US stock benchmarks declined, with the Nasdaq Composite leading the losses, as surging crude oil prices reignited inflation concerns. Both Brent crude futures and West Texas Intermediate (WTI) crude saw significant jumps, with Brent exceeding $100 per barrel for the first time since May, and WTI climbing to $92.37 per barrel. This ascent, attributed to escalating Middle East tensions, particularly threats by Iran's Houthi allies against Saudi oil tankers and President Trump's warnings of "major military punishment" against Tehran, has caused investors to factor in a higher probability of a September rate hike by the Federal Reserve, impacting growth-oriented tech stocks.
Technology and growth stocks were particularly hard hit, with the Nasdaq trading down 1.05% in futures. Salesforce dropped over 4%, while IBM and Microsoft also saw declines. Alphabet, Google's parent company, dipped despite reporting $119.8 billion in quarterly revenue, driven by strong growth in Google Cloud, which surged 82%. Tesla also delivered mixed second-quarter results with total revenue of $28.24 billion, up 26%, but investors remained cautious about its broader outlook amidst tighter monetary policy concerns.
Amidst the downturn, Super Micro Computer provided a much-needed boost to the AI sector, with its shares jumping 17% pre-bell after announcing over $60 billion in new fourth-quarter orders and plans for an AI data center with SpaceX. This robust demand for server, memory, and data-center capacity offered reassurance that the AI spending cycle is not stalling. NVIDIA also saw gains, rising over 2%, driven by continued optimism for AI-related chip demand. However, the broader market remained swayed by the macro threat of rising oil prices, with analysts like Pepperstone's Ahmad Assiri noting that markets are pricing in a significant probability of supply interruptions.
Goldman Sachs analysts have projected that Brent crude could exceed $120 a barrel in the fourth quarter and average $100 next year if disruptions in the Strait of Hormuz persist through 2027, with further upside if the Bab el-Mandeb strait and Suez Canal are also affected. The immediate outlook for crude oil remains supportive, with Goldman expecting prices to retain their recent gains through July and August due to declining global inventories, lower Middle East production, seasonal summer travel demand, and reduced releases of strategic petroleum reserves.
