Oil Prices Increase Amid Market Focus on UAE, AI-Related Worries Weigh on Equities

Global Markets Plummet as Iran Conflict and OPEC Ties Unravel

Stocks fell and oil prices rose on Tuesday as investors assessed the stalemate in the Iran conflict and news that the United Arab Emirates (UAE) was cutting ties with OPEC. The stalemate has disrupted energy supplies, fueled inflation, and killed thousands, with US President Donald Trump expressing unhappiness with the latest Iranian proposal to resolve the two-month war.

The conflict is at an impasse, and energy and other supplies are still failing to cross the critical Strait of Hormuz. The UAE's decision to quit OPEC and OPEC+ dealt a blow to the oil exporting groups and their de facto leader Saudi Arabia, causing a historic energy shock. Oil prices briefly pared gains on the news, but Brent was last hovering near a three-week high, while WTI broke through $100 per barrel for the first time since April 13.

US crude rose 3.93% to $100.16 a barrel and Brent rose to $111.13 per barrel, up 2.68% on the day. The UAE's decision to leave OPEC shows how tough it can be to keep a cartel together during tough times, said Brian Jacobsen, chief economic strategist at Annex Wealth Management. The UAE is OPEC's third-largest producer, and its quota is well below its capacity.

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The tech-heavy Nasdaq Composite fell more than 1% as investors questioned whether the so-far-unstoppable artificial intelligence (AI) boom can continue to deliver meaningful returns for investors. The Wall Street Journal reported that AI heavyweight OpenAI had missed internal targets for weekly users and revenue, raising concerns over the ChatGPT parent's ability to support its massive spending on data centers.

The Dow Jones Industrial Average rose 9.08 points, or 0.02%, to 49,176.87, while the S&P 500 fell 39.47 points, or 0.55%, to 7,134.44. The Nasdaq Composite fell 256.03 points, or 1.03%, to 24,630.88. Tech stocks related to OpenAI, such as Oracle and CoreWeave, fell over 3% each.

Investors are also focusing on earnings from US tech giants Microsoft, Alphabet, Amazon, Meta Platforms, and Apple that will further test the AI-driven rally. Higher oil prices continued to weigh on inflation expectations, causing the 2-year Treasury note yield to rise 3.9 basis points to 3.844%, from 3.805% late on Monday.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The yield on benchmark US 10-year notes rose 2.3 basis points to 4.36%, from 4.336% late on Monday, while the 30-year bond yield rose 1 basis point to 4.9523% from 4.942%. The dollar index rose 0.15%, while the British pound fell 0.1% against the dollar, and the euro was little changed.

The Bank of Japan (BOJ) left short-term rates unchanged at 0.75%, in the first of several central bank meetings this week that could provide evidence of the conflict's economic impact. The BOJ's decision initially strengthened the yen, but it was last around 0.1% lower at 159.54 per dollar.