ASX set to slip, oil surges as US reinstates Hormuz blockade

Oil prices are climbing following a weekend of attacks in the Middle East, while more losses for computer chipmakers and other winners of the artificial-intelligence boom weigh on stock markets.
The price for a barrel of Brent crude oil, the international standard, rose 7.8 per cent to $US81.92 after the United States and Iran each said the Strait of Hormuz is under its control. Fighting in the region has kept oil tankers from using the strait to deliver crude to customers worldwide from the Persian Gulf, which drives up fuel prices worldwide.
Brent’s price jumped toward $US80 immediately after President Donald Trump said he’s reinstating a blockade on Iranian ships in the strait. He also called for 20 per cent payments on all cargo shipped through it to reimburse the United States for providing protection in the area. Brent’s price, though, remains well below its wartime peak of nearly $US120 per barrel for its most actively traded contract.
On Wall Street, the S&P 500 fell 0.7 per cent, coming off its fourth winning week in the last five. The Dow Jones was down 121 points, or 0.2 per cent, in mid-afternoon trade, and the Nasdaq composite was 1.4 per cent lower. The Australian sharemarket is set to dip, with futures at 5.01am AEST pointing to a fall of 7 points, or 0.1 per cent, at the open. The ASX edged higher on Monday. The Australian dollar was trading at US69.18¢.
Chip stocks like Micron Technology helped lead the way lower on Wall Street. Micron sank 4.9 per cent, eating into what had been a stellar rise of 243.1 per cent for the year so far. Real profits are behind the rise because the AI rush has created surging demand for computer memory and other computing building blocks.
But worries are rising that stock prices have shot too high and that the demand may not be sustainable if AI doesn’t deliver as much profit and productivity as expected.
Nvidia fell 3.2 per cent. Because it’s the largest stock on Wall Street by value thanks to the euphoria around AI, it was the single heaviest weight on the S&P 500.
The day’s losses began in Asia, where South Korea’s Kospi index dropped 8.9 per cent. That included a 15.4 per cent plunge for SK Hynix’s stock in Seoul, the worst since it began trading in 1997.
The South Korean tech giant just launched shares of its stock trading in the United States on Friday, raising roughly $US26.5 billion ($38.3 billion). Those shares jumped 13.1 per cent in their first day of trading, but they fell 5.7 per cent Monday.
Other areas of the AI industry held up a bit better, and Taiwan Semiconductor Manufacturing Co.‘s shares in Taiwan rose 1 per cent. The chipmaker said its revenue in June soared nearly 68 per cent from a year earlier, bringing its total revenue growth for the first half of the year to 35.6 per cent from a year earlier.
But TSMC’s stock that trades in the United States fell 2.3 per cent.
Elsewhere, a group of 12 states sued Paramount Skydance seeking to block its $US110 billion bid to buy Warner Bros. Discovery, alleging the blockbuster Hollywood deal would leave viewers with higher prices and fewer choices for movies and television.
The antitrust lawsuit, filed in California federal court, alleges the deal would harm competition for film distribution and the licensing of cable TV channels. California and 11 other states with Democratic attorneys general joined the challenge, creating the largest legal hurdle to the deal after the Trump administration cleared the transaction without conditions in June.
“After this merger, for every dollar generated by wide-release theatrical films and basic cable channels in this country, the combined company will pocket more than a quarter,” the states alleged in the complaint. “This merger, in short, would create a media behemoth.”
Much of Wall Street’s attention this week will be on profit reports from companies saying how much they earned during the spring. On Tuesday alone, Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo are all releasing their latest quarterly results.
Analysts are forecasting that companies in the S&P 500 index will deliver overall growth of 23.6 per cent from a year earlier, according to FactSet. If they’re right, it would be the second straight quarter of growth better than 20 per cent.
Companies across industries will need to deliver strong growth to justify the big moves their stock prices have made. Indexes are near records despite their sharp recent swings due to worries around AI stocks.
Companies usually turn in results that top analysts’ expectations, including in 37 of the past 40 quarters, according to FactSet. If S&P 500 companies do so again by the usual margin, earnings growth for the latest quarter could end up being the best since 2021.
In the bond market, Treasury yields rose with the price of oil. The yield on the 10-year Treasury climbed to 4.62 per cent from 4.56 per cent late Friday and from just 3.97 per cent before the war with Iran began.
Yields have risen worldwide on worries about expensive oil and high inflation, which could push the Federal Reserve and other central banks to raise interest rates. Higher rates can keep a lid on inflation, but they also slow the economy and hurt prices for all kinds of investments.
In stock markets abroad, indexes moved modestly in Europe.
In Asia, the swings were sharper, beyond South Korea’s plunge. Stocks fell 2.1 per cent in Shanghai, and Japan’s Nikkei 225 dropped 1.9 per cent.
AP, Bloomberg
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.

