Crude oil prices jumped after US President Donald Trump announced that the ceasefire agreement with Iran had collapsed, raising fresh concerns about possible disruptions to energy supplies from the region.
Trump, speaking at a NATO summit in Turkey, said the ceasefire was “over”, although he indicated that diplomatic discussions could still continue.
The latest escalation followed Iranian attacks on vessels along the Strait of Hormuz, one of the world’s most important oil shipping routes, heightening fears of a wider conflict that could threaten global energy flows.
International benchmark Brent crude climbed more than five per cent, trading around $78 per barrel, while the US benchmark West Texas Intermediate (WTI) also gained about five per cent.
Analysts warned that the growing geopolitical uncertainty could continue to weigh on investor confidence.
“Geopolitical risks are rising” for markets, said Kathleen Brooks, research director at trading firm XTB.
The renewed hostilities came after the United States carried out extensive strikes on Iran earlier in the week following attacks on ships in the strategic waterway. The strikes triggered retaliatory actions against American military bases in the Gulf region.
Washington also moved to tighten pressure on Tehran by revoking a temporary sanctions waiver that had allowed some Iranian oil exports.
Brooks said Brent crude would likely need another major escalation, such as a possible naval blockade of the Strait of Hormuz, before prices could rise above the $80-per-barrel mark.
“For the Brent crude oil price to extend gains above $80 per barrel, we would need to see another US naval blockade of the Strait of Hormuz, which would stop Iran from selling its oil and cause a major escalation in tensions,” she said.
Stock Markets React to Middle East Tensions and AI Concerns
European equities declined sharply as investors responded to the latest geopolitical developments.
France’s CAC 40 and Germany’s DAX fell by about two per cent, while London’s FTSE 100 dropped nearly 1.5 per cent during midday trading.
Asian markets also recorded broad losses, with concerns over the Middle East conflict adding to existing worries about excessive investment in artificial intelligence-related technology companies.
South Korea’s Kospi index, which had benefited significantly from the technology rally, plunged more than five per cent. The index has now lost over 20 per cent since reaching a record high last month.
Samsung suffered another major decline, falling around six per cent after a steep sell-off the previous day. The company had recently forecast a significant increase in second-quarter operating profit, driven by strong demand for artificial intelligence chips.
Rival chipmaker SK hynix also dropped by about six per cent.
“Investors have been spooked in recent weeks by fears of excessive spending in the AI world and rich valuations in parts of the tech space, causing widespread profit-taking,” said Dan Coatsworth, head of markets at AJ Bell.
Markets in Tokyo and Shanghai also ended lower, although Hong Kong moved against the trend, gaining three per cent as investors bought previously weakened Chinese technology stocks.
Alibaba surged more than 12 per cent, while JD.com and Tencent gained almost four per cent each.
Dollar Strengthens as Inflation Concerns Return
The US dollar strengthened against major currencies as investors worried that higher oil prices could prolong inflation and influence future decisions by the Federal Reserve on interest rates.
A sustained rise in energy costs could increase pressure on central banks to maintain tighter monetary policies for longer.
Key market figures around 1100 GMT showed:
- Brent crude oil: Up 5.1% at $77.93 per barrel
- West Texas Intermediate: Up 5.0% at $73.95 per barrel
- FTSE 100 (London): Down 1.4% at 10,516.16 points
- CAC 40 (Paris): Down 2.0% at 8,265.75 points
- DAX (Frankfurt): Down 2.1% at 24,929.06 points
- Kospi (Seoul): Down 5.4% at 7,246.79 points
- Nikkei 225 (Tokyo): Down 2.1% at 66,819.05 points
- Hang Seng Index (Hong Kong): Up 3.0% at 24,199.46 points
- Shanghai Composite: Down 0.5% at 3,970.88 points
Currency movements showed the dollar gaining, with the euro trading at $1.1406 from $1.1415, the pound at $1.3344 from $1.3360, and the dollar rising to 162.49 yen from 162.09 yen on Tuesday.
Investors are now closely monitoring developments in the Middle East, particularly the security of the Strait of Hormuz, as further escalation could create additional volatility in energy markets and global equities.