Key Points
- Oil prices fell after last week’s rally as investors awaited details of a new US economic offensive against Iran.
- Asian shares declined, with technology stocks under pressure ahead of Nvidia’s earnings report.
- Investors are also watching the Jackson Hole meeting for signals on US monetary policy.
Main Story
Oil prices fell on Monday after recording strong gains last week, while global equities came under pressure as investors awaited details of a proposed US economic offensive against Iran.
US Treasury Secretary Scott Bessent was expected to outline new measures against Tehran later in the day, as the conflict in the Middle East continued and uncertainty persisted over the reopening of the Strait of Hormuz.
Bessent described the planned measures in a Financial Times article as an economic offensive of unprecedented scale, calling it an “economic D-Day”.
The prospect of tougher sanctions initially pushed both major crude benchmarks lower, with Brent remaining above $92 a barrel after gaining more than 7 per cent in the previous week.
Susannah Streeter, chief investment strategist at Wealth Club, said the shift towards economic measures could provide some relief from fears of further military action, although uncertainty remained over the prospects for a peace agreement.
European markets were relatively subdued, with London edging higher while Frankfurt and Paris were broadly unchanged.
Asian equities recorded wider losses, led by technology stocks, as investors positioned ahead of Nvidia’s earnings report. The US chipmaker has become an important indicator of investor confidence in the sustainability of the artificial intelligence investment boom.
South Korea’s Kospi fell more than 3 per cent, weighed by a sharp decline in Samsung Electronics, while Tokyo and Shanghai also ended lower.
Hong Kong’s Hang Seng Index declined despite news that fast-fashion retailer Shein planned to make its market debut in the city on Sept. 1. The listing is expected to value the company at about $27 billion.
Chinese technology company Alibaba also remained in focus after announcing plans to raise $10.2 billion through a Hong Kong share sale to finance its artificial intelligence expansion.
Investors are also looking ahead to the annual Jackson Hole gathering of central bankers, economists and finance officials in the United States, where developments in monetary policy are expected to remain a major focus.
The meeting follows moves by the US Treasury to increase bond buybacks as long-term borrowing costs have risen, with the 30-year Treasury yield reaching levels last seen in 2007.
Bond yields have also risen in several Western economies amid concerns over inflation and government debt, while the United States has reported federal debt exceeding $40 trillion.
On currency markets, the Canadian dollar weakened against the US dollar as trade tensions between Ottawa and Washington intensified following Canada’s vow to retaliate against new US tariffs.
The Issues
Markets are balancing several competing risks, including the impact of the Iran conflict on global energy supplies, uncertainty over US sanctions, rising government debt and questions about the sustainability of investment in artificial intelligence.
For oil markets, developments around Iran and the Strait of Hormuz remain particularly important because prolonged disruption could affect energy supplies and keep prices elevated.
Technology investors, meanwhile, are looking to Nvidia’s results for evidence that spending on AI infrastructure can continue to support the sector’s high valuations.
What’s Being Said
“The US is changing tactics in its battle against Iran, and its fight to get oil flowing more freely from the region,” — Susannah Streeter, chief investment strategist, Wealth Club.
“There may be some relief that the threats have moved from military strikes to some form of super sanctions, but there is little confidence that a route to a peace deal will open up any time soon,” — Streeter.
“These results will also offer insight into demand for AI infrastructure, how Nvidia is managing Chinese competition and what the future holds for the sector,” — Kathleen Brooks, research director, XTB.
What’s Next
Investors will focus on Bessent’s announcement on measures against Iran, developments around the Strait of Hormuz and any indications of progress towards ending the conflict.
Nvidia’s earnings and developments at Jackson Hole will also be closely watched for their potential impact on technology stocks, monetary policy expectations and broader market sentiment.
Bottom Line
Oil and equities opened the week under pressure as investors weighed the potential economic impact of tougher US action against Iran alongside concerns over technology valuations, borrowing costs and global economic growth.
