BY COMFORT OGBONNA
Asian stocks were mostly higher on Monday, following gains on Wall Street last week, while European equity futures pointed to a softer opening as rising oil prices and uncertainty surrounding shipping through the Strait of Hormuz kept investors cautious.
Markets are closely watching developments around the strategically important waterway, where shipping activity remains severely restricted. Conflicting statements from Iran and the United States have made it difficult for investors to assess when normal commercial traffic could resume.
U.S. Treasury Secretary Scott Bessent said over the weekend that the Strait of Hormuz could eventually become less important to global energy markets as oil producers redirect supplies through alternative pipelines. The comments added to uncertainty over the administration’s approach to the disruption and raised questions about how quickly global energy markets could adjust if shipping through the waterway remains limited.
Iran said Sunday that an agreement with Oman concerning new shipping routes through the Strait of Hormuz was in its final stages. Tehran, however, reiterated that the waterway would not fully reopen until the United States met additional conditions, making a rapid return to unrestricted shipping uncertain.
Further concerns emerged in the Red Sea after Yemen’s Houthi movement said it had resumed attacks around the port city of Mocha. The development raised concerns among shipping companies about the security of vessels traveling through the Bab el-Mandeb Strait, another critical passage for global trade and energy shipments.
Oil prices moved higher as traders assessed the potential for further disruptions. Brent crude rose about 1% to $84.38 a barrel, while U.S. crude gained 0.7% to $78.75.
Shipping through the Strait of Hormuz remained at extremely low levels, with only two tankers reported to have passed through the waterway on Friday. The limited traffic has heightened concerns about the potential effect on global oil supplies if restrictions continue for an extended period.
Investors are also preparing for several important U.S. economic reports this week, particularly inflation data that could influence expectations for the Federal Reserve’s next interest-rate decision.
A weaker-than-expected U.S. jobs report has increased expectations that the central bank could adjust interest rates in September. Markets are currently pricing in roughly a 44% probability of a rate increase, although those expectations could shift significantly after the release of consumer price data on Wednesday.
Economists are expecting the headline consumer price index to rise 0.1% for the month, while the core measure, which excludes food and energy prices, is forecast to increase 0.2%.
The inflation figures will be closely watched because persistent price pressures could make it more difficult for policymakers to adjust interest rates. A weaker reading, on the other hand, could strengthen expectations for a change in monetary policy.
U.S. retail sales data due Friday will provide another important indication of the strength of consumer spending. Economists are forecasting a modest 0.2% increase in July.
There is some uncertainty around the retail-sales figures because a major online shopping event was moved from July to June this year, potentially pulling some consumer spending forward and making comparisons with previous years more difficult.
U.S. stock futures were slightly lower on Monday after Wall Street’s major indexes closed at record levels Friday. Strong corporate earnings have been a major source of support for equities, with the Nasdaq gaining about 5% last week.
Corporate earnings have remained particularly strong among large technology companies and businesses benefiting from increased investment in artificial intelligence.
With nearly 90% of S&P 500 companies having reported their latest results, earnings per share were up about 30% from a year earlier after excluding certain investment gains. The proportion of companies exceeding earnings expectations has also remained at historically strong levels.
Artificial intelligence-related companies have been among the strongest performers. Median earnings-per-share growth for companies closely linked to AI was estimated at about 28%, compared with roughly 12% for companies less directly exposed to the technology.
However, analysts expect the pace of earnings growth among AI-related companies to moderate in the coming quarter, with growth projected at around 16%.
Investors will have fewer major corporate earnings reports to digest this week, but results from several technology and semiconductor companies will provide additional insight into business spending and demand for computing infrastructure.
Among the companies scheduled to report are semiconductor equipment maker Applied Materials, networking technology company Cisco and cloud infrastructure provider CoreWeave.
In Europe, investors will be watching economic confidence indicators and comments from central-bank officials for clues about the region’s economic outlook and future monetary policy.
The European Union’s Sentix investor confidence index for August is due Monday and will provide an indication of how investors view the region’s economic conditions.
Federal Reserve Bank of Cleveland President Beth Hammack is also scheduled to speak, with investors likely to pay close attention to any comments concerning inflation, interest rates and the outlook for the U.S. economy.
With energy markets facing renewed geopolitical risks and major U.S. economic data ahead, investors are entering the week with several factors capable of influencing stocks, bonds, currencies and commodities.
The direction of oil prices, developments surrounding the Strait of Hormuz and the latest U.S. inflation data are likely to remain among the most closely watched issues as markets assess the outlook for global growth and interest rates.
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