Oil prices increased while global stock markets declined on Wednesday following U.S. President Donald Trump’s comments casting uncertainty on the temporary peace with Iran. The S&P 500 dropped 0.3% after initially falling by 1.1%. Similarly, the Dow Jones Industrial Average fell by 1.1% when Trump announced the end of the truce. On the other hand, the Nasdaq composite recovered from an early decline and rose by 0.2% after Trump clarified that recent hostilities did not signal a return to full-scale conflict.
Canada’s primary index, the S&P/TSX, concluded the day with a 1% decline. In the oil market, the price of Brent crude surged by 5.2% to $78.02 US and briefly exceeded $80 US. Despite this increase, it remains below previous highs during the conflict. Concerns are mounting that prolonged warfare could disrupt the flow of oil through the Strait of Hormuz, potentially leading to inflation and prompting central banks to raise interest rates.
Higher interest rates, while effective in curbing inflation, could negatively impact the economy and affect various investment prices. Companies heavily reliant on fuel, such as American Airlines and Carnival, experienced notable stock declines. Housing industry stocks were also affected by apprehensions of rising Treasury yields influencing mortgage rates.
Conversely, some influential artificial intelligence stocks stabilized, alleviating concerns over inflated prices and the profitability of AI investments. Nvidia’s 3.7% rise notably buoyed the S&P 500 due to its significant market presence. Treasury yields rose alongside oil prices, with the 10-year Treasury yield reaching 4.57%.
In international markets, European stocks saw increased losses following Trump’s comments, with Germany’s DAX and France’s CAC 40 both declining by 2.2%. In Asia, South Korea’s Kospi plummeted by 5.3%, while Hong Kong’s Hang Seng index surged by three percent. Notably, shares of Chinese AI startup Zhipu in Hong Kong saw a significant 13.4% increase as a six-month lockup period for early investors expired.
Zhipu’s shares have soared over 1,300% since its listing in January, reflecting the ongoing volatility and optimism surrounding AI stocks in various markets.
