Benchmark Brent crude futures LCOc1 rose almost 3% to touch a more than three-week high of US$108.5 a barrel at one point in the session, stoking inflation worries and prompting traders to all but price out rate cuts in developed markets this year.
MSCI’s All-World index was a touch higher, while Europe’s STOXX 600 dipped around 0.2%. In Asia, markets in Tokyo and Seoul rose to trade around record highs, riding a fresh wave of AI-fuelled optimism, while Wall Street futures fell.
“It is an incredibly busy week ahead. Not only are we going to have inevitably another round of geopolitical headlines all over the place, we’ve also got five policy decisions across the G10, we’ve got five of the ‘magnificent 7’ (tech giants) reporting, and I think by market cap it’s about 45% of the S&P giving us results this week,” said Michael Brown, senior research strategist at Pepperstone.
While a ceasefire has frozen most fighting in the war triggered by US-Israeli strikes on Iran two months ago, markets remain focused on the shuttered Strait of Hormuz, crossed by barely any ships carrying cargoes of oil and gas.
The outlook for peace talks remains uncertain.
US President Donald Trump said Iran only had to call if it wanted to negotiate an end to the war. Iran’s foreign minister landed in Russia on Monday to seek support from President Vladimir Putin.
Goldman Sachs analysts lifted year-end Brent oil price forecasts to US$90 a barrel from US$80, basing the expectation on a June-end return to normal for Gulf exports.
“Non-linear price increases are likely if inventories drop to critically low levels, which we have not seen in the last few decades,” they warned in a note.
Equity investors tried to look past the oil shock, with renewed attention on the tech sector and the artificial intelligence trend that some view as unstoppable.
“AI is something that people are very optimistic about and very much considered a winner,” said Mike Seidenberg, senior portfolio manager for Allianz Technology Trust.
“It’s the top of the portfolio.”
Intel’s forecast last week for second-quarter revenue exceeding Wall Street expectations set off the latest round of buying, pushing the total value of the chipmaker-heavy stock markets in Taiwan and South Korea above that of Germany.
US tech earnings due in the coming week include reports from 44% of the S&P 500 by market cap.
Capital expenditure plans will be in focus for firms such as Microsoft, Alphabet, Amazon and Meta Platforms, set to report on Wednesday, while Apple will report a day later.
Major central banks are expected to keep policy on hold this week, including the US Federal Reserve – at what will likely be its last meeting with Jerome Powell in the chair.
The European Central Bank and Bank of England are also set to keep policy unchanged, but their tone and outlook could challenge market pricing for rate hikes later this year.
The first central bank to meet, however, will be the Bank of Japan, which is expected on Tuesday to keep its short-term policy rate steady at 0.75%.
In currencies, the dollar was broadly steady on Monday, with the euro at US$1.1746 and the Japanese yen pinned just below the crucial 160 level.