Markets slide as Hormuz blockade reignites supply fears

Global equity markets retreated on Tuesday as renewed military tensions between Washington and Tehran over the Strait of Hormuz threatened to disrupt international energy shipments, driving oil prices sharply higher and intensifying concerns that central banks could prolong restrictive monetary policies to counter inflationary pressures.

Hormuz blockade reinstated

US President Donald Trump announced the reinstatement of an American blockade in the Strait of Hormuz — through which one-fifth of global oil shipments pass — and declared that Washington would impose a 20% transit fee on all vessels passing through the strategic waterway. The Khatam al-Anbiya Central Headquarters, the Iranian Armed Forces unit responsible for military operations, stated it would not permit American intervention in the vital shipping lane.

The UAE Defense Ministry reported that Iranian cruise missiles struck two UAE-owned tankers transiting the southern corridor of the Strait of Hormuz, killing one crew member and injuring eight others. Conflicting claims over control of the waterway and renewed attacks have heightened investor caution and damaged diplomatic efforts, and Iranian Foreign Ministry spokesperson Esmail Baghaei said negotiations between Washington and Tehran have entered a crisis period.

Oil prices climb on supply risks

Brent crude rose above $85 a barrel for the first time since June 12 as traders priced in heightened supply disruption risks following renewed US military strikes on Iranian positions. By Tuesday morning, the international benchmark was trading at $84.20, up 1.6% from the previous session, while rising energy prices intensified inflation concerns and risk aversion across financial markets.

The yield on the US 10-year Treasury note held steady at 4.64% after climbing seven basis points on Monday. Federal Reserve Governor Christopher Waller said the central bank may need to tighten monetary policy further if core inflation remains elevated, reinforcing expectations that interest rates could stay higher for longer.

Equity markets retreat globally

US stocks closed lower on Monday as geopolitical anxieties compounded weakness in semiconductor shares, with the Dow Jones Industrial Average falling 0.26%, the S&P 500 losing 0.79%, and the Nasdaq Composite dropping 1.55%, though markets opened mixed on Tuesday. Major chipmakers posted significant declines, including Micron Technology down 4.3%, SanDisk off 12.6%, AMD lower by 4.2%, and Intel sliding 6.1%, while the US Dollar Index edged down 0.1% to 101.2 and gold rose 0.5% to $4,021 per ounce.

European markets ended Monday higher despite the escalating tensions, supported by gains in telecommunications and energy shares, with the UK's FTSE 100 gaining 0.1%, France's CAC 40 rising 0.31%, Germany's DAX 40 adding 0.19%, and Italy's FTSE MIB 30 advancing 0.37%, before opening mixed on Tuesday. The EU imposed sanctions on Russian intelligence officers, hackers, and affiliated companies over alleged cyber activities targeting member states, and approved new rules strengthening air passenger rights, while the UK's two-year government bond yield climbed 13 basis points to 4.34%.

Asian indices traded lower on Tuesday, as Japan's Nikkei 225 fell 0.1%, South Korea's Kospi declined 0.4%, China's Shanghai Composite lost 0.7%, and Hong Kong's Hang Seng Index dropped 0.5%. The Bank of Korea is widely expected to raise interest rates on Thursday after domestic inflation reached 3.2%, its highest level in two and a half years, while China's exports surged 27% in June and Japan's industrial production increased 0.1% in May from the previous month but fell 2.1% from a year earlier.