Hong Kong: Brent crude hit its highest price on Monday since June due to renewed fighting between the United States and Iran, while Asian equities were mixed as investors weighed the fallout of a prolonged Middle East war.
Crude has surged over the past week as Washington and Tehran traded fire, raising fears of a sustained disruption in the Strait of Hormuz, which carries around a fifth of the world’s seaborne oil.
Both Brent crude and US benchmark West Texas Intermediate extended their gains after climbing more than four percent at the end of last week. Brent rose above $91 a barrel, its highest price since June 11.
The latest moves came after another weekend of escalating fighting, with the United States carrying out fresh strikes on Iranian targets and Tehran responding with attacks on regional military assets in the Gulf.
The conflicting signals have left investors struggling to gauge the outlook for markets.
Higher crude prices have revived concerns that inflation could remain elevated and complicate the path to lower interest rates. Still, some analysts argue the broader economic backdrop is becoming more supportive.
“Markets are once again being forced to trade two seemingly contradictory stories on the same screen,” said Stephen Innes of SPI Asset Management.
While the renewed rise in oil prices has injected a fresh geopolitical risk premium into markets, he said cooling underlying US inflation and a softer labour market suggested the energy shock would not necessarily trigger a new cycle of broad-based inflation.
Instead, the biggest risk would come if elevated oil prices persist long enough to erode household spending and weigh on economic growth.
In Asia, the market was mixed.
Chinese shares outperformed as investors extended a recent rally, driven by expectations that Beijing will unveil further measures to support the economy following last week’s economic data.
Chinese markets were ahead, with Hong Kong adding more than two percent and Shanghai up 1.32 percent. Taipei, Manila, and Singapore also edged higher.
Elsewhere, however, caution prevailed. Seoul, Sydney, and Wellington opened down.
The mellow performance followed another weak session on Wall Street, where all three major indexes finished lower on Friday as investors continued to rotate out of technology shares while keeping a close watch on developments in the Gulf.
Gold eased despite the geopolitical uncertainty, falling 0.40 percent, while silver advanced 1.00 percent.
