NEW YORK: World oil prices surged Monday as a fresh flare-up between the US and Iran rattled investors, while a selloff in chipmakers sent South Korea’s stock market plunging.
Wall Street’s tech-heavy Nasdaq Composite slid at the start of New York trading, as did the broad S&P 500, as shares in US chipmakers tumbled.
European equities were mixed in afternoon trading.
The dollar traded mixed against main rivals.
“The roller-coaster ride continues, both with respect to the US-Iran conflict and the semiconductor trade,” said Briefing.com analyst Patrick O’Hare.
“Each is on a downhill swing today, which isn’t a comfortable situation for the stock market,” he added.
Renewed Middle East hostilities followed last week’s exchange of fire and came as negotiators struggle to reach a lasting peace deal to keep the crucial Strait of Hormuz open.
The US struck Iran for the second day Monday, prompting Tehran to retaliate against US allies in the Gulf as the two sides battle over the status of the strategic waterway.
President Donald Trump said the US would be taking over the Strait of Hormuz. “We’ll become the guardian of the Strait,” Trump told Fox News.
Brent North Sea crude, the international benchmark, rallied as much as 5% on Monday before paring gains to trade around 3.3% higher.
The main US contract, West Texas Intermediate, also spiked.
“While (oil) prices are still not at crisis levels, the creep upwards will ignite fresh inflationary worries and concerns about how far higher interest rates could move,” noted Susannah Streeter, chief investment strategist at Wealth Club.
“That’s being reflected in the bond markets, with yields on gilts and US Treasuries rising,” she added.
Higher interest rates could fuel equity volatility, Briefing.com’s O’Hare warned.
“The higher rates go, the more turbulent the turns will get, but if they come down, so will the market’s anxiety level,” he said.
Kospi tanks
On equity markets, tech firms came under renewed pressure after weeks of volatility fuelled by concerns about stretched valuations and questions over the vast sums pumped into the AI sector.
South Korean chip titan SK Hynix plunged more than 15%, extending a recent bout of selling that has seen the market heavyweight lose nearly 40% since hitting a record last month.
The loss came after the firm’s US-listed shares soared almost 13% on their New York debut following a record US$26.5 billion share sale.
Rival Samsung was down more than 10% by Monday’s close.
“The South Korean market is now considered a key barometer of sentiment towards the chip sector, so when it declines, it can have ripple effects across the world,” said Kathleen Brooks, research director at trading group XTB.
There were also losses in Tokyo, where tech firms Advantest and Tokyo Electron tumbled.
Shares in US chipmakers were also hit, with Micron and Marvell both down more than 6%.
Investors are gearing up for the latest earnings season, which will be pored over for an idea about the outlook for the AI industry.
This week sees reports from Taiwanese chip giant TSMC and Dutch firm ASML, which produces chipmaking equipment, while US tech firms begin reporting next week.
A number of Wall Street banks are lined up to report earnings this week, including JP Morgan, Bank of America and Goldman Sachs.
