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Oil surge unsettles global markets

Escalating tensions between the US and Iran pushed oil prices higher on Tuesday, reviving concerns over inflation and the prospect of further monetary tightening. Wall Street closed mostly lower on Monday, with energy shares an exception, while Asian trading was mixed on Tuesday as losses in Hong Kong and Australia offset small gains in Japan. Investors will also assess a busy set of manufacturing surveys and inflation data from Europe during the day.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

Oil
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Oil prices extended gains on Tuesday after US President Donald Trump threatened further strikes against Iran, raising concerns that renewed fighting could disrupt energy shipments through the Strait of Hormuz. Brent crude oil futures rose 3.4% to USD 91.41 per barrel and West Texas Intermediate (WTI) futures gained 1.3% to USD 86.90, after both contracts gained almost 3% on Monday. US forces struck Iranian military sites on Larak Island and Iran responded with missile attacks on US facilities in Jordan, while a tanker was hit by three unidentified projectiles as it exited the strait on Monday. Supply concerns were compounded by Russia’s extension of its diesel-export ban until 30 September, overshadowing OPEC+ plans to raise output by about 188,000 barrels per day from September. Gold declined 0.4% to around USD 4430 per ounce, while the US Dollar Index edged up 0.1% to 99.50. Bitcoin rose 1.3% to around USD 79,100.

Asian stocks fall as oil rises

Asian equities were mostly lower on Tuesday as Brent crude traded higher following renewed US-Iran hostilities, heightening inflation concerns and expectations of tighter US monetary policy. Markets were pricing a 66% probability of a Federal Reserve (Fed) rate increase in September after Fed Chair Kevin Warsh’s hawkish remarks on Friday. Japan’s Nikkei 225 rose 0.1% and Korea’s KOSPI was little changed, while Australia’s S&P/ASX 200 declined 0.2% and Hong Kong’s Hang Seng Index fell 1.1%. Mainland China’s CSI 300 and India’s Nifty 50 were little changed.

AI demand supports Asian factories

Manufacturing activity expanded across much of Asia in August as strong demand for artificial-intelligence hardware supported exports and factory output. China’s private manufacturing PMI rose to 51.5 points from 50.9 in July, Japan’s index increased to 54.9 from 54.5, while South Korea’s eased to 52.3 from 53.1 but remained in expansionary territory for a ninth consecutive month. South Korean exports climbed 68.7% year-on-year, extending their growth streak to 15 months, driven by semiconductor demand. Manufacturing also expanded in Taiwan, Malaysia and the Philippines, although India’s factory growth slowed to a five-year low and Indonesia returned to contraction.

Higher oil prices pressure US stocks

US equities ended mixed on Monday as renewed attacks between the US and Iran lifted oil prices and revived inflation concerns. The Dow Jones Industrial Average fell 0.7% to 53,185.90 points and the S&P 500 declined 0.3% to 7686.14 points, while the Nasdaq-100 edged up 0.1% to 29,456.97 points as technology shares stabilised. Fed Chair Kevin Warsh’s warning on Friday that inflation remained too high also reinforced expectations that further rate increases could be considered. Energy stocks advanced with oil.

German inflation rises

German consumer prices were 2.9% higher in August than a year earlier, up from 2.8% in July but below market expectations, preliminary data released on Monday showed. Energy inflation accelerated to 10.5% from 8.3%, reflecting higher energy and raw-material costs linked to the Iran conflict. Core inflation held at 2.4%, while services inflation slowed for a second month to 2.8%, suggesting that higher energy costs have not yet substantially lifted underlying price pressures. The market expects headline inflation to exceed 3% this autumn, while the European Central Bank is considering another interest-rate increase in September. European equities ended lower on Monday, with the Euro Stoxx 50 down 1.1% at 6416.05 points, Germany’s DAX falling 1.2% to 26,258.11 points, France’s CAC 40 declining 0.8% to 8334.50 points and the Swiss Market Index losing 0.8% to 14,286.43 points.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Dell, Medtronic, and Palo Alto Networks.

Economic data in focus: Manufacturing Purchasing Managers’ Indices from major economies, including Switzerland (09:30), Italy (09:45), France (09:50), Germany (09:55), the euro area (10:00), the UK (10:30), US S&P Global (15:45), and US ISM (16:00); German retail sales (08:00), Swiss retail sales (08:30), Italian gross domestic product (10:00), Italian unemployment rate (10:30), Italian Consumer Price Index (11:00), euro-area Consumer Price Index (11:00), euro-area unemployment rate (11:00), and US JOLTS jobs report (16:00).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.