- Analysts warn inventories could tighten, pushing prices higher.
- Nikkei eases, S&P futures down ahead of Nvidia results.
- Mounting inflation concerns keep bonds on back foot.
Oil led gains on Monday as fresh attacks in the Gulf intensified fears over supply disruption, pushing energy prices higher and sending ripples through global markets already under pressure from rising bond yields and geopolitical tensions.
Brent crude rose 1.2% to $110.63 a barrel, while US West Texas Intermediate gained 1.0% to $106.42.
Oil prices rose after a drone strike sparked a fire at a nuclear power plant in the United Arab Emirates, and Saudi Arabia said it intercepted three drones. US President Donald Trump warned Iran it must act “fast” to reach a deal.
Tensions were further amplified by concerns over the Strait of Hormuz, where shipping has been heavily disrupted. Tehran is seeking to formalise tighter control over the waterway, which typically carries around 20% of global oil trade.
“The closure is draining global oil inventories fast,” analysts at Capital Economics said. “Inventories could reach critical levels by end-June, setting the stage for Brent at $130-140pb, if not higher.”
“If the strait is closed through year-end and oil stays around $150pb into 2027, that would push inflation to near 10% in the UK and euro zone, send rates back to their recent peaks and lead to global recession.”
Rising energy costs also hit bond markets, with yields climbing sharply. US 10-year Treasury yields rose to 4.584%, up 23 basis points last week, while 30-year yields stood at 5.109% after an 18-basis-point jump.
G7 finance ministers gather in Paris on Monday to discuss the Strait of Hormuz and critical raw material supply chains, as geopolitical divisions threaten to test unity.
In equities, Japan’s Nikkei fell 0.4% after recent record highs, while South Korea’s market dropped 2.1% as semiconductor-driven gains cooled. MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.6%.
Chinese stocks hovered near four-year highs ahead of data on retail sales and industrial output.
In the United States, stock futures fell in early trade.
Citi analysts said earnings strength has been narrow, driven by a small group of large companies.
“We identify 20 stocks that contributed the majority of index earnings upside,” wrote analyst Scott Chronert. “Forward guidance increases also show a similar narrow focus.”
“Broadening is a necessary condition for meaningful index upside from here. This will require a better line of sight to the Iran conflict wind-down.”
The focus this week is on Nvidia, with expectations high as the artificial intelligence rally continues to dominate markets. The stock is up 36% since March lows, while a key semiconductor index has surged more than 60%.
Retail earnings, led by Walmart, will also be closely watched for signs of consumer resilience under pressure from higher energy prices.
In currency markets, risk aversion supported the US dollar. The euro stood at $1.1620 after a 1.4% weekly fall, while sterling traded at $1.3318 following a 2.3% drop amid political and bond market pressure.
The dollar held firm against the yen, with intervention fears keeping traders wary of further moves.
Gold was steady at $4,540 an ounce, with limited safe-haven flows despite heightened geopolitical risks.
2026-05-18 05:46:00
