Brent Oil Nears $100 as Alphabet Spending Lifts Chip Stocks

Summary

Brent oil climbed to its highest level since early June as the widening Middle East conflict disrupted shipping through the Red Sea and fuelled inflation concerns. The S&P 500 and Nasdaq ended lower on Wednesday, with Alphabet falling despite record cloud growth after raising its capital spending plans, while Tesla was also in focus following results. Asian chipmakers rallied on expectations of stronger AI infrastructure demand, and the US dollar remained supported by safe-haven demand as traders fully priced in a Federal Reserve rate hike in September.

Equities

The FTSE 100 closed 1.2% higher on Wednesday at 10,717, reaching its highest level in more than four months, while the FTSE 250 gained 0.7% to its strongest close in over four years. Mining, energy and banking shares led the advance as higher oil and precious metals prices lifted commodity-related stocks. Investors also continued to assess the outlook for Bank of England interest rates after UK inflation eased by more than expected in June, although markets still expect the central bank to leave rates unchanged next week.

Commodity producers provided much of the support for London's blue-chip index. Precious metals miners climbed 4.5% as gold reached a two-week high, while industrial miners added 1.9%. Energy stocks rose 1.4% after oil prices jumped more than 3% on concerns over potential supply disruptions linked to renewed tensions involving Iran and Houthi attacks on Red Sea shipping. HSBC, the UK's largest listed company, closed 2.1% higher as banking shares gained 1.7%.

Segro finished 2.9% higher on Wednesday after US logistics property group Prologis submitted a final takeover proposal for the warehouse landlord. J D Wetherspoon fell 4.2% after warning that annual earnings are likely to miss expectations because of weaker sales and rising costs. EasyJet dropped 11.8% after Reuters reported that the European Union is preparing a review of airline ownership rules that could complicate future US takeover interest in the carrier.

On Wall Street, the S&P 500 closed 0.14% lower on Wednesday, the Nasdaq fell 0.57% and the Dow Jones Industrial Average finished broadly unchanged, down 0.01%. Investors focused on quarterly earnings from major technology companies while keeping an eye on higher oil prices and developments in the Middle East.

Super Micro Computer surged 19.8% after announcing more than $60 billion of new fourth-quarter orders, lifting optimism across the AI server sector. Dell Technologies climbed 9.3% and Hewlett Packard Enterprise gained 3.0% following the update. AT&T rose 3.5% after reporting stronger-than-expected wireless subscriber growth, while Philip Morris International added 3.3% after quarterly earnings beat forecasts on stronger cigarette demand.

Alphabet closed 1.5% lower before reporting results after the market closed, with investors watching its AI strategy following delays to a key model launch. Tesla ended the regular session down 1.3% before falling a further 3.0% in after-hours trading after reporting negative free cash flow for the second quarter, the first such result in more than two years. Texas Instruments closed 1.0% higher before releasing results, although its shares weakened in extended trading despite issuing a stronger-than-expected revenue outlook.

Forex & Commodities

The US dollar remained firm early on Thursday, supported by renewed tensions between the United States and Iran, although the dollar index edged slightly lower to 101.1 after reaching higher levels during the previous session. Sterling moved modestly higher against the dollar to 1.338, while the euro also strengthened slightly to 1.142 ahead of the European Central Bank's policy announcement later today. The Japanese yen stayed close to its weakest level since 1986, trading around 163.1 per US dollar after touching 163.2 on Tuesday.

Attention remains focused on central banks as the ECB is widely expected to leave interest rates unchanged today. However, policymakers are expected to keep the option of a September rate increase open following the recent rise in energy prices. Looking ahead, investors are also preparing for next week's Federal Reserve meeting. Markets continue to expect rates to remain unchanged this month, although futures pricing now indicates a 77% probability of a rate increase in September as higher oil prices raise concerns about inflation.

Spot gold eased early on Thursday to $4,122 per ounce after reaching a two-week high of $4,166 during the previous session. Higher US Treasury yields and expectations that interest rates could remain elevated limited demand for bullion, although a softer dollar provided some support. Silver traded at $59.66 per ounce, while platinum rose to $1,653 and palladium advanced to $1,298.

Oil prices climbed further in early Thursday trading, extending Wednesday's gains as supply concerns intensified. Brent crude rose to $96.27 per barrel, its highest level since 8 June, while West Texas Intermediate reached $88.48. The latest increase followed a new round of US strikes on Iran, reports of attacks on Saudi oil tankers in the Red Sea and warnings from Iran's Revolutionary Guards that the Strait of Hormuz remained under their control, heightening concerns over global energy supplies.