Oil prices rise, stocks slide as Middle East violence flares, adding to uncertainty

BANGKOK: Oil prices jumped 2%, and world shares skidded on Tuesday as recurring violence in the Iran war, after more than a month with no significant fighting, heightened uncertainty over the conflict's future.

Shares in online fast-fashion retailer Shein fell as much as 10% after it began trading in Hong Kong on Tuesday. It closed 4% lower.

Brent crude gained 2% to $92.35 per barrel. It gained 2.7% on Monday after the US attacked rocket launchers on an Iranian island on Sunday, saying they were preparing to launch mines into the Strait of Hormuz. Iran responded by launching missiles at US sites in Jordan, all of which were intercepted.

The war has curtailed traffic in the Strait of Hormuz, which once accounted for about 20% of the world’s oil shipments. Oil prices remain high after an initial surge earlier in the war, and that has made everything from gasoline to shipped goods more expensive. US benchmark crude climbed 2.5% to $87.84 per barrel.

In early European trading, Germany's DAX lost 1.1% to 25,982.28, while the CAC 40 in Paris gave up 0.4% to 8,303.65. Britain's FTSE 100 declined 1.1% to 10,702.25.

In Asian share trading, Hong Kong's Hang Seng fell 0.9% to 25,329.73 and the Shanghai Composite index shed 0.2% to 3,979.89.

Tokyo's Nikkei 225 gave up early gains, falling 0.2% to 66,215.34. The Kospi in South Korea added 0.2% to 6,835.80. The S&P/ASX 200 in Australia slipped 0.1% to 9,066.70.

Taiwan's Taiex picked up 1.8% and the Sensex in India fell 0.3%. US futures were 0.1% higher.

Wall Street closed out August on a downbeat note on Monday as the S&P 500 index fell 0.3%. The Dow Jones Industrial Average dropped 0.7% and the Nasdaq composite slipped 0.1%.

Monday's losses were broad, with nearly every sector within the benchmark S&P 500 finishing in the red.

Edison International slumped 23.1% and PG&E fell 20.1% for the two steepest declines. That followed reports about potential California wildfire legislation that would allow insurers to sue utilities over related claims. But energy stocks notched gains. Exxon Mobil rose 2.7% and Chevron rose 2.1%.

Higher energy prices have fuelled already stubbornly high inflation, well above the Federal Reserve's 2% target. That has been weighing on household spending and consumer confidence and given the Fed a more complicated path ahead for its interest rate policy.

The yield on the two-year Treasury, which closely tracks expectations about Fed moves, held steady on Monday at 4.34%, where it was late on Friday. That's up significantly from about 3.50% at the beginning of 2026.

The yield on the 10-year Treasury rose to 4.75% from 4.73% late on Friday. That's back up around the level seen two weeks ago when the Trump administration took the unusual step of announcing it would intervene in the bond market.

Any increase to interest rates that could cool inflation also risks hurting the jobs market. Later this week, the US will report August jobs data. In July, the US job market stalled unexpectedly as employers cut 23,000 jobs. Labor Department revisions slashed another 103,000 jobs from May and June payrolls.

In other dealings early on Tuesday, the US dollar rose to 159.90 Japanese yen from 159.74 yen. The euro slipped to $1.1598 from $1.1619.

By RSSS/AP