Remarks by U.S. President Donald Trump about Iran and a decline in vessel traffic through the Strait of Hormuz increased concerns about energy supplies in global markets. Nvidia’s plan to mobilize more than $500 billion in financing for artificial intelligence infrastructure, however, partly limited the negative mood in the markets.
Trump’s Iran remarks raise risk concerns
Donald Trump said the possibility of a major attack against Iran remained if an agreement could not be reached with the country. Trump said Iran was demanding war reparations in exchange for signing an agreement and argued that Tehran was the party that should make the payment.
The remarks reinforced expectations that reaching an agreement with Iran could take longer. Iran’s demand that the Strait of Hormuz remain closed also kept concerns about energy supplies alive.
Brent crude rises to $87.70
Driven by supply concerns, October-dated Brent crude rose 5% to $87.70 a barrel. Brent later traded sideways at around $87.80.
The rise in oil prices brought global inflation risks back into focus, while the yield on the U.S. 10-year Treasury note rose by about 6 basis points to 4.71%. Expectations for a hawkish stance from the Federal Reserve also strengthened.
Analysts said weaker employment in the United States had shifted expectations for possible Fed moves to a less hawkish position than in the previous period. Pricing in money markets pointed to divided expectations over the Fed’s move next month, while the probability that the bank would end the year with one rate hike was assessed at 75%.
Cleveland Fed President Beth Hammack said multiple rate hikes might be needed to bring inflation down. The U.S. inflation data due to be released could change expectations for the Fed, and market volatility could increase both before and after the data.
Nvidia targets more than $500 billion in capital
Investment activity in the artificial intelligence sector partly offset pressure stemming from the Middle East. U.S.-based technology company Nvidia announced that it had formed a strategic partnership with six financial institutions to mobilize more than $500 billion in third-party capital for the development of AI infrastructure.
The company signed memorandums of understanding with Apollo, Blackstone, BlackRock, Brookfield, Goldman Sachs and KKR to establish independent computing finance platforms.
Nvidia Founder and Chief Executive Officer Jensen Huang said the company’s operations, which began with chip production, were expanding toward the creation of a new, investable infrastructure class known as AI factories.
BlackRock Chief Executive Officer Larry Fink said unprecedented levels of investment and a skilled workforce were needed to build AI infrastructure. Goldman Sachs Chief Executive Officer David Solomon viewed positively the possibility of creating a new credit market based on Nvidia computing.
Analysts said the agreement could make it easier to secure financing for AI infrastructure investments in the coming period. However, increased cyclicality in the sector could amplify the impact of potential negative developments.
Gold tests a peak at $4,435
The U.S. 10-year Treasury yield remained broadly flat amid concerns that higher energy prices could increase inflationary pressure. The dollar index held its position around 99.
Supported by uncertainty over the Fed’s future steps, gold rose 1.1% to $4,390 an ounce. The price later tested a roughly two-and-a-half-month high at $4,435; after retreating from that level, gold traded at $4,377 an ounce, down 0.3%.
Shares of U.S. chipmaker Intel fell 4.1% after the company announced plans to raise $15 billion through a committed common stock offering. The S&P 500 fell 0.06%, the Nasdaq declined 0.32% and the Dow Jones dropped 0.11%. U.S. index futures, meanwhile, started the day higher.
European markets track energy costs
Developments in the Middle East and rising energy costs led to mixed trading in European equity markets. A recovery in the semiconductor sector and gains in energy shares were among the leading movements in regional markets.
Natural gas prices in Europe rose 8% amid uncertainty over shipments through the Strait of Hormuz. In the euro area, the investor confidence index rose 4 points to 0.9 in August.
A study by Triodos Bank found that extreme heat and prolonged drought across Europe during the summer could cause approximately €180 billion in damage to the European Union economy. The study said this impact could wipe out the economic growth projected for the year.
France is expected to be the country most affected by extreme temperatures. Recurrent heatwaves could reduce the country’s gross domestic product by approximately 1.4%, while the economy could contract 0.6% year on year.
The FTSE 100 in the United Kingdom fell 0.35%, while Italy’s FTSE MIB 30 declined 0.1%. France’s CAC 40 rose 0.13%, while Germany’s DAX 40 was flat. European index futures started the day mixed.
Technology shares diverge in Asia
Despite risks stemming from the Middle East, strong activity in AI investment supported risk appetite in Asian markets. South Korea’s technology-heavy stock market rose, while markets in China and Hong Kong traded lower. Markets in Japan remained closed for Mountain Day.
Shares of Taiwan Semiconductor Manufacturing Company gained 0.8% after the company announced that its July sales had increased 45%. Near the close, the KOSPI was up 1.4%, while the Hang Seng fell 0.6% and the Shanghai Composite declined 0.1%.
BIST 100 ends the day up 0.23%
The BIST 100 index at Borsa Istanbul, which traded with a buying bias, ended the day up 0.23% at 13,811.60 points. The August futures contract based on the BIST 30 index fell 0.10% in the evening session from the regular-session close.
Dollar/Turkish lira ended the previous day at 47.7040. The exchange rate rose 0.1% to trade at 47.7380 at the opening of the interbank market. Analysts assessed 13,900 and 14,000 points as resistance levels for the BIST 100, and 13,700 and 13,600 points as support levels.
Retail sales in Türkiye and existing-home sales in the United States will be monitored. The data will be released at 10:00 and 17:00 Türkiye time, respectively.
