Australia Hikes Rates as Oil Prices Pressure Markets

Investors turned cautious on Tuesday as escalating tensions in the Middle East and rising energy costs tempered the momentum from a previous session rally. While the United States saw the S&P 500 gain 1% on Monday, futures have since surrendered those gains as the geopolitical situation involving Iran remains volatile. The energy market continues to react to developments in the Strait of Hormuz. Although a brief period of optimism regarding shipping lanes to India, China, and Pakistan initially pushed Brent Crude Oil down to $100 per barrel, prices later surged back above $104. This reversal followed difficulties in establishing a maritime coalition to protect tankers, keeping supply concerns at the forefront of investor sentiment. Central bank activity has also taken center stage, starting with Australia. The Reserve Bank of Australia raised interest rates for the second consecutive month in a narrow 5-4 vote, citing persistent risks to the inflation outlook. Market attention is now shifting toward the Federal Reserve, which begins its two-day policy meeting on Wednesday. In Asian equity markets, performance was mixed. South Korea led gains with the KOSPI rising 2.3%, while the Nikkei in Japan ended the session flat. Sentiment was buoyed slightly by constructive trade talks in Paris, where representatives discussed agricultural goods and rare earth materials. The technology sector continues to be driven by the expansion of artificial intelligence. NVIDIA Corporation announced at its annual developer conference that its AI chip revenue could reach $1 trillion by 2027 as the company moves to dominate inference computing. However, supply chain concerns persist, with SK hynix Inc. warning that a global shortage of chip wafers could last until 2030 due to the overwhelming demand for AI-capable hardware.