Markets Anxious Over US-Iran Peace Deal, Oil Prices Rise
Oil prices continued their upward trend on Wednesday as Middle East peace talks faltered. This occurred despite a rise in most stock markets, driven by ongoing demand for everything related to artificial intelligence (AI).
According to AFP, although Donald Trump has expressed confidence that the United States and Iran are closer to ending their three-month conflict and reopening the Strait of Hormuz, crude oil investors appear unswayed as they await tangible progress. Anxiety on trading floors increased this week following reports from Iran suggesting that communications had been severed following Israeli attacks on Lebanon, a claim denied by the US President on Tuesday.
“The fake news reports stating that the Islamic Republic of Iran and the US stopped talking several days ago are false and erroneous,” he wrote on his Truth Social network. He added that conversations have been continuous, including as recently as today, though he emphasised that it is time for Iran to reach a deal.
Meanwhile, Israel continues to strike Lebanon, jeopardising the fragile ceasefire between Washington and Tehran, while Iran has launched missiles towards neighbouring countries. Despite Trump’s optimism, the US military reported on Tuesday that it had successfully intercepted a series of Iranian missile and drone attacks in the Gulf and conducted defensive strikes near Qeshm Island. Centcom also confirmed that three Iranian attack drones launched towards civilian sailors were intercepted.
Uncertainty regarding the peace deal has pushed oil prices up by approximately 2%, with Brent crude rising more than 5% this week and WTI up 10%. Conversely, stocks continued an extraordinary rally, driven by the technology sector and AI demand. Tokyo rose by more than two per cent, supported by a 13 per cent surge in chipmaker Tokyo Electron, while Advantest jumped 5.1 per cent. Taipei rose two per cent due to strong progress from Taiwan Semiconductor Manufacturing Company.
While Shanghai, Sydney, Singapore, and Manila also gained, Hong Kong, Mumbai, Wellington, and Jakarta experienced declines. Chris Beauchamp, head market analyst at IG, noted that equity markets are once again taking cues from the technology sector rather than geopolitical headlines, as AI-related capital expenditure shows no signs of slowing down.
This rally follows record highs for the S&P 500 and Nasdaq, where chipmaker Marvell Technology surged over 32% after Nvidia CEO Jensen Huang praised it as the next trillion-dollar company. Adding to the positive sentiment among traders, US job openings surged in April to a 23-month high, ahead of crucial employment data that may determine the Federal Reserve’s next move regarding interest rates.
In currency markets, the Yen strengthened slightly, approaching 160 against the dollar, amid speculation of potential intervention by Japanese authorities. This comes as the Japanese cabinet approved an additional $19 billion budget to support households struggling with the rising cost of living caused by the Iran conflict.