Oil Spike and AI Worries Drive Volatile Global Market Rotation

Overview

• Markets swung from relief to caution after a weekend pause in U.S. strikes briefly sent Brent toward $90 and lifted stocks, but the rally reversed when U.S. forces intercepted Iranian missiles and carried out a joint strike with Saudi Arabia on Wednesday, pushing oil sharply higher.
• A report that Shanghai Yuliangsheng has begun industrial production of deep ultraviolet (DUV) lithography machines amplified fears that Chinese firms could erode ASML’s edge, triggering heavy selling in semiconductor names and large losses in Asian markets, notably Seoul where the Kospi plunged about 10–12%.
• Investors are also nervous about massive, uncertain AI capital spending by big tech, which has prompted equity and debt issuance and helped drive steep declines in AI-linked and chip stocks across the U.S. and Asia.
• European markets have shown relative resilience because they hold fewer chip-exposed firms and have seen supportive effects from lower energy costs and some strong corporate results, but they faltered when oil rebounded and bond yields rose.
• Key near-term catalysts to watch are the Federal Reserve’s policy decision and speeches from its new leadership plus quarterly results from Microsoft and Meta, which together will shape inflation expectations, borrowing costs, and whether tech and chip valuations fall further.