Oil Prices Jump as Middle East Tensions Shake Markets, AI Rally Loses Steam

Oil prices climbed on Wednesday as renewed conflict in the Middle East and fresh U.S. sanctions targeting Iranian oil exports reignited concerns over global energy supplies, while investors reduced exposure to bonds and technology stocks amid rising inflation fears and slowing momentum in the AI-driven market rally.

Brent crude futures gained 2% to around $75.60 per barrel. Although prices remain well below the peaks seen during previous conflicts, the increase was enough to pressure bond markets, with the yield on the 10-year U.S. Treasury rising to a one-month high of 4.565%. Higher oil prices have heightened concerns that inflation could remain elevated, especially after months of geopolitical tensions reduced global crude inventories.

Market participants remain cautious following recent U.S. strikes on Iranian military assets, including air defense, surveillance, and drone facilities. Iran responded by warning of a "crushing response," raising doubts about the durability of last month's ceasefire framework. Washington also revoked a waiver that had allowed Iran to continue selling oil internationally, further tightening supply concerns.

Analysts said markets are reacting to renewed geopolitical risks but have not yet entered panic mode. They also noted that current Brent prices may still underestimate the possibility of additional disruptions in the region. Recent data showing the U.S. Strategic Petroleum Reserve at its lowest level since 1983 has further increased concerns over future supply shocks.

Currency markets reflected the cautious mood, with the U.S. dollar strengthening against major peers. The euro slipped to just above $1.14, while the dollar climbed beyond 162 yen, increasing speculation that Japanese authorities could intervene to support their currency. Meanwhile, the New Zealand dollar gained after the Reserve Bank of New Zealand delivered a widely expected interest rate increase.

Asian stock markets were mixed as investors reassessed technology valuations. Hong Kong shares provided support to regional indexes, but South Korea's market fell after Samsung Electronics, despite reporting a 19-fold surge in quarterly profit, saw its shares decline sharply. The disappointing market reaction also weighed on global semiconductor stocks, reinforcing concerns that the AI-driven rally may be entering a period of consolidation, even as long-term optimism for artificial intelligence investments remains intact.