most Asian stock markets strengthened due to the long-awaited recovery of technology shares, while European exchanges showed weaker performance. London, Paris, and Frankfurt traded lower, and the dollar strengthened against other major currencies.
The FTSE 100 index in London fell as Centrica shares dropped 9% after the owner of British Gas announced 1,300 job cuts and released a controversial earnings report. In Paris, the index lost 1%, partly due to a 15% decline in shares of semiconductor manufacturer STMicroelectronics, as the company’s sales forecast fell short of expectations. Meanwhile, French oil and gas giant TotalEnergies rose by 3% after reporting a doubling of net profit in the second quarter amid rising energy prices.
Interest in AI Investments
Investor optimism about the artificial intelligence (AI) sector has waned somewhat in recent months due to concerns over overvalued companies and uncertainty about when multi-billion dollar investments will yield returns. A report from Alphabet, the parent company of Google, released on Wednesday, intensified these concerns by indicating possible expenses of up to $205 billion on AI development this year—significantly more than analysts had anticipated. Next week, investors will closely scrutinize the financial results of Microsoft, Meta, and Amazon to evaluate their capital investment plans.
Meanwhile, Asian traders returned to buying technology stocks after the previous decline. The index in Seoul rose by more than 4% due to gains in shares of chip manufacturers SK hynix and Samsung. Positive momentum in Tokyo was driven by Advantest and SoftBank, while the Hong Kong and Shanghai exchanges also closed with gains.
Pressure on the Japanese Yen
Tokyo remains in focus, where the yen has fallen to its lowest level against the dollar in four decades. This decline is attributed to fears of a significant gap between the low interest rates set by the Bank of Japan and those in the United States and other major economies. Rising oil prices and concerns about the future of Japan’s economy are also putting additional pressure on the currency.
Source: Channel NewsAsia
