Brent crude futures jumped 3.51% to $104.79 a barrel in Thursday trading, as most Gulf bourses, European equities and the majority of Asian markets fell amid an escalation in the confrontation between the United States and Iran and growing concerns over disruption to energy supply routes.
Concerns intensified after the fiercest naval confrontation in the conflict, which has been ongoing for 6 months, as Iran struck 10 vessels near the Strait of Hormuz after the United States sank 5 Iranian tankers. Houthi attacks on Saudi Arabia also heightened concerns over alternative energy export routes through the Red Sea, after ballistic missiles and drones targeted cities in the kingdom’s south for a second consecutive day.
Most Gulf bourses fall
The Saudi index closed down 0.1%, dragged lower by a 1.1% decline in Saudi Arabian Mining Co. (Ma’aden), while a 0.4% gain in Saudi Aramco limited the losses.
In the United Arab Emirates, Dubai’s index fell 0.4% as Emaar Properties dropped 0.7%, while Abu Dhabi’s index bucked the trend, rising 0.1%. Qatar’s index declined 0.3%, weighed down by a 1.4% drop in Qatar National Bank, while the indexes in Oman and Kuwait rose 0.3% and 0.1%, respectively. Bahrain’s index was little changed.
George Pavel, general manager at Naga.com Middle East, said caution continued to dominate investor sentiment in Gulf Cooperation Council markets, amid disrupted shipping through the Strait of Hormuz, attacks on tankers and concerns that the confrontation could continue for longer.
Outside the Gulf, Egypt’s blue-chip index fell 0.4%, with Commercial International Bank down 0.7%.
Higher energy costs weigh on Europe
Major European indexes fell in trading, with the Stoxx 600 Europe down 0.51% at 637.16 points and the Euro Stoxx 50 losing about 0.50% to reach 6280.28 points.
Losses extended to broader indexes, with the S&P Europe 350 falling about 1.43% to 2602.19 points and the S&P Euro index declining 1.41% to 2827.74 points.
European equities are facing additional pressure from higher energy costs as oil and gas prices rise, putting inflation risks and higher production costs back in focus, particularly with winter approaching.
Declines dominate Asian markets
Hong Kong’s Hang Seng Index posted the biggest losses among major Asian indexes, falling 1.27% to 24954.47 points, while Australia’s S&P/ASX 200 declined 1.03%.
China’s Shenzhen index fell 0.77% and the Shanghai Composite declined 0.43%, while Taiwan’s index dropped 0.51%, South Korea’s Kospi fell 0.25% and Singapore’s index declined 0.7%.
By contrast, Japan’s Nikkei rose 0.2% to 65270.95 points, while India’s Nifty 50 advanced by the same percentage. New Zealand’s index was little changed.
Foreign inflows led by technology stocks
The day’s pressure came despite foreign investors returning to buy Asian equities in August after 9 consecutive months of selling, amid continued appeal for technology stocks linked to artificial intelligence.
Data from the London Stock Exchange Group showed that foreign investors made net purchases of $4.72 billion in 7 Asian markets in August, adding another $1.52 billion to their investments in the region from the beginning of September through Tuesday’s close.
Taiwan was the biggest beneficiary, recording net foreign purchases of $11.15 billion in August and ending 2 months of outflows, while India attracted about $3.1 billion. South Korea, by contrast, recorded outflows of $8.65 billion for the fourth consecutive month, despite foreign investors returning to inject about $1.1 billion since the beginning of September.
The return of foreign funds coincided with strong earnings from Asian companies, with profits exceeding analysts’ forecasts by an average of 10.2% in the latest quarter. Corporate earnings rose 44.7% year on year, while the technology sector recorded growth of 88.3%.
Song Chae, a senior investment specialist for Asian equities excluding Japan and emerging markets at BNP Paribas Asset Management, said the recent inflows reflected a return to artificial intelligence investment rather than a broad-based return of funds to Asian equities.
He added that higher bond yields, oil prices and geopolitical risks could keep markets volatile, despite the continued appeal of technology companies directly linked to artificial intelligence infrastructure.
