Oil climbed on
Monday as stalled U.S.-Iran peace talkspointed to further
disruption in Middle East energy exports, while global stocks
held steady at the start of a busy week of tech earnings reports
and central bank decisions.
Benchmark Brent crude futures rose almost 3 per cent to
touch a more than three-week high of $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 U.S.-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.
U.S. 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 $90 a barrel from $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.
Rates and Hyperscaler earning
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.
U.S. tech earnings due in the coming week include reports
from 44 per cent 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 U.S. 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 expectedon Tuesday to keep its short-term
policy rate steady at 0.75 per cent.
In currencies, the dollar was broadly steady on Monday, with
the euro at $1.1746 and the Japanese yen pinned just
below the crucial 160 level.