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July 20, 2026 - 07:51
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 steadied after a technology-led selloff rattled markets last week.Brent rose 2.5% to just over $90 a barrel following back-and-forth strikes in the Middle East, including the targeting of vessels attempting to transit the Strait of Hormuz. Treasury 10-year futures slid 7/32, with trading in the cash market shut in Asian hours because of a holiday in Japan. Government bonds in Australia and New Zealand dropped on concern higher oil prices will stoke inflation.Nasdaq 100 futures rose 0.2% after Friday’s selloff that was triggered by Chinese AI startup Moonshot AI unveiling a model that challenged perceptions of US leadership in artificial intelligence. MSCI’s Asia Pacific equity index swung between small gains and losses, while South Korea’s Kospi index fell 4.3% as traders returned following a holiday on Friday. Futures indicated a tepid start for European stocks.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.”On Friday, the high-profile Philadelphia Stock Exchange Semiconductor Index fell into a bear market, jolted by Chinese AI startup Moonshot. Technology shares in Hong Kong rose on Monday while Chinese stocks gained after two major state funds revealed fresh purchases and as regulators are set to meet with key industry participants.Alibaba Group Holding Ltd. shares climbed as much as 5.6% in Hong Kong 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.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.“What concerns me most going forward is the macro chain reaction,” said Dilin Wu, a strategist at Pepperstone Group Ltd. “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 were unchanged as of 6:48 a.m. London time Nasdaq 100 futures rose 0.2% The MSCI Asia Pacific Index fell 0.3% The MSCI Emerging Markets Index fell 0.5% Australia’s S&P/ASX 200 was little changed Hong Kong’s Hang Seng rose 1.8% The Shanghai Composite was little changed Euro Stoxx 50 futures fell 0.1% CurrenciesThe Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1441 The Japanese yen was little changed at 162.36 per dollar The offshore yuan was little changed at 6.7727 per dollar The British pound rose 0.1% to $1.3467 CryptocurrenciesBitcoin fell 0.5% to $64,144.16 Ether fell 0.5% to $1,856.18 BondsAustralia’s 10-year yield advanced six basis points to 4.96% CommoditiesSpot gold fell 0.2% to $4,009.50 an ounce West Texas Intermediate crude rose 2.5% to $84.53 a barrel This story was produced with the assistance of Bloomberg Automation.–With assistance from Winnie Hsu and Jake Lloyd-Smith.©2026 Bloomberg L.P.
