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July 20, 2026 - 07:03
6 minutes
(Bloomberg) — Oil climbed to the highest level in more than a month and bonds fell as US and Iranian attacks escalated, renewing inflation concerns. Stocks edged up after a technology-led selloff rattled markets last week.Brent rose as much as 3.8% to $91.42 a barrel, the highest level since June, with back-and-forth strikes that have expanded beyond military targets. Treasury 10-year futures slipped 7/32, with trading in the cash market shut during Asian hours Monday because of a holiday in Japan. Government bonds in Australia and New Zealand also declined on concern that higher oil prices will stoke inflation.Nasdaq 100 futures rose 0.5% after Friday’s selloff, triggered by Chinese AI startup Moonshot AI’s surprise breakthrough, which unveiled a model that challenged perceptions of US leadership in artificial intelligence. MSCI’s Asia Pacific equity index edged up 0.1%, while South Korea’s Kospi index fell 3.5% as traders returned following a holiday on Friday. Futures indicated modest gains for European stocks as well.The escalation in the Middle East is unsettling markets already rattled by a selloff in tech stocks as investors question whether the artificial-intelligence spending boom can sustain the sector’s rapid gains. Oil’s advance is also bringing inflation back into focus after recent benign US data had eased expectations that the Federal Reserve would need to raise interest rates.“Asia remains fragile as higher oil revives inflation risks, pushes yields up and tightens financial conditions for energy-importing economies,” said Charu Chanana, chief investment strategist at Saxo Markets. “Korea’s sharp swings also show that AI and semiconductor de-risking is not over.”Earlier, the high-profile Philadelphia Stock Exchange Semiconductor Index fell into a bear market on Friday, jolted by Chinese AI startup Moonshot. Chinese shares rose on Monday following last week’s rout, after two major state funds revealed fresh purchases and as regulators are set to meet with key industry participants.Alibaba Group Holding Ltd. climbed as much as 5.6% after releasing a preview of its flagship Qwen3.8 Max model, which the company described as second only to Anthropic’s Fable 5.“In the long run, the real threat to the memory trade in South Korea comes from China,” Homin Lee, senior macro strategist at Lombard Odier, said in an interview with Bloomberg TV. “In the second half of the year, we’re going to get a bit of narrative shift in a favor from the Chinese AI and semiconductor ecosystem that leads you to all the mega listings that are on the horizon, which it now seems the authorities are quite supportive of.”What Bloomberg’s Strategists Say…“The widening premium for Brent crude over WTI highlights concerns that the US-Iran war escalation will further disrupt global energy supplies. For now, though the gap is contained enough for equities to go on paying it little mind, unlike the early months of the war.”— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.Meanwhile, the gains in oil came after US reports last week showed consumer prices dropped in June for the first time in six years, and a key gauge of underlying inflation was little changed. The average US nationwide price of a gallon of regular gasoline is poised to push back above $4, while diesel is already north of $5 a gallon and climbing.Earlier this month in Sintra, Portugal, Fed Chair Kevin Warsh said price risks have come down in recent weeks and repeated his determination to bring inflation back to the US central bank’s 2% target.With Warsh making clear that the central bank’s priority is to pull down inflation, traders will also look to this week’s data for signs of a resilient US economy to cement expectations of a rate hike in September or October.Forward markets see about two hikes by the first quarter of 2027, and the vocal representation of hawkish members underpins this, Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank, wrote in a client note.With the ceasefire framework between the US and Iran not in effect anymore and oil surging over $90 a barrel, markets are having to reprice the situation, said Dilin Wu, a strategist at Pepperstone Group Ltd.“What concerns me most going forward is the macro chain reaction,” she said. “Every dollar above $90 makes the Fed’s job harder at exactly the moment it was starting to get easier. Inflation was cooling, rate hike expectations were coming down, markets were finding their feet. Oil above $90 reverses all of that in one move.”Corporate Highlights:Ryanair Holdings Plc said profit dropped by 34% in its fiscal first quarter as the Middle East conflict hikes the price of oil and dents consumer’ desire to travel. Moonshot AI has told investors it’s preparing to list in as early as six months, seizing the opportunity to tap capital markets after its latest model upended industry perceptions of China’s artificial intelligence capabilities and sent tech stocks reeling. 01.ai, the Chinese AI startup founded by computer scientist Kai-Fu Lee, is pushing ahead with plans to raise funds before an initial public offering in 2027. Samsung Biologics Co. has agreed to acquire Switzerland’s PolyPeptide Group AG in an all-cash deal that values the contract drugmaker’s equity at about 1.46 billion Swiss francs ($1.8 billion), expanding its manufacturing capabilities. Some of the main moves in markets:StocksS&P 500 futures rose 0.2% as of 1:58 p.m. Tokyo time Australia’s S&P/ASX 200 rose 0.2% Hong Kong’s Hang Seng rose 2.1% The Shanghai Composite rose 1.2% Euro Stoxx 50 futures rose 0.2% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1444 The Japanese yen was little changed at 162.34 per dollar The offshore yuan was little changed at 6.7724 per dollar CryptocurrenciesBitcoin was little changed at $64,518.38 Ether rose 0.2% to $1,869.41 BondsAustralia’s 10-year yield advanced six basis points to 4.96% CommoditiesWest Texas Intermediate crude rose 2.2% to $84.28 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.–With assistance from Winnie Hsu and Jake Lloyd-Smith.©2026 Bloomberg L.P.
