Oil Jumps as Israel-Iran Strikes Threaten Fragile Ceasefire; Asian Chip Stocks Tumble

Oil climbed sharply in early European trading on Monday after Israel and Iran traded waves of attacks, the first exchange of fire between them since a ceasefire took hold in early April. Brent crude rose 4.9% to $97.64 a barrel. West Texas Intermediate gained 4.5% to $94.59. Both benchmarks are up more than 60% this year, though both remain well below March, when Brent traded around $120.

Israel struck central and western Iran, and it did so even though President Trump had told reporters he asked Prime Minister Benjamin Netanyahu not to respond to the Iranian attacks. The escalation threatens the progress of a long-awaited peace deal. Analysts at Saxo Bank said a lasting agreement looks increasingly elusive. They also pointed to the near-closure of the Strait of Hormuz, which continues to tighten global energy markets. Several oil majors, they noted, are warning that the window before physical shortages emerge may be measured in weeks rather than months.

The damage in Asia came mostly from chips. Stocks fell after Wall Street's losses on Friday, with chip-related shares leading the way after their recent rally. South Korea's Kospi closed 8.3% lower, its largest daily percentage loss in three months, and trading was briefly halted as memory chip stocks tumbled. Samsung Electronics fell 10% and SK Hynix 7.7%; together the two memory makers account for about half of the index's market capitalization. Japan's Nikkei dropped 3.85% and Hong Kong's Hang Seng lost 1.3%.

Europe opened lower. The Stoxx 600 fell 0.9%, with the aerospace and defense sector down 2.6% as Middle East escalation weighed on energy-intensive companies. Germany's DAX lost 1.25%, with Siemens down 2.2% and Rheinmetall down 1.9%. In Paris the CAC 40 slipped 0.8%; Safran fell 2.9% and Stellantis 2.8%. London's FTSE 100 lost only 0.3%, cushioned by oil majors. The semiconductor-heavy AEX in Amsterdam fell 0.9%, with ASML down 2.4%. Italy's FTSE MIB declined 0.4%, its losses limited by a 9.5% jump in Banca MPS on takeover reports, and Spain's IBEX 35 fell 0.5%.

U.S. futures were mixed after Friday's sharp drop. S&P 500 futures rose 0.1%, Dow futures fell 0.3%, and Nasdaq futures gained 0.8% after trading flat earlier, even as the investor pullback from artificial intelligence continued in Asian and European trade.

Bonds and currencies moved with oil. The dollar hit a two-month high overnight, with the DXY index reaching 100.174 before settling at 100.098. The 10-year Treasury yield rose 3.4 basis points to 4.569%, after touching a two-week high of 4.580% in Asian trade, according to Tradeweb. The 10-year German Bund yield reached a two-week high of 3.072%, according to LSEG.

Elsewhere, bitcoin recovered tentatively, up 1.8% to $62,984 after falling to $59,125 on Friday, a 20-month low below the key $60,000 level. Zaye Capital Markets analyst Naeem Aslam called the rebound fragile, citing renewed exchange-traded fund inflows after a 13-day, $4.4 billion outflow streak. Gold futures fell 1% to $4,321.89 a troy ounce and silver fell 2.8% to $67.15.

The week ahead is dense. U.S. May inflation data arrives Wednesday, following last week's stronger-than-expected jobs numbers, and will shape rate expectations before the Federal Reserve's June 17 decision. The European Central Bank and Bank of Canada also announce rate decisions, with markets anticipating the ECB's first hike since 2023. SpaceX is expected to start trading Friday.