Oil Jumps as Hormuz Attacks Shake Markets

Summary

Oil prices rose after fresh attacks near the Strait of Hormuz undermined the US-Iran ceasefire and prompted the US to reimpose sanctions on Iranian crude sales. The FTSE 100 edged higher as gains in Shell supported energy stocks, while US markets closed mixed, with the S&P 500 and Nasdaq retreating from recent AI-driven gains. The US dollar remained firm as Treasury yields climbed, while sterling and the euro traded under pressure. South Korea's KOSPI extended its sharp decline as volatility in AI-related technology shares continued.

Equities

The FTSE 100 closed 0.1% higher on Tuesday, supported by a strong rally in energy shares that outweighed weakness in precious metals miners. The blue-chip index finished at 10,655.88, while the FTSE 250 fell 0.5%. Rising oil prices also helped lift the London market after reports of attacks on vessels near the Strait of Hormuz renewed concerns about disruption to global energy supplies.

Shell closed 3.4% higher on Tuesday after raising its second-quarter gas production guidance and signalling significantly stronger gas trading than in the previous quarter. The upbeat trading update also lifted confidence across the sector, with BP gaining 1.4% by the close. Consumer stocks also performed well, with Diageo climbing 3.5% and Unilever adding 2.9%, while Lloyds reported that UK house prices edged up 0.2% in June, marking their first monthly increase since February despite ongoing economic uncertainty.

The S&P 500 closed 0.45% lower on Tuesday, while the Nasdaq fell 1.16% and the Dow Jones Industrial Average finished 0.25% lower after briefly reaching a record intraday high. Technology shares came under pressure as investors questioned whether the recent surge in AI-related companies had pushed valuations too far, leading to broad weakness across the semiconductor sector.

Micron Technology closed 4.7% lower on Tuesday and Sandisk fell 7.3%, dragging the Philadelphia Semiconductor Index down 4.65%. Sentiment was also affected by reports that Chinese AI startup DeepSeek is developing its own AI chip, potentially reducing future reliance on suppliers such as Nvidia and Huawei. Attention is now turning to Friday's Nasdaq debut of SK Hynix's US listing as investors assess whether demand for AI-related chip stocks remains strong.

SpaceX fell almost 7% on Tuesday during its first trading session as a member of the Nasdaq 100 after several brokerages initiated coverage of the stock. Fiserv moved in the opposite direction, closing 1.8% higher following reports that it has held discussions with major US banks, including JPMorgan and Bank of America, about selling its debit payments infrastructure business. Investors are also looking ahead to the release of minutes from the US Federal Reserve's latest policy meeting, the first under Chair Kevin Warsh.

Forex & Commodities

The US dollar remained close to its highest level in a week early on Wednesday as renewed military action between the US and Iran increased demand for safe-haven assets. The dollar strengthened against the Japanese yen for a fourth consecutive session, trading around ¥162.3, while the euro was broadly unchanged at $1.142. Sterling also held steady near $1.335. In contrast, the New Zealand dollar advanced after the Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.5% and indicated that further policy tightening is likely if inflation pressures persist. The Australian dollar also edged higher alongside the stronger New Zealand currency.

Spot gold recovered early on Wednesday after briefly falling to its lowest level in almost a week, trading around $4,128 per ounce. The precious metal found support as investors weighed the latest geopolitical developments, although gains were limited by a firmer US dollar and higher bond yields ahead of the Federal Reserve minutes.

Oil prices continued to climb early on Wednesday following fresh US airstrikes on Iran and the reinstatement of sanctions on Iranian oil sales. Brent crude traded around $76.59 per barrel after extending gains from Tuesday, while US West Texas Intermediate reached approximately $72.26. Markets also reacted to reports that commercial vessels, including oil and LNG tankers, had been attacked near the Strait of Hormuz, raising renewed concerns about energy supplies through one of the world's most important shipping routes.