Global stocks mixed while oil prices jump on Hormuz

Global stock markets traded with little change on Monday, clinging to near-record highs as investors adopted a cautious stance ahead of crucial inflation data later in the week. Thin summer trading volumes contributed to the subdued market activity.

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Stocks are doing their best to ignore the situation in the Persian Gulf, which is frankly what they've been doing for the last few months.

Geopolitical tensions in the Persian Gulf saw oil prices surge by approximately five percent. Iran presented a list of conditions for reopening the Strait of Hormuz, prompting a response from US President Donald Trump stating the United States would seek compensation from Iran. While this spike in oil prices weighed on US equities, it did not trigger significant sell-offs, with the broad-based S&P 500 closing down 0.1 percent.

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We've noticed a pattern pretty much since the beginning of April that stocks will rally on anything that sounds like a positive development toward a ceasefire or a lasting peace, but not sell off when the bond market or the oil market express their disappointment with the lack of progress.

Analysts noted that markets have largely ignored the situation in the Persian Gulf for months, showing a pattern of rallying on positive peace developments but not selling off when oil or bond markets express disappointment. "We've noticed a pattern pretty much since the beginning of April that stocks will rally on anything that sounds like a positive development toward a ceasefire or a lasting peace, but not sell off when the bond market or the oil market express their disappointment with the lack of progress," said Steve Sosnick of Interactive Brokers.

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A prolonged disruption to energy flows should keep the inflationary pressures elevated.

In Europe, Paris and Frankfurt posted marginal gains, while London experienced a slight decline. Earlier in Asia, technology shares propelled markets higher, with Japanese and Korean chipmakers leading the charge. Tokyo's Nikkei climbed over two percent, and Seoul, Hong Kong, Shanghai, and Mumbai also closed higher. The dollar's performance against other currencies was mixed, recovering some losses from Friday following the US jobs figures.

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That could make it harder for the Fed to ease policy, even if we see further data weakness, potentially providing an underlying source of support for the greenback.