Oil prices jump as US and Iran carry out airstrikes

Oil prices jumped and world shares were mixed on Monday after the US carried out airstrikes and Iran retaliated.  In early European trading, Germany’s DAX added 0.2 per cent to 25,105.55 and the CAC 40 in Paris edged 0.1 per cent higher, to 8,347.26. Britain’s FTSE 100 also was up just 0.1 per cent, at 10,506.86.

US stock futures were mixed, with the contract for the S&P 500 down 0.3 per cent and that for the Dow nearly unchanged. The Nasdaq composite future lost 0.9 per cent. The price of Brent crude, the international standard, climbed as much as nearly 5 per cent early Monday before falling back. As of early morning in Europe, it was up 2.3 per cent at $77.72 per barrel, while US benchmark crude added 2.1 per cent to $72.92 per barrel.  Prices for both types of crude oil recently had slipped back to around the levels they were at before the war with Iran began, after the two sides set an interim agreement on ending the conflict and ships resumed transporting oil through the Strait of Hormuz. However, the United States launched several waves of strikes on Iran into Monday morning over an Iranian attack on a container ship in the strait that set it ablaze and left a crew member missing over the weekend. Iran retaliated by targeting countries across the Middle East.  In Asian share trading, Tokyo’s Nikkei 225 index lost 1.9 per cent to 67,242.73, while in Seoul, the Kospi declined 9 per cent to 6,806.93. It’s now at its lowest level since early May.

Shares in South Korean memory chipmaker SK Hynix, which soared 13 per cent in their debut on Friday on Wall Street, slumped 15.4 per cent in Seoul. Its bigger rival, Samsung Electronics, sank 10.7 per cent.

Elsewhere in Asia, Hong Kong’s Hang Seng edged 0.2 per cent higher, to 24,212.36, and the Shanghai Composite index shed 2.1 per cent to 3,913.79.

In Australia, the S&P/ASX 200 was nearly unchanged at 8,808.50.

US stocks ticked higher Friday after investors showed sustained appetite for winners of the artificial-intelligence boom. The S&P 500 rose 0.4 per cent and the Dow Jones Industrial Average added 0.3 per cent. The Nasdaq composite climbed 0.3 per cent.

SK Hynix’s shares jumped immediately after trading began in the midday hours after it raised roughly USD 26.5 billion by selling American depositary shares at a price of USD 149 each.

SK Hynix’s stock in Seoul had already surged more than 600 per cent over the last year thanks to euphoria around AI. The boom has created real profits due to surging demand for computer memory. But it has also raised worries that AI stock prices have shot too high and that all the world’s spending on chips and data centres won’t be able to produce enough productivity and profit growth to make it worth it.

“The reason why this stock, along with other memory chipmakers, has gone parabolic is that AI demand has somehow created the perception that a sector historically defined by boom-and-bust cycles could remain permanently in the boom phase,” Ipek Ozkardeskaya of Swissquote said in a commentary.

SK Hynix plans to double its production capacity, or possibly more, to keep up with demand. However, “Technological breakthroughs, more efficient AI models or simply a slowdown in AI infrastructure investment could quickly turn the market into one of oversupply,” she said.

Similar concerns apply to many AI stocks as they’ve grown into some of Wall Street’s most influential because of their huge valuations. Beyond that, investors will be focusing on earnings reports, watching to see if corporate profits are growing fast enough to justify big gains in stock prices, which are broadly near records.

This week will bring earnings reports from many of the biggest US banks, including Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo on Tuesday alone.

Meanwhile, worries about how continued fighting with Iran will affect the global flow of crude are clouding the outlook both for energy costs and overall inflation.

High bond yields have been weighing on financial markets worldwide since more expensive oil and high inflation could push the Federal Reserve and other central banks to raise interest rates.

Higher rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.

In other dealings early Monday, the U.S. dollar rose to 162.01 Japanese yen from 161.72 yen. The euro rose to USD 1.1435 from USD 1.1408.