LONDON - Oil prices soared anew and stock markets slid on Wednesday after US President Donald Trump said the ceasefire with Iran was over, following renewed strikes in the Middle East.
The latest bout of fighting was sparked by Iranian attacks on ships in the vital Strait of Hormuz shipping route.
Trump said at a NATO summit in Turkey that the ceasefire was “over”, although he left the door open to more talks.
The markets responded, with oil shooting back up again having in recent days come back down towards pre-war levels around $70 a barrel.
International benchmark Brent North Sea crude jumped more than 5% to around $78 a barrel while the main US contract, West Texas Intermediate, also soared 5% although both slipped back slightly mid-afternoon.
Wall Street stocks dropped, with the Dow Jones Industrial Average losing 1.0% at 52,412.15 in early trading. The broad-based S&P 500 and the tech-heavy Nasdaq Composite Index were down around 0.5% as Trump “triggered a sell-off” in markets, said Sam Stovall from CFRA.
In Europe, Paris and Frankfurt had shed around 1.8% 90 minutes from the close while London was down 1.2%.
“Geopolitical risks are rising” for markets, noted Kathleen Brooks, research director at the trading group XTB.
Fawad Razaqzada, market analyst with Forex.com, was even more blunt.
“After a long and eventful first half of the year dominated by the US-Israel war on Iran and Trump’s constant flip-flopping, the last thing investors, and frankly anyone else, needed with the summer holidays approaching was a return of the same geopolitical environment,” he said.
“Unfortunately, it looks like we could be heading back to that.”
The United States launched extensive strikes on Iran this week following attacks on ships in the strait, triggering a wave of reprisals against American bases in the Gulf.
Washington also revoked a temporary sanctions waiver for Iranian oil.
Brooks added that “for the Brent crude oil price to extend gains above $80 per barrel, we would need to see another US naval blockade of the Strait of Hormuz, which would stop Iran from selling its oil and cause a major escalation in tensions”.
Equities in Asia also suffered, with the geopolitical tensions coming on top of a retreat from the tech sector on concerns over the eye-watering sums being invested in AI.
Seoul’s Kospi — which has been Asia’s poster child for the tech rally — sank more than five percent and has lost more than 20% since hitting a record high last month.
Samsung took another hit following a rout on Tuesday that came despite the firm forecasting a roughly 19-fold jump in second-quarter operating profit from a year earlier on the back of strong AI chip demand.
The company and rival SK Hynix both tumbled around six percent.
“Investors have been spooked in recent weeks by fears of excessive spending in the AI world and rich valuations in parts of the tech space, causing widespread profit-taking,” said Dan Coatsworth, head of markets at AJ Bell.
The dollar made some gains against its peers as the prospect of another hit to Middle East oil supplies fuelled concerns that inflation could remain elevated for longer than feared, putting pressure on the Federal Reserve to hike interest rates.
Key figures at 1350 GMT
- Brent North Sea Crude: UP 5.0% at $77.82 a barrel
- West Texas Intermediate: UP 4.6% at $73.65 a barrel
- New York - Dow: DOWN 1.0% at 52,412.15 points
- New York - S&P 500: DOWN 0.5% at 7,466.79
- New York - Nasdaq Composite: DOWN 0.3% at 25,734.20
- London - FTSE 100: DOWN 1.2% at 10,543.14 points
- Paris - CAC 40: DOWN 1.8% at 8,287.52
- Frankfurt - DAX: DOWN 1.8% at 25,020.52
- Seoul - Kospi: DOWN 5.4% at 7,246.79 (close)
- Tokyo - Nikkei 225: DOWN 2.1% at 66,819.05 (close)
- Hong Kong - Hang Seng Index: UP 3.0% at 24,199.46 (close)
- Shanghai - Composite: DOWN 0.5% at 3,970.88 (close)
- Euro/dollar: DOWN at $1.1399 from $1.1415
- Pound/dollar: DOWN at $1.3345 from $1.3360
- Dollar/yen: UP at 162.49 yen from 162.09 yen on Tuesday
- Euro/pound: DOWN at 85.41 pence from 85.44 pence
