Global stocks recovered on Monday as stronger evidence of artificial intelligence demand boosted technology shares, while a retreat in oil prices eased some of the pressure that has weighed on global bond markets.
MSCI’s All World index rose 0.3%, while European shares gained 0.75%. US stock futures also advanced, with Nasdaq futures up nearly 1% as chipmakers rallied.
Intel shares rose 5.4% in premarket trading, while Micron and AMD each gained around 2%. Fresh data from South Korea provided further support for the technology sector, showing that the country’s exports during the first 20 days of September reached a record high, driven largely by strong semiconductor demand.
The gains came after a difficult week for financial markets. Investors had been increasingly concerned that persistently high oil prices and renewed inflation could force major central banks to keep raising interest rates.
Stay ahead of the geopolitical week.
MD Briefing delivers expert analysis across five global fronts — the Indo-Pacific, energy, geoeconomics, European security, and the Middle East — every Monday morning. Free.
That pressure eased somewhat as oil prices retreated toward $100 a barrel after rising above $109 last week.
“Maybe things got a little bit apocalyptic last week, and they’re just easing off,” said IG chief market strategist Chris Beauchamp. He cautioned, however, that the broader direction for oil prices remained higher.
The market is therefore balancing two powerful forces: renewed optimism over AI demand and continued concerns about energy prices, inflation and interest rates.
Oil retreats as supply outlook improves
Oil prices fell despite renewed threats between Iran and the United States and an attack by the Houthis on Saudi Arabia’s capital.
Brent crude fell around 2% to $101.70 a barrel.
One factor behind the decline was evidence that more oil was reaching global markets than previously expected. Data from analytics firm Kpler showed Saudi oil exports had recovered to just over 4 million barrels per day during September, after falling to around 2.4 million barrels per day in August.
That August figure was Saudi Arabia’s lowest export level since at least 2013.
There were also reports that Saudi producers were working to restore some flows through the country’s main east to west pipeline after it was damaged in attacks last week. Details remained limited, however, and analysts questioned how quickly the infrastructure could return to normal operations.
The improvement remains fragile.
“We now estimate that oil markets have 5 to 10 weeks before global oil and refined product inventories deplete,” said Vivek Dhar, head of commodities at Commonwealth Bank of Australia, compared with estimates of 15 to 20 weeks only two weeks earlier.
That leaves markets highly exposed to further disruptions from the conflict.
Bonds remain under pressure
The oil retreat nevertheless provided immediate relief for government bonds.
Bond markets have been under pressure as investors reassess the path for interest rates. Expectations of higher inflation caused by expensive energy have raised the prospect that central banks could keep monetary policy tighter for longer.
Markets were pricing in a 56% chance of another Federal Reserve rate increase in October, while a further increase by the end of the year was widely expected.
The pressure has pushed borrowing costs higher across major economies. The average 10 year government bond yield among the Group of Seven economies reached around 4.2%, its highest level since 2008.
European bonds also faced additional political and fiscal concerns.
French government debt came under pressure last week as investors worried about inflation and the country’s long term public finances. Its risk premium over German debt reached its highest level since the euro zone debt crisis of 2012.
German bonds faced their own political backdrop after Chancellor Friedrich Merz’s conservative party suffered its worst election results since 1949.
Yet the immediate driver for European bonds on Monday was the decline in oil prices.
German 10 year yields fell 5 basis points to 3.472%, while French 10 year yields dropped 10 basis points to 4.469%, reversing most of the previous week’s increase.
Markets caught between AI and oil
The contrast between technology shares and bonds highlights the competing narratives driving global markets.
AI demand continues to provide support for semiconductor companies and technology stocks. Strong South Korean export data has reinforced expectations that demand for chips remains robust, despite broader concerns about the global economy.
At the same time, the Iran conflict continues to threaten energy supplies and create inflation risks. A sustained rise in oil prices could force central banks to maintain or increase interest rates, placing renewed pressure on bonds and other interest rate sensitive assets.
For now, the retreat in oil has given investors some breathing room.
The bigger question is whether the improvement in oil supply can last. If prices rise again as the conflict continues, inflation concerns could quickly return to the centre of the market narrative.
For investors, the balance between resilient AI driven growth and renewed energy inflation may therefore remain one of the defining forces shaping global markets in the weeks ahead.
With information from Reuters.
