Escalating Middle East tensions and a renewed surge in oil prices dominated global markets on Thursday, reigniting inflation concerns and pushing bond yields higher. Equity markets weakened across the US and Europe after capital expenditure forecasts from major technology companies spooked investors.
Oil shock and AI spending concerns weigh on Wall Street
A sharp rise in oil prices and renewed concerns over AI capital expenditure drove US equities lower. The DOW fell -1.1%, the S&P 500 declined -1.3%, and the NASDAQ dropped -2.4% as investors reacted negatively to stronger AI spending plans from Alphabet (-7.0%) and Tesla (-13.0%), alongside Brent crude climbing back above US$100 per barrel. Initial jobless claims unexpectedly fell to 187,000, the lowest level since 1969, reinforcing labour market resilience and adding to concerns that the Federal Reserve may need to keep monetary policy restrictive for longer. Stocks in the semiconductor supply chain, including Micron Technology (+2.5%), gained as investors viewed Alphabet’s increased infrastructure spending as supportive for memory demand, while American Airlines fell around -7.5% after warning soaring fuel costs could eliminate profits this year. Thermo Fisher jumped +9.1% after comfortably beating earnings expectations and lifting full-year guidance, reinforcing confidence that the recovery in biopharma and research spending is gaining momentum. Defence stocks also rallied broadly as Lockheed Martin (+11.0%) and RTX (+7.4%) both delivered earnings beats and upgraded guidance, reinforcing expectations of a sustained defence spending cycle. The US two-year yield added +5bp to 4.36%, while the 10-year yield rose to 4.70%, up +5bp.
Higher oil prices and ECB caution pressure European markets
European equities retreated as investors digested higher energy prices and a cautious European Central Bank. The STOXX 600 fell -1.2% while the FTSE 100 lost -0.7%. The ECB left its deposit rate unchanged at 2.25% after June’s +25bp increase but warned that the inflationary effects of the Middle East conflict had yet to fully emerge. Nestlé dropped -8.0% after reporting a fall in first-half profit and announcing the sale of half of its water division. In the UK, Segro jumped +7.2% after its board backed the £14 billion takeover proposal from Prologis.
Asian and Australasian markets shift higher despite the US’s weak lead
Lacking the US’s weak lead, Asian and Australasian markets delivered a generally positive performance on Thursday. China’s CSI 300 grew +0.2%, the Shanghai Composite edged +0.3% higher, Japan’s Nikkei 225 rose +0.5%, South Korea’s KOSPI soared +4.4%, Hong Kong’s Hang Seng added +1.3%, the ASX 200 gained +0.2%, and the NZX 50 increased +0.2%. Korean markets were buoyed by Samsung (+3.7%) and SK Hynix (+4.9%). In Australia, James Hardie Industries surged +6.1% after reporting quarterly sales and operating earnings ahead of guidance, while BHP rose +1.5% and Rio Tinto gained +0.5% as higher commodity prices supported miners.
Oil up, Gold and Iron Ore down
WTI Crude leaped +5.7% to US$91.79/bbl, Gold fell -2.0% to US$4,046.69/oz, and Iron Ore lost -0.3% to US$98.39/MT.
Today's Events
- Japan: CPI (June 2026)