Tech stocks skid, bond yields rise as Gulf conflict sends oil surging
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July 13 : Tech stocks fell sharply and government bond yields rose on Monday as investors grappled with concerns over a fresh escalation in the Middle East conflict and valuations in AI-related shares.
U.S. and Iranian forces renewed exchanges of heavy missile and drone assaults, with Tehran saying it had again closed the vital Strait of Hormuz.
The dollar edged down with the rate outlook from the Federal Reserve under the spotlight, just a day before Chair Kevin Warsh is due to face Congress for the first time in his new role.
MSCI’s main world stocks index <.MIWD00000PUS> fell 0.31 per cent. Europe’s STOXX 600 .STOXX was down 0.10 per cent, with tech stocks falling 0.70 per cent.
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Nasdaq futures dropped 0.90 per cent, S&P 500 futures were down 0.25 per cent and Dow E-minis were flat. Japan’s Nikkei <.N225> fell 1.9 per cent.
“if this (an escalation in the Middle East) leads to markets selling off, RBC BlueBay suspects that this price action could be an attractive entry point to add risk, unless the attitude within the U.S. administration towards putting boots on the ground in Iran were to suddenly change, which for now seems unlikely,” said Mark Dowding, BlueBay CIO, RBC BlueBay Asset Management.
Brent crude pared its earlier rise and was last up 3.0 per cent to $78.22 a barrel, up from the recent trough of $70.14, while U.S. crude added 2.4 per cent to $73.75 a barrel.
“Short term, we still remain optimistic that we could have a fudge or a patch that would enable oil to flow through and put a lid on oil prices. (U.S. President Donald) Trump is constrained due to mid-term elections and the prospects of losing the Senate, as well as the House,” said Mohit Kumar, an economist at Jefferies.
“He (Trump) would be much more amenable to some version of a deal before mid-terms to keep oil prices in check,” he added.
Inflation figures for June on Tuesday could show some cooling in the headline rate of 4.2 per cent as gasoline prices decline, though some of that will reverse now that oil is rising anew.
AI VALUATIONS IN FOCUS
South Korea’s formerly red-hot KOSPI sank 7.6 per cent, having already lost almost 8 per cent last week, as leveraged bets on semiconductor shares came under pressure. The market has emerged as a key global barometer for chip-sector sentiment and further losses could ripple out more broadly.
U.S.-listed shares of SK Hynix fell 9.3 per cent in the U.S. pre-market after jumping almost 14 per cent in their Nasdaq debut on Friday.
“All eyes on the AI capex trajectory: rising concerns around the sustainability of the AI capex boom appear to have been the main catalyst for the momentum wobble,” BofA said, adding that the bank remained positioned for a continued momentum reversal.
For equity investors, a lot is now riding on the coming earnings season. The major banks kick off from Tuesday, while Netflix and General Electric are also on the docket.
“Tech continues to screen highly in our models, supported by stand out earnings growth/momentum and attractive valuations,” analysts at Citi wrote in a note.
“While AI volatility may remain elevated over the coming quarter, we maintain our Overweight stance on global IT and the U.S.,” they added. “We pair these growth exposures with over weights in cyclical regions/sectors, including Japan, financials and materials.”
EURO/DOLLAR RISES
The spike in oil pushed 2-year Treasury yields to their highest since February 2025 at 4.2393 per cent, while fed fund futures implied around 38 basis points of policy tightening by the end of the year.
The dollar index was down 0.08 per cent at 100.87, with the euro rising 0.18 per cent to $1.1433, as the U.S. currency already priced in the impact of the conflict including a more hawkish Federal Reserve.
The greenback added 0.20 per cent on the yen to 162.85, regaining some of the ground lost on Friday when Japanese Finance Minister Satsuki Katayama floated an idea to encourage the $1.8 trillion Government Pension Investment Fund (GPIF) and other retirement vehicles to bring some of their money home.
The Government Pension Investment Fund’s (GPIF) potential moves are in the spotlight, as analysts say it has the greatest capacity among Japanese investors to influence forex markets. Although its latest five-year strategy review was completed in 2025, GPIF can still adjust its holdings within its target allocation bands.
The pound eased 0.16 per cent to $1.3395 ahead of a pivotal week in British politics as Andy Burnham is expected to be formally anointed as Labour leader on Friday and named as prime minister on July 20.
In commodity markets, the rise in yields weighed on non-interest bearing gold, which slipped 1.5 per cent to about $4,060 an ounce. [GOL/]
Source: Reuters
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