Asian shares rise as chips rally, brent advances after renewed US-Iran tensions

ASIAN shares climbed for the first time in three days on Thursday (Jul 9), following a rally in chipmakers, as oil extended its gains after the US said it struck Iran for a second straight day.

The MSCI Asia Pacific Index climbed 0.5 per cent, with South Korean shares – a bellwether for semiconductors and artificial intelligence investments – climbing 3 per cent. Japanese shares also rose.

Among the main market moves, the S&P 500 futures were little changed as of 9.07 am Tokyo time. The Hang Seng futures fell 0.2 per cent, Japan’s Topix rose 0.4 per cent and Australia’s S&P/ASX 200 fell 0.8 per cent.

The chip sector remained in focus after SK Hynix’s US listing was more than seven times oversubscribed, according to people familiar with the matter. Meanwhile, Bain Capital sold its entire stake in flash memory chipmaker Kioxia Holdings.

Brent extended its gains to a third day, climbing to about US$78.80 a barrel, as the latest strikes stoked fears that the conflict could disrupt shipping through the Strait of Hormuz.

Earlier, the two-year Treasury yield, which is sensitive to expectations for Federal Reserve policy, rose as much as five basis points during the US session to 4.23 per cent, within a basis point of last month’s high.

The 10-year yield climbed as much as four basis points to 4.59 per cent, its highest since late May. Gold steadied after a three-day decline.

The flare-up in tensions and surge in oil prices have reignited inflation concerns, prompting money markets on Wednesday to bring forward bets on the next Fed interest rate increase to October from December.

That has added to pressure on markets already grappling with elevated stock valuations after this year’s rally in AI shares.

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The additional strikes were launched “to further degrade their ability to threaten freedom of navigation in the Strait of Hormuz”, the US Central Command said in a social media post. 

“Markets were not initially taking the re-escalation in US-Iran tensions too seriously earlier this week,” said Fawad Razaqzada at Forex.com. “But today, that seems to have changed.”

Veteran strategist Ed Yardeni said the rupture in the ceasefire between the US and Iran risks sparking a fresh acceleration in price growth, which in turn could compel the Fed to raise interest rates.

A few Fed officials in their most recent policy meeting said there was a case for raising rates, though they ultimately supported the decision to leave rates on hold.

More generally, minutes of their June gathering reflected growing concern over inflation just as worries over the labour market slightly receded.

“One thing is certain: future policy is heavily contingent on the political situation in the Middle East,” said Jeffrey Roach at LPL Financial.

“If we can tease out any forward guidance from the minutes, it would be the committee is working through a wide range of scenarios and will not commit to a specific scenario until the incoming data provides necessary clarity.” BLOOMBERG