Oil surges on Iran attack; chip rout deepens ahead of Fed
An Iranian missile attack on US forces has pushed Brent crude above $87 and halted Strait of Hormuz traffic, injecting fresh inflation anxiety into a Federal Reserve meeting already shadowed by a global sell-off in semiconductor stocks.
Brent crude jumped 3.8% to $87.26 a barrel after the US military intercepted an Iranian missile barrage targeting a base in Jordan. The escalation has effectively frozen tanker traffic through the Strait of Hormuz after Iran rejected an Omani proposal to split inbound and outbound shipping lanes, opting instead to demand oversight of all vessels.
The disruption is compounding existing supply constraints. ING analysts Warren Patterson and Ewa Manthey noted reports that the 400,000 barrel-per-day Jazan refinery in Saudi Arabia has shut following Houthi attacks. The European gas market is also under severe strain; QatarEnergy has extended force majeure on LNG deliveries into late September, leaving EU gas storage just 56% full compared to a 10-year average of 72%. The analysts warned the market looks "increasingly vulnerable as we head into winter", with July imports on track to fall more than 25% year-on-year.
These energy shocks arrive at a critical moment for the Federal Reserve, which announces its interest rate decision later today. According to Deutsche Bank’s Jim Reid, the market is pricing a 32% chance of a rate hike, making this the most uncertain FOMC meeting since December 2018. DB economists expect the central bank to hold, but warn that renewed Middle East tensions complicate the inflation outlook and could trigger dissents in favour of tighter policy.
Chip rout accelerates
While energy prices rise, the global sell-off in semiconductor shares is accelerating. The South Korean market fell 8.3% as SK Hynix dropped 9% despite reporting a six-fold surge in quarterly profit, while Samsung lost 6%. The losses follow a brutal session in the US, where the Nasdaq fell 1% on heavy declines for Sandisk, Western Digital, Micron, and AMD. European peers Infineon and ASML both fell roughly 1%.
Miners cash in on AI
Paradoxically, the artificial intelligence narrative is shifting wealth into the physical commodities needed to build data centres. Rio Tinto posted a 43% jump in second-quarter profit to $6.9bn, lifted by copper prices, while Glencore reported a 15% increase in copper production. Their shares rose 2% and 4% respectively, leading a 1.9% gain in the FTSE 100’s basic materials sector.
Outside of resources, consumer goods group Reckitt Benckiser reported better-than-expected 4.2% like-for-like sales growth, though operating profit fell 14.3% to £1.47bn. The company trimmed its forecast for oil-related cost impacts, stating: "While still volatile, oil prices have moderated since then and we currently expect a reduced input cost impact in 2026. We continue to view this as a manageable headwind and are taking actions to mitigate the impact."
