Oil prices spike on fresh US-Iran attacks, tech weighs on stocks again
Seoul led losses in most Asian stocks, dragged down by market heavyweight SK hynix’s 10 per cent plunge.
A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia on Jun 4, 2023. (File photo: Reuters/Alexander Manzyuk)
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HONG KONG: Oil prices jumped more than four per cent Monday (Jul 13) after another flare-up between the United States and Iran that threatened their already fragile truce, while Seoul led losses in most Asian stock markets as tech firms suffered another selloff.
The renewed hostilities in the Middle East followed last week’s exchange of fire and came as negotiators struggle to reach a lasting peace deal to keep the crucial Strait of Hormuz open.
The US military launched a new wave of strikes on Sunday after renewed fighting over the waterway saw several of Washington’s Gulf allies targeted by incoming fire.
Both main oil contracts, which have tumbled since the announcement of the agreement, spiked as much as 4.5 per cent, fanning fresh concerns that inflation – already elevated because of the war – could force central banks to hike interest rates.
The renewed fighting followed an Iranian attack early Sunday on a commercial ship in the strait, with the crew forced to abandon it after it went up in flames.
Iran’s Revolutionary Guards said after the incident that “the Strait of Hormuz will be closed until further notice and until the end of American interventions in this region”, according to state news agency IRNA.
CENTCOM countered on X that the strait was “open to all vessels seeking to lawfully transit”.
“One can easily imagine the situation spiralling quite rapidly,” said Fawad Razaqzada, a market analyst at Forex.com.
“Of course, rhetoric can soften. We’ve seen that movie before. But for now, traders are forced to assume the worst.”
But while the resumption of hostilities has led to another spike in crude prices, IG analyst Fabien Yip said they were unlikely to hit the lofty levels seen following the outbreak of war back in March.
“Oil’s return towards pre-war levels in June reflected markets pricing in a best-case outcome for the fragile US-Iran arrangement,” she wrote, adding that the “re-escalation exposes how fragile that assumption was”.
“Near-term, the risk premium should keep prices supported, though a repeat of the earlier spike appears unlikely, as demand remains slow to recover while stranded-tanker releases and OPEC+ output quota expansion continue to add barrels to an already oversupplied outlook.”
On equity markets, Seoul tanked more than 5 per cent as tech firms came under renewed selling pressure after weeks of volatility fuelled by concerns about stretched valuations and questions over the vast sums pumped into the AI sector.
The KOSPI was dragged by market heavyweight SK hynix’s 10 per cent plunge, extending a recent bout of selling that has seen the chip titan lose about a third of its value since hitting a record last month.
The loss also came despite soaring almost 13 per cent on its New York debut following a record US$26.5 billion share sale.
Rival Samsung was down more than six per cent.
There were also losses in Tokyo, where tech firms Advantest and Tokyo Electron sank more than one per cent each.
Shanghai, Singapore, Wellington and Jakarta dropped, though Hong Kong, Taipei and Manila rose.
The dollar rose on safe-haven buying and on bets that the Federal Reserve will have to hike rates at least once this year to tame war-fuelled inflation.
Investors are also gearing up for the latest earnings season, which will be pored over for an idea about the outlook for the AI industry.
This week sees reports from Taiwanese chip giant TSMC and Dutch firm ASML, which produces chipmaking equipment.
A number of Wall Street banks are also lined up to file, including JP Morgan, Bank of America and Goldman Sachs.
Source: AFP/co
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