The reignition of Middle East war flames escalates concerns over inflation, AI chip stocks fall dragging down global stock markets.

Due to the further escalation of the situation in the Middle East, international oil prices surged on Monday, while AI-related chip stocks continued to be sold off, dragging down major stock markets in the US and Asia. The market is concerned that the political risks of GEO Group Inc will increase energy costs and may exacerbate inflationary pressures, further impacting the global economy and corporate profit prospects. As of Monday, the international benchmark Brent crude oil futures price rose by 9.6%, to $83.30 per barrel. Both the US and Iran had claimed control of the Strait of Hormuz, leading to the continued escalation of tensions in this important global energy transport route. At the same time, US President Trump announced the resumption of a naval blockade against Iran and stated that a 20% "compensation fee" would be levied on all goods transported through the Strait of Hormuz to offset the costs incurred by the US to ensure the security of this waterway. Oil prices further increased in response to this news. However, the current price of Brent crude oil is still significantly lower than the previous phase high of nearly $120 per barrel during the Middle East conflict. Due to the rise in oil prices and the decline in the AI sector, the three major US stock indices collectively fell. The S&P 500 index fell by 0.79%, ending its recent consecutive upward trend, with chip stocks being the main drag on the market that day. Micron Technology, Inc. (MU.US) fell by 4.32%, partially reversing its year-to-date gains. Despite being driven by the AI craze, Micron's cumulative gains for the year still exceed 240%, causing the market to worry about whether the current demand and profit growth related to AI can be sustained long-term. AI leader NVIDIA Corporation (NVDA.US) fell by 3.52% that day. As the current highest market value company in the US stock market, NVIDIA Corporation became one of the most obvious stocks dragging down the S&P 500 index. Asian markets were also under pressure. The South Korean composite stock price index plummeted by 8.9%, with the share price of SK Hynix, a storage chip giant, plunging by 15.4%, marking its largest single-day drop since its listing in 1997. It is worth noting that SK Hynix (SKHY.US) had just completed a $26.5 billion US depositary receipt issue last week and debuted on NASDAQ last Friday, with its stock price rising by 13.1% on its first day of listing, but falling by 9.3% in the US stock market on Monday. In contrast, some companies in the AI industry chain showed relatively stable performance. Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) announced a nearly 68% year-on-year growth in revenue for June, driving a 35.6% year-on-year growth in revenue for the first half of this year. Boosted by the performance, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR rose by 1% in the Taiwanese market, but its US-listed stock (TSM.US) still fell by 2.9%. This week, market focus will shift to US corporate earnings season. On Tuesday, major financial institutions including Bank of America Corp (BAC.US), Citigroup Inc. (C.US), JPMorgan Chase & Co. (JPM.US), Goldman Sachs Group, Inc. (GS.US), and Wells Fargo & Company (WFC.US) will release their latest quarterly results. According to FactSet data, analysts expect that the overall profit of S&P 500 index component companies in the second quarter will increase by 23.6% year-on-year. If the forecast is realized, it would mark the second consecutive quarter of over 20% profit growth. With stock market valuations at historical highs and the volatility of AI concept stocks intensifying, the market generally believes that whether companies can deliver strong performance will be a key factor in supporting further market growth. In the bond market, as rising international oil prices raise concerns about inflation, US Treasury bond yields continue to climb. The yield on the 10-year US Treasury bond rose to 4.61%, higher than the 4.56% at the close of last Friday, and significantly higher than the level of about 3.97% before the outbreak of the Iran conflict. The rise in energy prices may prompt the Federal Reserve and other major central banks to continue to maintain a tight monetary policy or even raise interest rates further to curb inflation. However, higher interest rates may also drag down economic growth and create pressure on the valuation of risk assets such as stocks and bonds.