The price of oil has risen again this Thursday, surpassing the $111-per-barrel Brent threshold. This latest 2.3% surge before the opening of European stock markets comes after Iran reported that seven tankers were damaged in the Strait of Hormuz overnight, adding a new level of tension to fears of a resumption of total war after the American midterm elections, as also highlighted in recent days by the U.S. press. At the same time, Saudi oil company Aramco has announced forecasts of an increase in global crude demand of up to almost three million barrels per day, even if the war ends now, "only to compensate for the amounts that have been withdrawn from reserves and to respond to increased demand in the markets," a loss estimated at 3 billion. The present situation is an "unprecedented crisis for oil and natural gas markets," the oil company states.
In the case of West Texas Intermediate (WTI), a U.S. benchmark, its price has increased by 2.1% before the opening of European stock exchanges, reaching $99.1 per barrel. Behind the rising tensions is also the news that the U.S. has ordered the departure of non-essential personnel from Saudi Arabia due to Houthi threats, pointing to an even more critical situation in the region.
In response to all this, global stock markets have fallen again. In European mid-session trading, hours before the opening of Wall Street, the Ibex 35 was trading down 1.86% at 18,965 points, dragged down by the financial sector, led by Bankinter after reporting revenues below analysts' expectations today. Following the financial institution were Solaria (-4.45%), CaixaBank (-3.98%), ArcelorMittal (-3.74%), Banco Sabadell (-3.69%), Banco Santander (-3.39%), ACS (-3.08%), and Unicaja (-2.89%). Among the few stocks trading positively in the mid-session were Telefónica (+0.67%), Logista (+0.65%), and Colonial (+0.50%).
The rest of the main European markets are also trading in the red today: in the mid-session, London was down 0.54%; Paris, 1.49%; Frankfurt, 1.09%; and Milan, 1.91%.
The context is not simple: the rise in oil prices, caused by fears of an escalating war in the Middle East, is also occurring at a time when panic is looming over the situation of European public debt. The increase in oil prices "fuels investors' fears of rising inflation," which would lead to a new rise in interest rates in the eurozone and further pressure on public debt in Europe, analysts at Swissquote Bank explain.
In Spain, the yield on Spanish 10-year bonds reached 4.086%, slightly above the 4.081% recorded at Wednesday's close. Thus, the risk premium widened again to 70.3 basis points. In Germany, the yield on the Bund — a benchmark throughout Europe — stood at 3.25%.
And in France — the focus of international attention due to its critical economic, political, and especially social situation amid the latest protests — the yield has exceeded 5% this week, a level not seen since 2002 for the country's financing costs. This Thursday, the risk premium demanded by investors for French bonds with a 10-year maturity compared with the German Bund soared above 160 basis points, the largest gap between these benchmarks since November 2011, leaving its yield at 5.064%.
"It could be seen as a structural risk, pressured by fiscal pressures, political fragmentation, and rising financing costs, with voters favoring populist parties that promise to protect spending and cut taxes," analysts at Renta 4 say. "The central scenario would be prolonged economic drag, not an immediate default," which is already spreading to Italian and Belgian bonds, they point out.
All this is compounded by the uncertainty in the artificial intelligence sector. "Fears related to AI are gaining strength again after Meta announced a new increase in its investment spending," experts from Natixis note. Mark Zuckerberg's group — whose futures on Thursday pointed to declines in the Wall Street session — announced that it would have to raise "hundreds of billions of dollars over several years" starting this fall, after posting negative quarterly cash flow. Indeed, "this is the first quarter since 2013 in which the company fails to generate enough operating cash to cover its investments," Banca March explained. In parallel, Tesla reported this week in its earnings presentation lower profit, stable revenue, and a cut to its investment forecast. And CoreWeave, which has resorted to borrowing to buy more Nvidia artificial intelligence chips, has experienced several sessions of particular instability in recent weeks due to concerns about its debt.
So, AI-related stocks are showing instability today amid concerns that the sector's boom may be threatened by the rising cost of the loans needed to build data centers and buy more AI chips, stemming from higher interest rates driven by inflation and rising fuel prices.
In Asian stock markets, with a strong tech presence, the session ended in the red. In more detail, the Seoul stock exchange fell by 3.52%, weighed down by Samsung Electronics (-4.03%) and SK Hynix (-5.49%). Tokyo lost 2.65%, with Advantest falling by 6.01%. Taipei retreated, dragged down by TSMC (-1.45%). Even Chinese stock markets were affected by this movement, as evidenced by Hong Kong, which lost 3.03%. Technological skepticism is compounded by China's regulatory intervention in its e-commerce companies. And the market does not like interventionist measures.
Overall, the effect extends to Europe: within the tech sector, STMicroelectronics fell by 3.43% in the mid-session in Paris, Infineon by 2.66% in Frankfurt, and ASML by 2.81% in Amsterdam.
The last to open, the U.S. stock market, also opened in the red: at the bell, the Dow Jones fell by 0.54%, the Nasdaq by 1.48%, and the S&P 500 lost 0.95% on Wall Street.
Here, U.S. bond yields have fallen to 5.03%, down from 5.13% at Wednesday's close and from more than 5.30% earlier this month. This could be a sign that investors are buying U.S. public debt in search of safer assets as interest in AI declines. However, the 10-year U.S. Treasury yield remains well above the 3.97% level it stood at before the war in the Middle East.