Oil prices jump on Hormuz tensions as US indices retreat from records

NEW YORK: Oil prices jumped on Monday (May 4) after a drone strike sparked a fire at an Emirati energy installation, threatening a fragile US-Iran ceasefire, while US warships entered the crucial Strait of Hormuz.

Seoul and Taipei hit record highs as Asian traders joined the rally in tech shares, but US equity indices retreated from record finishes last week.

Oil prices climbed, with the benchmark international contract Brent crude for July delivery jumping more than five per cent, after the drone strike in the emirate of Fujairah.

The UAE defence ministry later said Iranian drone and missile attacks were targeting the country.

Earlier, the US Navy said destroyers passed through the Strait of Hormuz as part of a new shipping protection mission announced by US President Donald Trump over the weekend.

Tehran's forces effectively closed the strait, a key route for oil and gas shipments, in response to the US-Israeli military campaign that began on February 28, while Washington is maintaining a blockade of Iranian ports.

Major US stock indices have forged higher in recent weeks, with both the S&P 500 and Nasdaq ending at records Friday, in a surge that has surprised some market watchers given the increase in oil prices.

But Monday proved an occasion for investors to pull back.

Rising tensions in the Middle East "became a very good excuse to take some money off the table," said Briefing.com analyst Patrick O'Hare, characterizing Monday's market movement as profit taking.

While the situation in the Middle East remains concerning "at this point, the market isn't worried about a worst-case scenario unfolding in the Iran war," O'Hare said.

Forecast-beating reports last week from Apple, Google, Microsoft and Samsung reawakened interest in the artificial intelligence sector after the market tumult caused by the US-Israeli strikes on Iran at the end of February.

There's "optimism that AI continues to mask the pain elsewhere", said Swissquote analyst Ipek Ozkardeskaya.

This week's earnings calendar includes reports from Disney, Pfizer and McDonald's.

Elsewhere, Seoul surged more than five per cent and Taipei jumped more than four percent to hit fresh records.

South Korean chip giant SK hynix was the standout, piling on 12.5 per cent, while rival Samsung was up more than five percent. Taiwanese counterpart TSMC was 6.6 per cent up.

Paris and Frankfurt ended the day down more than one per cent.

Tokyo, Shanghai and London were closed for holidays.