Meanwhile, tech stocks took a hit and investors turned their attention to corporate earnings and the outlook for interest rates.
Efforts to end the Middle East war appeared at a standstill on Tuesday, with the United States considering Tehran’s latest offer to unblock the strait, and Iran saying Washington could no longer dictate terms.
Iran has blockaded the waterway – a vital conduit for oil and gas shipments – since the start of the US-Israeli offensive two months ago, sending shockwaves through the global economy.
CNN, however, reported that US president Donald Trump was unlikely to accept Iran’s proposal to restore traffic in the strait, as Qatar warned of the possibility of a “frozen conflict” if a definitive resolution is not found.
Oil prices rallied, with Brent crude for June delivery rising 2.8% to US$111.26 a barrel.
The benchmark US contract, WTI for June delivery, rose 3.7% to US$99.93 per barrel.
Hopes for a deal had been rising going into last weekend but Trump dashed them on Saturday by scrapping a planned trip by his envoys Steve Witkoff and Jared Kushner to Islamabad for negotiations.
“Right now, the market is not optimistic about the chance of a deal to reopen the Strait due to Iran’s request to push discussions about nuclear disarmament into the future,” said Kathleen Brooks, research director at XTB trading platform.
Meanwhile, major crude producer United Arab Emirates announced it will withdraw from the Opec and Opec+ oil cartels on May 1, calling it a strategic decision.
Rystad Energy analyst Jorge Leon said the UAE’s move is significant as, alongside Saudi Arabia, it is one of the few nations with significant spare production capacity.
“While near-term effects may be muted given ongoing disruptions in the Strait of Hormuz, the longer-term implication is a structurally weaker Opec” and potentially more market volatility, Leon said.
AI concerns
The tech-heavy Nasdaq Composite fell nearly one percent, with shares in companies linked to OpenAI hit by a report in the Wall Street Journal that the ChatGPT maker had missed targets on the number of users and revenue.
Shares in Oracle, which is building massive data centre capacity for Open AI, fell more than four percent, while CoreWeave, another important OpenAI provider, sank 5.8%.
When you get a piece of news like this, you know, people say, ‘Oh, maybe I’ll just take profits and see what happens,'” said Thomas Martin at Globalt Investments. “This is going to continue to go on for quite a long time.”
The news also means that AI spending by tech giants Amazon, Google, Meta and Microsoft will come under even closer scrutiny when they report results later this week.
Europe’s main equity markets ended mostly lower.
Stock markets mostly fell in Asia, under further pressure after the Bank of Japan sharply raised its inflation forecasts for the current year and halved its growth projections owing to surging oil prices while leaving its key interest rate unchanged.
The US Federal Reserve began a two-day meeting Tuesday amid the same growing inflationary concerns over the surge in energy costs. However, the US central bank is expected to keep rates unchanged.