Global stocks rose on Tuesday as oil prices retreated from a one-month high on mediation efforts in the Middle East, providing relief to markets that had been pressured by escalating tensions. Europe's STOXX 600 rose 0.2%, while futures tracking the tech-heavy Nasdaq led gains on Wall Street with a 0.8% rise to 25,772.549, showing strong opening momentum. In Asia overnight, Japan's Nikkei finished up 3.3% and South Korea's volatile KOSPI ended 3.6% higher, showing broad-based recovery across global markets. Brent crude futures eased 0.6% to $88.72 per barrel on Tuesday as investors latched on to hopes of a resolution, after hitting a one-month high of $91.42 a barrel in the previous session. However, the latest developments show Brent crude has now climbed above $90 per barrel for the first time in over a month, reflecting the ongoing geopolitical tensions. Shorter-dated U.S. Treasury yields eased on Tuesday, with the 2-year note down 1.7 basis points at 4.198%, as hopes of diplomatic breakthrough pushed oil prices lower and supported expectations that the Federal Reserve would not need to hike interest rates imminently.
The S&P 500 advanced 0.6%, while the Dow Jones Industrial Average was up 212 points, or 0.4%, with the Nasdaq Composite outperforming at over 1%, as artificial intelligence-related stocks remained the primary drivers of the market. Micron Technology climbed 7.8%, adding to Monday's 1.9% gain after having fallen 13.3% during the previous week, while Nvidia rose 1.5% after revealing that it holds a 9.3% stake in Nebius, a Dutch artificial intelligence cloud company. The buoyancy in tech stocks led to a sharp rally in the NASDAQ 100 index, with the index jumping 1.2% on Tuesday, as investors positioned themselves ahead of major tech earnings starting this week. Semiconductor stocks were among the top gainers, lifting the broader technology sector as investors positioned themselves for earnings reports that are expected to provide fresh insight into artificial intelligence spending and business demand. The S&P 500's information technology and communication services sector gained 0.8% and 1.8% respectively, demonstrating the broad-based nature of the tech rally. Following a prolonged surge fuelled by heavy investment in AI chips and data centres, these stocks have faced selling pressure in recent weeks amid concerns that valuations had become stretched, with investors questioning whether the current pace of AI-related spending can be sustained if the technology does not generate the anticipated improvements in profitability and productivity.
Shares of 3M surged more than 7% after the industrial conglomerate reported quarterly profit and revenue that exceeded analysts' estimates, with the company also upgrading its full-year 2026 profit outlook. General Motors also posted stronger-than-expected second-quarter revenue and profit, adding to the positive earnings momentum. Market participants are closely watching results from Alphabet, IBM, and Tesla, which are scheduled to report later this week. Alphabet's earnings, due on Wednesday, are expected to offer important clues on AI investments and cloud computing demand, themes that have driven much of this year's market rally. The second-quarter earnings season has started on a strong note, adding to investor optimism and supporting the broader market rally across technology and industrial sectors.
Despite the positive market sentiment, geopolitical tensions remained firmly in focus as US Central Command carried out its 10th consecutive night of strikes on Iran after President Donald Trump declared the ceasefire "over." In response, Tehran has reportedly targeted US military assets across West Asia, while Yemen's Houthi rebels announced a maritime embargo against Saudi Arabia, raising concerns about regional stability and global energy supplies. Despite the recent rally in oil prices, market-based measures of inflation have stayed well anchored, according to strategists at ANZ Research, who noted that the Fed's credibility in inflation management, receding tariff effects, and a non-inflationary labour market were among several factors explaining the stability. The decision by the Iran-aligned Houthis to impose a naval blockade on Saudi Arabia on Monday risked further escalating the conflict, keeping Brent crude just below $90 a barrel, a five-week high. David Morrison, a senior market analyst at Trade Nation, noted that "it seems to suggest that this isn't a total breakdown. There are still channels for sort of talks to go on, which is great news." The developments represent a potential breakthrough in efforts to resolve the ongoing conflict that has disrupted global oil markets.
The renewed hostilities have pushed oil prices sharply higher, with the international benchmark Brent crude climbing above the $90-a-barrel mark on 20 July for the first time in over a month. US WTI crude futures also touched their highest level in a month on the same day. The blockade of the strategically important Strait of Hormuz has disrupted shipping traffic, tightening crude oil and natural gas supplies to several Asian countries and adding to concerns over global energy security. The conflict, which initially began with efforts to curb Iran's nuclear programme, has since shifted its focus to the strategically important Strait of Hormuz, with Tehran using the waterway as leverage against US military actions. On 14 July, Trump reimposed a naval blockade after another round of ceasefire negotiations collapsed, with both sides continuing to exchange attacks and few signs that the conflict will ease anytime soon. The continued rise in crude prices has renewed concerns that inflation could accelerate again after showing signs of easing more quickly than economists had anticipated, which could prompt the Federal Reserve and other central banks to raise interest rates further, weighing on economic growth and putting pressure on stock prices and other asset classes.
