ISLAMABAD: Oil prices jumped more than four per cent on Wednesday after renewed fighting in the Middle East reignited concerns about supplies through the Strait of Hormuz.
On the other hand, a selloff in technology stocks deepened across Asia ahead of the US Federal Reserve’s policy decision.
Brent crude oil rose 4.3 per cent to $87.73 a barrel. Likewise, US West Texas Intermediate climbed 4.3 per cent to $82.68, recovering from losses recorded during a three-day lull in hostilities between the United States and Iran.
The latest gains followed US and Saudi air strikes on militia groups in Iraq on Tuesday.
The US military said the operation targeted “Iran-aligned terrorists” allegedly directed by Iran’s Islamic Revolutionary Guard Corps to attack US forces and Saudi energy infrastructure.
US Central Command also said Iran launched multiple ballistic missiles at US military installations in the Middle East, though all were intercepted.
Tehran, meanwhile, announced it had detained three oil tankers in the Strait of Hormuz, a critical maritime route that carries roughly one-fifth of the world’s oil and liquefied natural gas trade.
The renewed escalation followed a brief pause in nearly two weeks of exchanges involving US strikes on Iran and missile and drone attacks targeting Washington’s regional allies.
US President Donald Trump said earlier this week there remained a “good chance” of reaching a diplomatic agreement with Tehran. He also said that Iran and the US were in talks.
Oil remains volatile throughout July
Oil markets have experienced sharp swings throughout July. Brent crude climbed from around $72 per barrel at the start of the month to above $100 last week before retreating during the brief pause in hostilities.
In equity markets, technology shares remained under pressure as investors reassessed lofty expectations surrounding artificial intelligence-related spending.
A report in the Chinese media outlet stated that Shanghai Yuliangsheng, a Chinese company, had begun mass production of chips. ASML, a Dutch semiconductor equipment manufacturer, has long dominated chipmaking technologies.
South Korea’s benchmark Kospi index fell six per cent, extending an almost 11 per cent decline in the previous session.
Shares of SK hynix dropped 10 per cent after the memory chip maker reported quarterly operating profit and revenue below market expectations, despite a sharp increase in net income. Samsung Electronics lost six per cent.
SK hynix, a major supplier of high-bandwidth memory chips used in Nvidia products, has lost more than half its market value since reaching a record high a month ago.
Japanese technology stocks also fell, dragging the Nikkei 225 down 1.1 per cent, while Taiwan’s stock market lost nearly three per cent as Taiwan Semiconductor Manufacturing Company retreated. Hong Kong bucked the regional trend, with the Hang Seng Index rising 1.5 per cent.
Investors are now focused on the US Federal Reserve’s policy announcement later Wednesday. Markets overwhelmingly expect interest rates to remain unchanged, but analysts say policymakers could adopt a more hawkish tone amid lingering inflation concerns.
Matt Weller, head of market research at City Index, said traders would be watching for stronger language on inflation risks and any signs that Federal Open Market Committee members favour tighter monetary policy.
“Assuming the Fed leaves rates unchanged as expected, traders will be on the lookout for a potentially stronger description of inflation risks,” Weller said.
Multiple dissents in favour of higher rates would represent “a credible hawkish surprise” and could strengthen the US dollar while weighing on risk assets.
