Strait of Hormuz Tensions Resurface, Oil Prices Waver

Global stock markets saw little movement last week, with a marginal gain of 0.2% in local currencies. The United States outperformed, experiencing a 0.6% increase in sterling terms, partly due to its distance from the escalating conflict in the Strait of Hormuz and strong performance in its tech sector. Conversely, the UK, Japan, Europe, and emerging markets all registered losses ranging from 1.5% to 2.4%.

Renewed tensions in the Strait of Hormuz have led to fluctuating crude oil prices, with Brent crude rising to $79 per barrel from a recent low of $72. However, prices remain significantly below earlier highs of over $100. While the risk of major conflict escalation appears low, a lasting peace deal seems unlikely, suggesting a continued state of partial Strait reopening with periodic flare-ups, keeping oil prices around current levels.

The tech sector continues to be a source of market volatility. Stellar results from some chip companies have recently been met with share price declines, a reversal of earlier trends. Despite this, enthusiasm persists in certain areas, as evidenced by the successful US listing of SK Hynix and gains in companies like Nvidia and Meta.

On the macroeconomic front, the release of the latest Fed meeting minutes indicated a likelihood of interest rate hikes, contributing to a slight increase in government bond yields. Consequently, US Treasuries and UK gilts experienced losses of approximately 0.5%.