Oil prices dropped significantly after the US and Iran paused nearly two weeks of retaliatory strikes, reducing geopolitical concerns about Middle East energy supplies. Brent crude fell as much as 7.4% to below $90 a barrel, then paring losses, while US West Texas Intermediate (WTI) crude dropped 7% to $83.06 per barrel. Analysts like Stephen Innes of SPI Asset Management noted that oil's sharp retreat alleviated pressure on equities, currencies, bonds, and central banks, highlighting oil as a "fastest-moving tax in the global economy" due to its impact on consumer and business costs.
Despite the decline in oil prices, the S&P 500 fell 0.2%, marking its second consecutive weekly loss. The Nasdaq composite fell 0.5%, largely due to a selloff in chip stocks, with Nvidia dropping 5% and Micron Technology slumping 5.8%. However, the Dow Jones Industrial Average rose 123 points, or 0.2%. Microsoft rose 2.5% and Apple gained 1%.
In Asian markets, sentiment improved, leading MSCI's Asia Pacific equities gauge to rise 0.4%. A notable event was the debut of Chinese memory chipmaker CXMT Corp. in Shanghai, which soared 466% to become China's most valuable listed company with an estimated market capitalization of 3.3 trillion yuan (nearly $490 billion). This comes as demand for AI infrastructure remains robust, with Samsung Electronics securing a contract worth over $200 billion to supply chips to Broadcom Inc., and Nvidia planning to invest $1 billion in Naver Corp. for an AI data center in South Korea. Qualcomm Inc. also plans to increase smartphone processor prices by a double-digit percentage.
Investors are now looking ahead to a busy week of corporate earnings, with Microsoft and Meta Platforms due on Wednesday, followed by Apple Inc. and Amazon.com Inc. on Thursday. The Federal Reserve's interest rate policy update on Wednesday is also a key focus, especially with a nearly 36% chance of a rate hike. Inflation concerns remain high due to recent energy price surges and fresh US-imposed tariffs, which could worsen the situation, as noted by Chris Larkin of E-Trade from Morgan Stanley, who described the week as having "more than its fair share of potential surprises, good and bad."
