Hong Kong stocks slump alongside Asian markets after oil crosses US$100
Brent crude jumps over 20 per cent to trade at around US$110 a barrel, prompting investors to further reduce risk exposure
Hong Kong stocks fell on Monday, briefly slumping to a six-month low, as a rout spread across major Asia-Pacific markets after crude oil surged above US$100 a barrel, fuelling fears of global stagflation.
The Hang Seng Index closed 1.4 per cent lower at 25,408.46. The Hang Seng Tech Index fell 0.1 per cent. On the mainland, the CSI 300 Index fell 1 per cent and the Shanghai Composite Index lost 0.7 per cent.
Both Brent and West Texas Intermediate (WTI) oil contracts traded close to US$110 a barrel, a level not seen since the height of the Russia-Ukraine war in 2022, as the war in the Middle East shows no signs of ending. Both oil benchmarks retreated later, with Brent trading at about US$107 a barrel and WTI near US$102.
Oil above US$100 a barrel would add 0.7 percentage point to global inflation, while shaving global growth by 0.4 percentage point, according to economists.
“When oil rises to US$110, the market does not haggle over valuation models; it heads straight for the nearest exit and starts pushing,” said Stephen Innes, a managing partner at SPI Asset Management. “When crude spikes, it moves straight through the corporate bloodstream. Input costs surge, inflation expectations climb and earnings estimates get marked down faster than analysts can rewrite their notes. It is the macro equivalent of watching a tax get imposed on the entire economy overnight.”
Both the US and Iran hinted at a prolonged conflict in the Gulf. US President Donald Trump said that his country and Israel would work together to decide on when to end the war. Iran elected Mojtaba Khamenei, the son of the late supreme leader Ali Khamenei, as the new head of the Islamic Republic.
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