Facts Only

* The price for a barrel of Brent crude oil rose 7.8 per cent to $US81.92 after the United States and Iran stated control over the Strait of Hormuz.
* President Donald Trump stated he is reinstating a blockade on Iranian ships in the strait and called for 20 per cent payments on cargo through it.
* The S&P 500 fell 0.7 per cent; the Dow Jones was down 121 points (0.2 per cent); and the Nasdaq composite was 1.4 per cent lower.
* The Australian sharemarket futures point to a fall of 7 points (0.1 per cent) at the open.
* Micron Technology sank 4.9 per cent.
* Nvidia fell 3.2 per cent.
* South Korea’s Kospi index dropped 8.9 per cent; SK Hynix stock plunged 15.4 per cent.
* Taiwan Semiconductor Manufacturing Co.’s shares rose 1 per cent.
* TSMC’s US-listed stock fell 2.3 per cent.
* SK Hynix shares jumped 13.1 per cent on their first day of trading in the United States following a share launch.
* Taiwan Semiconductor Manufacturing Co.’s revenue in June soared nearly 68 per cent from a year earlier, resulting in 35.6 per cent total revenue growth for the first half of the year.
* A group of 12 states sued Paramount Skydance over a $US110 billion bid to buy Warner Bros. Discovery.

Executive Summary

Oil prices rose following Middle East attacks and statements from the United States and Iran regarding control of the Strait of Hormuz, which restricted tanker access to the Persian Gulf. Brent crude oil reached $81.92, increasing by 7.8 per cent. Stock markets experienced losses; the S&P 500 fell 0.7 per cent, the Dow Jones was down 121 points, and the Nasdaq composite was 1.4 per cent lower. The Australian sharemarket is expected to dip, with futures pointing to a 7-point fall. Chip stocks, like Micron Technology, saw declines, as real profits lagged behind surging demand for AI-related computing components. Nvidia fell 3.2 per cent, heavily impacting the S&P 500. Meanwhile, South Korea’s Kospi index dropped 8.9 per cent, including a significant fall for SK Hynix stock. In the technology sector, Taiwan Semiconductor Manufacturing Co.’s shares rose 1 per cent despite its revenue soaring by nearly 68 per cent in June. Legal challenges were mounted against Paramount Skydance regarding a $110 billion acquisition bid, alleging anti-competitive effects in film distribution and cable licensing. Analysts forecast overall S&P 500 growth of 23.6 per cent from a year earlier, contingent on companies meeting expectations. Treasury yields rose due to oil price increases and broader inflation worries, suggesting potential interest rate hikes by central banks.

Full Take

The narrative presented is one where geopolitical instability directly fuels commodity price volatility and simultaneously exacerbates domestic financial anxieties centered on technological growth. The focus shifts between tangible physical constraints, like the Strait of Hormuz control impacting oil supply, and abstract systemic risks embedded in speculative asset valuations, specifically the artificial intelligence boom. We observe a tension between real economic indicators—such as soaring revenues at TSMC—and market sentiment driven by perceived future productivity gains from AI. The pattern suggests that heightened global friction (oil/blockades) acts as an immediate upward pressure on physical assets, while internal sector competition (AI valuation vs. profit realization) generates significant downside risk in equities. Furthermore, the legal challenge against the media merger illustrates a structural conflict: the tension between large-scale corporate consolidation and the protection of public access to information. The rise in Treasury yields signals that monetary policy is responding to this dual pressure of inflationary expectations from energy costs and growth concerns from technological speculation. The underlying implication is that market coherence depends on whether immediate, tangible security issues can be decoupled from long-term, speculative technological euphoria. What assumptions about the sustainability of AI-driven growth are being masked by the performance metrics? How does the response to geopolitical shocks influence risk appetite for future innovation bets?