Global Stocks Fall on Chip Sell-Off as Oil Prices Spike Amid Middle East Tensions

Global equity markets stumbled on Friday, led by a significant downturn in chipmaker stocks, while oil prices surged on the back of renewed military conflict in the Middle East. The divergence highlights a risk-off sentiment among investors, driven by both geopolitical instability and a rotation out of the high-flying technology sector.

Geopolitical Tensions Drive Oil Higher

Crude oil prices are set for their sharpest weekly increase in three months, with both major benchmarks poised to gain more than 11%. The rally was fueled by reports of new U.S. military action against Iran.

• Brent crude futures rose 0.7% to $84.83 a barrel.
• U.S. West Texas Intermediate (WTI) crude advanced 0.7% to $79.49 per barrel.

The U.S. Central Command confirmed in a statement it had begun a new wave of strikes on Thursday to "further degrade Iranian military capabilities." Analysts noted the direct impact on energy market sentiment. "The U.S. and Iran are further away from seeing eye-to-eye," said Thierry Wizman, a strategist at Macquarie, in a note to clients. Wizman added that there is a "risk of seeing some oil infrastructure destroyed in the process."

Chip Sector Sell-Off Weighs on Equities

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In equity markets, a sell-off in the semiconductor sector weighed heavily on Asian and Western indexes. Japan's Nikkei slid 2.8%, while U.S. futures pointed to a lower open, with Nasdaq futures down 0.7% and S&P 500 futures off 0.4% in early trade.

The weakness follows a recent investor rotation out of semiconductor stocks and into other areas like banking. "Asia’s AI trade thesis is being tested again," analysts at HSBC wrote. "After a strong rally so far this year - led by semiconductors - concerns have resurfaced about potential overcapacity in the AI build-up."

Currencies and Commodities React

The U.S. dollar held steady, with safe-haven demand from the Middle East tensions offsetting receding expectations for Federal Reserve rate hikes this year. In a notable move, the Japanese yen remained near a 40-year low, trading at 162.38 per dollar, prompting verbal interventions from Japanese Finance Minister Satsuki Katayama aimed at supporting the currency.

Elsewhere, the flight to safety was visible in precious metals. Spot gold gained 0.4% to trade at $3,985.64 an ounce.