Shares skid in Asia amid fresh US-Iran strikes and Hormuz uncertainty

[SYDNEY] Share markets slipped in Asia on Monday (Jul 13) as fighting intensified in the Gulf and Iran claimed to have closed the vital Strait of Hormuz, sending oil prices surging and rekindling inflation risks globally.

The dollar gained with bond yields as investors nudged up the chance of a hike in interest rates from the US Federal Reserve, with Chair Kevin Warsh due to face Congress on Jul 14 for the first time in his new role.

US inflation figures for June on Tuesday could show some cooling in the headline rate of 4.2 per cent as petrol prices decline, though some of that will reverse now that oil is rising anew.

Brent crude climbed 4.1 per cent to reach US$79.11 a barrel, up from the recent trough of US$70.14, while US crude added 4.1 per cent to US$74.37 a barrel.

US officials said around 20 vessels had been escorted through the strait in the previous 24 hours, though ship tracking sites showed little traffic moving.

Equity investors will be hoping the earnings season proves as upbeat as forecast with the major banks kicking off from Tuesday, while Netflix and General Electric are also on the docket.

“Tech continues to screen highly in our models, supported by standout earnings growth/momentum and attractive valuations,” wrote analysts at Citi in a note.

“While AI volatility may remain elevated over the coming quarter, we maintain our Overweight stance on global IT and the US,” they added. “We pair these growth exposures with over weights in cyclical regions/sectors, including Japan, financials and materials.”

S&P 500 futures eased 0.4 per cent, while Nasdaq futures lost 0.9 per cent. In Europe, Eurostoxx 50 futures and DAX futures both fell 0.6 per cent, while FTSE futures dipped 0.1 per cent.

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Japan’s Nikkei fell 1.6 per cent, having shed 1.7 per cent in the week ended Jul 12, while MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.9 per cent.

Testing the chip bubble

South Korea’s formerly red-hot market shed 5.4 per cent, and will be in focus having lost almost 8 per cent in the week ended Jul 12 as leveraged bets on semiconductor shares came under pressure. The market has recently become something of a bellwether for the chip sector globally and further losses could ripple out more broadly.

South Korean chipmaker SK Hynix’s US-listed shares jumped almost 14 per cent in their Nasdaq debut on Jul 10. News that Apple had sued OpenAI and two former employees for trade secrets theft emerged after markets closed.

Analysts at BofA warned the AI capex boom was eroding cash generation with hyperscalers having spent US$234 billion in 2026 and forward free cash flow expected to turn negative for the first time since at least 2007.

The spike in oil pushed 2-year Treasury yields to their highest since early 2025 at 4.2393 per cent, while US Fed fund futures slipped 2 ticks, implying 34 basis points of policy tightening by the end of 2026.

That in turn kept the dollar index firm at 101.13. The euro eased a fraction to US$1.1394 as Europe is far more reliant on foreign oil than the US.

The dollar added 0.2 per cent on the yen to 162.03, regaining some of the ground lost on Jul 10 when Japanese Finance Minister Satsuki Katayama floated an idea to encourage the US$1.8 trillion Government Pension Investment Fund (GPIF) and other retirement vehicles to bring some of their money home.

“The GPIF currently allocates 50/50 between domestic and offshore and a move back even to the pre-pandemic norm closer to 60/40 would come with a large JPY buying flow,” said Taylor Nugent, a senior economist at NAB.

“It is worth noting though that while allocations can theoretically be reviewed any time, they tend to be slow moving, and the FY26 investment plan is already in place.”

The pound eased 0.2 per cent to US$1.3379 ahead of a pivotal week in UK politics as Andy Burnham is expected to be formally anointed as Labour leader on Jul 17 and named as prime minister on Jul 20.

In commodity markets, the rise in yields weighed on non-interest bearing gold which slipped 1.1 per cent to US$4,076 an ounce. REUTERS