Stalled U.S.-Iran peace talks drove oil prices higher on Monday, heightening concerns over potential disruptions to Middle East energy exports, while global stocks held steady at the start of a busy week of tech earnings and central bank decisions.
Benchmark Brent crude climbed nearly 3 per cent, reaching a more than three-week high of $108.5 per barrel at one point, fuelling inflation concerns and prompting traders to largely rule out interest rate cuts in developed markets this year.
MSCI’s All-World index edged slightly higher, while Europe’s STOXX 600 slipped about 0.2%. In Asia, markets in Tokyo and Seoul traded near record highs, buoyed by renewed optimism around artificial intelligence, even as Wall Street futures declined.
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“It is an incredibly busy week ahead. Not only are we going to have inevitably another round of geopolitical headlines all over the place, we’ve also got five policy decisions across the G10, we’ve got five of the ‘magnificent 7’ (tech giants) reporting, and I think by market cap it’s about 45% of the S&P giving us results this week,” a senior research strategist at Pepperstone, Michael Brown said.
A ceasefire has halted most of the fighting sparked by U.S.-Israeli strikes on Iran two months ago, but markets remain fixated on the largely closed Strait of Hormuz, with minimal oil and gas shipments passing through.
Prospects for renewed peace talks are unclear.
The U.S. President, Donald Trump said that “Iran need only reach out if it seeks negotiations to end the conflict, while Iran’s Foreign Minister arrived in Russia on Monday to seek backing from President Vladimir Putin.”
Goldman Sachs raised its year-end Brent oil forecast to $90 per barrel from $80, assuming Gulf exports return to normal by the end of June. Analysts cautioned that prices could rise sharply if inventories fall to critically low levels, a scenario not seen in decades.
Despite the oil-driven uncertainty, equity markets shifted focus back to the tech sector and the continued momentum behind artificial intelligence, which many investors see as difficult to slow.
“AI is something that people are very optimistic about and very much considered a winner. It’s the top of the portfolio,” a senior portfolio Manager for Allianz Technology Trust, Mike Seidenberg said..
Intel’s (INTC.O), opens new tab forecast last week for second-quarter revenue exceeding Wall Street expectations set off the latest round of buying, pushing the total value of the chipmaker-heavy stock markets in Taiwan and South Korea above that of Germany.
Reuters