Global equities slump as semiconductor rout deepens and Middle East tensions spike oil prices
The Philadelphia semiconductor index falls 23.5% from its peak, while US and Iranian strikes on infrastructure push crude higher and trigger a flight to safety in bonds and utilities.
Global share indexes tumbled on Friday as a third consecutive day of losses in semiconductor stocks collided with escalating military tensions between the United States and Iran. The dual pressures prompted a broad rotation into defensive assets, with government bonds and utility stocks seeing increased demand, while energy sectors rallied on surging oil prices.
The Philadelphia semiconductor index dipped to a level 23.5 per cent below its record closing high of June 22, falling more than 2 per cent on the day. Investors are reassessing artificial intelligence valuations following the release of Kimi K3 by Chinese startup Moonshot, described as the world’s largest open-weight AI system. Mona Mahajan, head of investment strategy and asset allocation at Edward Jones, noted that the sector had risen in a parabolic fashion and that such trades tend not to last indefinitely.
Geopolitical instability further weighed on sentiment as the United States and Iran expanded attacks on key infrastructure. The US struck bridges and an airport in Iran, while Tehran responded by targeting a power and desalination plant in Kuwait. Disruptions continued in the Strait of Hormuz, where the renewed conflict has again cut off global energy supplies, with US Marines boarding a tanker and another ship reportedly hit by a projectile.
In energy markets, US crude rose 2.47 per cent to $80.90 a barrel, and Brent crude climbed 2.45 per cent to $86.29 per barrel. The shift towards safety was evident in the bond market, where US Treasury yields fell across the curve. The yield on benchmark 10-year notes dropped 4.36 basis points to 4.525 per cent, while the 30-year bond yield fell to 5.0546 per cent, as markets priced out the likelihood of a Federal Reserve rate hike in July.
Wall Street indices reflected the mixed sentiment, with the Dow Jones Industrial Average down 0.19 per cent, the S&P 500 down 0.85 per cent, and the Nasdaq Composite down 1.62 per cent at 11:02 am New York time. Asian markets suffered steeper losses, with Japan’s Nikkei tumbling 4 per cent and Taiwan’s market plunging more than 6 per cent. Meanwhile, spot gold rose 0.74 per cent to $3,999.49 an ounce, though it remained on track for a weekly loss due to inflation fears driven by higher energy costs.
