U.S. crude rose 3.68% to $99.92 a barrel and Brent rose to $111.13 per barrel, up 2.68% on the day, as reported by Reuters. The oil price surge was driven by stalled U.S.-Iran peace talks, which pointed to further disruption in Middle East energy exports. Shipping blockades have cut daily transits through the Strait of Hormuz to near zero, prolonging the supply disruption that has jolted markets around the world. U.S. President Donald Trump is unhappy with the latest Iranian proposal on resolving the two-month war, a U.S. official said, dampening hopes for resolution of a conflict that has killed thousands while disrupting energy supplies and fuelling inflation. Tehran has signalled it might accept an interim deal whereby it reopens Hormuz in exchange for Washington ending its blockade of ports, according to Axios. US Secretary of State Marco Rubio told Fox News he believes Iranian negotiators are 'serious' about reaching an accord.
The UAE said on Tuesday it was quitting OPEC and OPEC+, dealing a blow to the oil-exporting groups and their de facto leader, Saudi Arabia, as reported by Reuters. The UAE is OPEC's third-largest producer and the quota it has is well below its capacity, according to Brian Jacobsen, chief economic strategist at Annex Wealth Management. "The UAE leaving shows how tough it can be to keep a cartel together during tough times," Jacobsen said. Even if the immediate reaction was muted, 'longer-term it gives OPEC a lot less sway over the markets,' he added. Oil prices briefly pared gains on the news but Brent was last hovering near a three-week high while WTI broke through $100 per barrel for the first time since April 13.
The pan-European STOXX 600 index fell 0.37% while MSCI's gauge of stocks across the globe fell 8.04 points, or 0.53%, as reported by Reuters. The emerging market stocks gauge was down 0.76% and MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.7%, with Japan's Nikkei index falling 1% after hitting a record high on Monday. Major regional bourses moved higher with Germany's DAX and Spain's IBEX 35 adding about 0.3% each, according to The Economic Times. However, technology and consumer staples shares weighed on the pan-European index, down 0.6% and 0.7% respectively, with technology-led moves aiding U.S. stocks to all-time highs while energy-dependent Europe has lagged.
The tech-heavy Nasdaq Composite underperformed other U.S. indexes as investors questioned whether the artificial intelligence boom could continue to deliver meaningful returns, according to Reuters. The Dow Jones Industrial Average fell 31.64 points, or 0.06%, to 49,136.15, the S&P 500 fell 35.13 points, or 0.49%, to 7,138.78 and the Nasdaq Composite fell 223.30 points, or 0.90%, to 24,663.80. Tech stocks linked to artificial intelligence, such as Oracle and CoreWeave as well as chip stocks AMD and Broadcom, dropped more than 3% each, despite the broader index of semiconductor stocks remaining up more than 40% so far this year. The Wall Street Journal reported that AI heavyweight OpenAI had missed internal targets for weekly users and revenue, raising concerns over the ChatGPT parent's ability to support its massive spending on data centers.
The Bank of Japan left short-term rates unchanged at 0.75% in the first of several central bank meetings this week, as reported by Reuters. The yen briefly strengthened on the view that a rate hike was now in play, but was last 0.12% lower at 159.6 per dollar. The U.S. Federal Reserve, the Bank of England and the European Central Bank are due to announce decisions later this week, with all expected to keep rates unchanged. The dollar index rose 0.19% while the 2-year Treasury note yield rose 3.1 basis points to 3.836%, with higher oil prices continuing to lift inflation expectations. The 10-year U.S. Treasury yield rose 1 basis point to 4.346% and the 30-year bond yield dipped 0.6 basis points to 4.9358%.
