Oil prices spike on fresh US-Iran attacks, tech hammers on stocks again

Oil prices jumped more than four percent on Monday after another flare-up between the United States and Iran that threatened their already fragile truce, while South Korean stocks plunged as tech firms were hit by a fresh rout.

The renewed hostilities in the Middle East followed last week's exchange of fire and came as negotiators struggle to reach a lasting peace deal to keep the crucial Strait of Hormuz open.

The US military launched a new wave of strikes on Sunday after renewed fighting over the waterway saw several of Washington's Gulf allies targeted.

Both main oil contracts, which have tumbled since the announcement of the agreement, spiked as much as 4.5 percent, fanning fresh concerns that inflation--already elevated because of the war--could force central banks to hike interest rates.

The renewed fighting followed an Iranian attack on a commercial ship in the strait early on Sunday, with the crew forced to abandon it after it went up in flames.

Iran's Revolutionary Guards said after the incident that "the Strait of Hormuz will be closed until further notice and until the end of American interventions in this region", according to state news agency IRNA.

CENTCOM countered on X that the strait was "open to all vessels seeking to lawfully transit".

Fawad Razaqzada, a market analyst at Forex.com, said: "One can easily imagine the situation spiralling quite rapidly."

"Of course, rhetoric can soften. We've seen that movie before. But for now, traders are forced to assume the worst."

But while the resumption of hostilities has led to another spike in crude prices, IG analyst Fabien Yip said they were unlikely to hit the lofty levels that followed the outbreak of war on 28 February.

"Oil's return towards pre-war levels in June reflected markets pricing in a best-case outcome for the fragile US-Iran arrangement," she wrote, adding that the "re-escalation exposes how fragile that assumption was".

"Near-term, the risk premium should keep prices supported, though a repeat of the earlier spike appears unlikely, as demand remains slow to recover while stranded-tanker releases and OPEC+ output quota expansion continue to add barrels to an already oversupplied outlook."

On equity markets, Seoul tanked nine percent at one point as tech firms came under renewed selling pressure after weeks of volatility fuelled by concerns about stretched valuations and questions over the vast sums pumped into the AI sector.

The Kospi was dragged by market heavyweight SK hynix's plunge of more than 15 per cent, extending a recent bout of selling that has seen the chip titan lose nearly 40 per cent since hitting a record last month.

The loss came after the firm's US-listed shares soared almost 13 per cent on their New York debut following a record $26.5 billion share sale. Rival Samsung was down more than 10 per cent.

There were also losses in Tokyo, where tech firms Advantest and Tokyo Electron tumbled.

Shanghai, Singapore, Wellington, Manila, Mumbai and Jakarta dropped.

However, Hong Kong, Taipei and Manila rose.

London opened with gains but Paris and Frankfurt edged down.

The dollar rose on safe-haven buying and on bets that the Federal Reserve will have to hike rates at least once this year to tame war-fuelled inflation.

Investors are also gearing up for the latest earnings season, which will be pored over for an idea about the outlook for the AI industry.

This week sees reports from Taiwanese chip giant TSMC and Dutch firm ASML, which produces chipmaking equipment.

A number of Wall Street banks are also lined up to file, including JP Morgan, Bank of America and Goldman Sachs