Oil prices rise and stocks slide as Middle East violence flares, adding to uncertainty

Oil prices jumped two per cent and world shares skidded on Tuesday as recurring violence in the Iran war, after more than a month with no significant fighting, heightened uncertainty over the future of the conflict.

Shares in online fast-fashion retailer Shein fell as much as 10 per cent after they began trading in Hong Kong on Tuesday. They closed 4 per cent lower.

Brent crude gained two per cent to US$92.35 per barrel. It gained 2.7 per cent on Monday after the US attacked rocket launchers on an Iranian island on Sunday, saying they were preparing to launch mines into the Strait of Hormuz. Iran responded by launching missiles at US sites in Jordan, all of which were intercepted.

The war has curtailed traffic in the Strait of Hormuz, which once accounted for about 20 per cent of the world’s oil shipments. Oil prices remain high after an initial surge earlier in the war, and that has made everything from gasolene to shipped goods more expensive.

US benchmark crude climbed 2.5 per cent to US$87.84 per barrel.

In early European trading, Germany’s DAX lost 1.1 per cent to 25,982.28, while the CAC 40 in Paris gave up 0.4 per cent to 8,303.65. Britain’s FTSE 100 declined 1.1 per cent to 10,702.25.

In Asian share trading, Hong Kong’s Hang Seng fell 0.9 per cent to 25,329.73 and the Shanghai Composite index shed 0.2 per cent to 3,979.89.

Tokyo’s Nikkei 225 gave up early gains, falling 0.2 per cent to 66,215.34. The Kospi in South Korea added 0.2 per cent, to 6,835.80.

The S&P/ASX 200 in Australia slipped 0.1 per cent to 9,066.70.

Taiwan’s Taiex picked up 1.8 per cent and the Sensex in India fell 0.3 per cent.

US futures were 0.1 per cent higher.

Wall Street closed out August on a downbeat note on Monday as the S&P 500 index fell 0.3 per cent. The Dow Jones Industrial Average dropped 0.7 per cent and the Nasdaq composite slipped 0.1 per cent.

Monday’s losses were broad, with nearly every sector within the benchmark S&P 500 finishing in the red.

Edison International slumped 23.1 per cent and PG&E fell 20.1 per cent for the two steepest declines. That followed reports about potential California wildfire legislation that would allow insurers to sue utilities over related claims.

But energy stocks notched gains. Exxon Mobil rose 2.7 per cent and Chevron rose 2.1 per cent.

Higher energy prices have fuelled already-stubbornly high inflation, well above the Federal Reserve’s two per cent target. That has been weighing on household spending and consumer confidence and given the Fed a more complicated path ahead for its interest rate policy.

The yield on the two-year Treasury, which closely tracks expectations about Fed moves, held steady on Monday at 4.34 per cent, where it was late Friday. That’s up significantly from about 3.50 per cent at the beginning of 2026.

The yield on the 10-year Treasury rose to 4.75 per cent from 4.73 per cent late Friday. That’s back up around the level seen two weeks ago when the Trump administration took the unusual step of announcing it would intervene in the bond market.

Any increase to interest rates that could cool inflation also risks hurting the jobs market. Later this week, the US will report August jobs data. In July, the US job market stalled unexpectedly as employers cut 23,000 jobs. Labor Department revisions slashed another 103,000 jobs from May and June payrolls.

In other dealings early Tuesday, the US dollar rose to 159.90 Japanese yen from 159.74 yen. The euro slipped to US$1.1598 from US$1.1619.

AP