Oil prices climb as Middle East tensions escalate

Global oil prices surged on Monday after Israel rejected a U.S.-brokered Gaza deal and reports emerged of a potential Iran-Oman agreement to tighten control over the Strait of Hormuz. Brent crude, the international benchmark, rose 0.8% to $84.23 per barrel, while U.S. benchmark crude climbed 0.7% to $78.72 per barrel. The developments deepened concerns over threats to key shipping lanes and the risk of renewed conflict in the region. Iran suggested it may bar vessels linked to “hostile countries” from the Strait of Hormuz, a critical chokepoint for global oil shipments, as part of a proposed deal with Oman to establish a safe shipping route. Meanwhile, Yemen’s Iranian-backed Houthi rebels attacked a government-held port on the Red Sea coast, further stoking fears of disruptions to maritime trade. Analysts warned that Iran could be leveraging the situation to extract concessions from the U.S. “Negotiators said that a deal to establish a safe shipping route was close, but Iran may now be exploring just how much it can extract from the U.S. in return,” said Bas van Geffen, senior macro strategist for Rabobank. Regional markets reacted unevenly to the geopolitical jitters. Japan’s Nikkei 225 led gains in Asia, surging 2.1% to 66,970.22, driven by strong performances in technology stocks like Tokyo Electron (+4.1%) and Advantest (+6.4%). South Korea’s Kospi added 0.7% to 6,299.66, though chipmakers Samsung Electronics (-0.4%) and SK Hynix (-0.1%) lagged as foreign investors trimmed positions to lock in profits. Hong Kong’s Hang Seng rose 1.1% to 25,937.49, while the Shanghai Composite gained 0.7% to 3,966.59. European indices showed mixed results, with Germany’s DAX up 0.3% at 26,411.01 and France’s CAC 40 down 0.1% to 8,703.73. Britain’s FTSE 100 fell 0.3% to 10,869.35. In the U.S., the S&P 500 edged 0.1% higher to 7,757.64, setting a new record, while the Dow Jones Industrial Average slipped 0.1% to 54,036.93, just shy of its August 5 peak. The Nasdaq composite advanced 1.3% to 26,690.62, with tech giants Nvidia (+2.3%) and Broadcom (+1.7%) leading the charge. The dollar strengthened against the yen, rising to 158.72 JPY from 157.71 JPY, while the euro weakened to $1.15617 from $1.1568. Investors are now eyeing a busy week of U.S. economic data, with the July consumer price index (CPI) due on Wednesday. Inflation is forecast to have risen at a 3.4% annual rate, slightly below June’s 3.5% pace, though still elevated above the Federal Reserve’s 2% target. The jobs market showed signs of cooling in July, with employers unexpectedly cutting 23,000 jobs, a revision that slashed 103,000 jobs from May and June payrolls. A softer labor market has fueled speculation that the Fed may delay interest rate hikes, which could support risk assets like stocks. However, the mixed signals from the economy—high inflation alongside slowing employment—complicate the Fed’s balancing act between curbing inflation and sustaining growth.