Global stocks fall as tech jitters deepen and Middle East tensions lift oil prices

Global stock markets fell on Monday as investors reacted to a sharp sell-off in US technology shares and renewed conflict in the Middle East, which pushed oil prices higher.

Markets in Asia and Europe declined after losses in US tech stocks late last week raised concerns about how companies driving the artificial intelligence boom would finance heavy spending plans.

Brent crude, the international oil benchmark, rose nearly 5% to $97.60 a barrel after Iran and Israel exchanged fire following an Israeli strike on Beirut. It later eased to $94.60 a barrel after Iran said it was halting military operations against Israel, after Donald Trump called for both sides to “immediately stop shooting”.

In Asia, where economies are heavily dependent on oil imports, stock markets dropped sharply. South Korea’s Kospi index fell by nearly 9% at one point, briefly triggering a trading suspension. The decline was led by chipmakers Samsung Electronics and SK Hynix, whose shares fell by 9% and 6% respectively.

Japan’s Nikkei 225 fell 3%, while Hong Kong’s Hang Seng dropped 1.5%. In London, the FTSE 100 opened down 0.4%, with Rolls-Royce and British Airways parent company IAG among the biggest fallers. Shares in BP and Shell rose.

Stock markets in Germany, France and Spain also fell before recovering some losses after Iran declared a halt to military operations against Israel.

US markets opened higher on Monday, recovering some of Friday’s losses. The S&P 500 gained 1% in early trading, led by chip stocks.

European companies linked to the AI boom also fell sharply at the start of trading. Besi, or BE Semiconductor Industries, fell 4.5% and ASML dropped 3.2%, making them among the biggest decliners on the pan-European Stoxx 600 index, which was down almost 0.9%.

Germany’s Aixtron fell nearly 6%, while Finland’s Nokia dropped 5%.

The declines followed a steep sell-off in technology shares at the end of last week, when the Nasdaq lost nearly 5% of its value. The S&P 500 also fell 2% over the week, ending a nine-week run of gains.

Investors have become more cautious about AI-related valuations, particularly as the prospect of higher inflation and interest rates this year has increased.

Susannah Streeter, chief investment strategist at Wealth Club, said markets were pricing in a greater likelihood of an interest rate rise from the Federal Reserve this year.

“Fears of higher interest rates come just as tech giants, which have some of the deepest cash pockets, are seeking fresh funding to help finance eye-watering capital expenditure plans,” she said. “The demand is voracious right now, but there is concern that assets being invested in today, at a time when the technology is so expensive, could become obsolete further down the road.”

Charu Chanana, chief investment strategist at Saxo, said: “The market is becoming more selective on AI. Investors now want clearer proof of earnings delivery, monetisation, capex discipline and funding returns. This looks more like a positioning reset than a regime break. The AI story is not over, but easy AI enthusiasm may be.”

The rise in Brent crude, which had fallen as low as $93 a barrel last week, followed the first exchange of direct strikes between Iran and Israel since a ceasefire paused the war in April.

Fears are growing that the clashes could escalate and delay the reopening of the strait of Hormuz, a major shipping route through which about a fifth of the world’s oil and gas supply normally flows.

Speaking to the Financial Times before the Israeli strikes on Iran, Donald Trump said he would dictate to Israel’s prime minister, Benjamin Netanyahu, how the war should be conducted.