By Ukumbi Afrika Global financial markets turned cautious on Thursday as a sharp rise in oil prices fuelled fresh inflation concerns, pushing European government borrowing costs to their highest levels in years ahead of the European Central Bank's (ECB) policy meeting.
Brent crude climbed 4% to nearly $98 per barrel after escalating tensions in the Middle East threatened global energy supplies. The Iran-aligned Houthi movement said it had attacked two Saudi oil tankers, while the United States launched another round of strikes on Iran, intensifying fears of wider regional disruption.
The surge in oil prices lifted Germany's benchmark 10-year government bond yield above 3.2% for the first time since the eurozone debt crisis in 2011, as investors worried higher energy costs could keep inflation elevated.
Attention is now firmly on the ECB, where policymakers are widely expected to leave interest rates unchanged. However, markets anticipate a more hawkish tone that could pave the way for another rate increase in September.
European equities traded lower, weighed down by a 15% slump in shares of chipmaker STMicroelectronics following disappointing earnings. Investors also continued to digest Alphabet's decision to increase artificial intelligence spending by an additional $15 billion this year.
In contrast, Asian markets advanced as optimism surrounding AI investment boosted semiconductor stocks. South Korea's KOSPI gained more than 4%, supported by strong performances from SK Hynix and Samsung Electronics, while Japan's Nikkei and Hong Kong's Hang Seng also posted gains.
Currency markets remained focused on central banks. The euro strengthened ahead of the ECB decision, while the Japanese yen hovered near a 40-year low against the US dollar despite speculation that the Bank of Japan could accelerate interest rate hikes.
The combination of rising oil prices, geopolitical uncertainty and expectations of tighter monetary policy is likely to keep global markets volatile in the coming weeks.
Source: Reuters
Reporters: Marc Jones & Ankur Banerjee