- Analysts warn that inventories could be reduced, which would drive up prices.
- Nikkei falls and S&P futures fall ahead of Nvidia results.
- Growing inflation concerns keep bonds on the defensive.
Oil led gains on Monday as fresh attacks in the Gulf intensified fears about supply disruptions, lifting energy prices and sending ripples through global markets already pressured by rising bond yields and geopolitical tensions.
Brent crude rose 1.2% to $110.63 a barrel, while U.S. West Texas Intermediate gained 1.0% to $106.42.
Oil prices rose after a drone attack caused a fire at a nuclear power plant in the United Arab Emirates, and Saudi Arabia said it intercepted three drones. US President Donald Trump warned Iran that it must act “quickly” to reach a deal.
Tensions were further amplified by concerns over the Strait of Hormuz, where shipping has been severely affected. Tehran is seeking to formalize tighter control over the waterway, which normally carries around 20% of the world’s oil trade.
“The shutdown is rapidly depleting global oil inventories,” analysts at Capital Economics said. “Inventories could reach critical levels by the end of June, setting the stage for Brent at $130-$140 a barrel, if not higher.”
“If the strait closes until the end of the year and oil remains around $150 a barrel in 2027, that would push inflation to around 10% in the UK and eurozone, send rates back to their recent highs and lead to a global recession.”
Rising energy costs also hit bond markets, with yields rising sharply. US 10-year Treasury yields rose to 4.584%, up 23 basis points last week, while 30-year yields settled at 5.109% after a jump of 18 basis points.
G7 finance ministers meet in Paris on Monday to discuss the Strait of Hormuz and critical raw materials supply chains, as geopolitical divisions threaten to test unity.
In stocks, Japan’s Nikkei fell 0.4% after hitting recent record highs, while South Korea’s market fell 2.1% as semiconductor-driven gains cooled. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.6%.
Chinese stocks hovered around four-year highs ahead of data on retail sales and industrial production.
In the United States, stock futures fell in early trading.
Citi analysts said earnings strength has been narrow, driven by a small group of large companies.
“We identified 20 stocks that contributed the majority of the index’s gains,” wrote analyst Scott Chronert. “Increases in future guidance also show a similarly narrow focus.”
“Extension is a necessary condition for the index to rise significantly from here. This will require a better vision of how to end the conflict with Iran.”
The focus is on Nvidia this week, with expectations high as the artificial intelligence rally continues to dominate the markets. The stock is up 36% from March lows, while a key semiconductor index is up more than 60%.
Retail sector earnings, led by Walmart, will also be closely watched for signs of consumer resilience under the pressure of higher energy prices.
In currency markets, risk aversion supported the US dollar. The euro was trading at $1.1620 after a weekly drop of 1.4%, while the pound was trading at $1.3318 after a 2.3% drop amid political and bond market pressure.
The dollar held firm against the yen, and fears of intervention kept traders cautious about further measures.
Gold held steady at $4,540 an ounce, with limited safe-haven flows despite heightened geopolitical risks.
