Global markets drift as AI profitability, Hormuz tensions mount

Global equity markets traded mixed Thursday as questions over OpenAI's revenue projections dragged technology shares lower and escalating tensions in the Strait of Hormuz lifted oil prices above $104 per barrel, complicating the outlook for inflation-weary investors.

AI profitability fears hit tech shares

Oracle led declines among artificial intelligence-related companies, falling 5.5% during Thursday's session. The drop came amid growing skepticism over whether OpenAI can achieve its projected annual revenue targets, raising broader questions about the sector's valuation metrics.

Investors are now looking ahead to the corporate earnings season beginning next week for further indications of the technology sector's financial performance. The Nasdaq Composite lost 1.25% Thursday, while the S&P 500 fell 0.47% and the Dow Jones Industrial Average gained 0.1%.

Middle East tensions and monetary policy

US President Donald Trump said Thursday that Washington would not launch military attacks against Iran before the Nov. 3 midterm elections. He also indicated that he did not wish to reach an agreement with Tehran to end the war, claiming that Iran's economy and military had been devastated while millions of barrels of oil continued passing through the Strait of Hormuz daily.

His remarks came amid reports of attacks on vessels in the strategic waterway and as Hurricane Isaias disrupted oil supplies along the US Gulf Coast. Brent crude futures for December delivery exceeded $104 per barrel Thursday before retreating 1.4% to $102.80 on Friday.

Federal Reserve officials continued to signal that further monetary tightening could be necessary to bring inflation back to the central bank's 2% target. Fed Governor Christopher Waller told the Istanbul Economic Forum that additional rate hikes could be needed if economic data remained broadly in line with expectations. St. Louis Fed President Alberto Musalem stated that monetary policy would need to be tightened further.

The yield on the benchmark 10-year Treasury note fell about five basis points Thursday to 5.24% and stood at 5.22% Friday following a Treasury buyback operation involving long-term bonds. The US Dollar Index declined 0.1% to 102.1 Thursday and slipped another 0.1% to 102, while gold rose 1.2% to $4,184 per ounce on the back of lower bond yields and a weaker dollar.

European and Asian markets pressured

European equity markets faced selling pressure Thursday amid rising energy prices and weakness in regional bond markets. Britain's FTSE 100 fell 0.16%, Germany's DAX lost 1.18%, Italy's FTSE MIB declined 1.35% and France's CAC 40 dropped 0.51%.

Bank of England Governor Andrew Bailey told the Istanbul Economic Forum that the global financial system had remained resilient despite growing uncertainty but warned against complacency. Bailey noted that policymakers should prepare for larger financial shocks rather than treat them as exceptional events and warned that expanding AI-related investment could expose the economy to new risks.

In Germany, exports fell 0.8% month on month in August while imports increased 0.9%, narrowing the trade surplus to €19.5 billion ($21.9 billion). The government raised its economic growth forecast for this year to 1.3% from 0.5%.

Asian equity markets were mostly lower Friday as rising energy costs and concerns over AI profitability dampened risk appetite. Gold mining stocks advanced across the region, with Hong Kong-listed Zijin Gold International gaining 5% and Zhaojin Mining rising 3.45%, while Japan's Nikkei 225 fell 0.1% after data showed household spending fell 3.1% year on year in August.

China's Shanghai Composite declined 0.6% and Hong Kong's Hang Seng rose 1.2% near the close of trading. US and European stock indexes opened higher Friday, while South Korean financial markets remained closed for a holiday.