Global markets are heating up again after the US military launched new airstrikes on Iran and revoked the country's global oil export permits. As a result, crude oil prices surged higher while Asian stock markets are expected to fall for a second consecutive day due to the decline in chip stocks.
Here is a summary of what happened in the market:
1. WTI Crude Oil Up 2.9%
West Texas Intermediate (WTI) crude oil prices surged above $72 per barrel.
The US attack was launched in response to the disruption of merchant ships in the Strait of Hormuz. This action also threatens the interim peace agreement that was just signed on June 17.
Other Assets: The dollar index strengthened, while gold prices fell below $4,100 an ounce as investors worried that high energy prices would prompt the Federal Reserve (Fed) to raise interest rates again.
2. Tech Stocks & AI ‘Bubble’ Starts to Shake
Japan, South Korea, and Australia stock index futures all pointed lower after Wall Street fell. Chip stocks fell more than 4% while the Nasdaq 100 index fell 1.8%.
The geopolitical tensions are testing markets that are already worried about a “bubble” in artificial intelligence (AI) stocks that are said to be overpriced and out of sync with actual profits.
UBS analysts are suggesting investors start diversifying their portfolios and not just relying on tech stocks alone.
3. SpaceX’s Entry & Earnings Season
Tech stocks continued to receive attention when SpaceX was confirmed to join the Nasdaq 100 index on Tuesday, forcing a portfolio rebalancing by fund managers.
Corporate earnings season begins next week. The biggest risk now is if the tech giants fail to meet their overly optimistic profit targets.
Strategist Ed Yardeni expects a market correction to be avoided if investors start rotating into other sectors that are lagging behind but have good financial performance. In conclusion, the geopolitical situation and uncertainty in the AI sector are currently putting investors on alert mode. Make sure your risk management is kept tight in these fast-moving market conditions!
