Crude oil values surge by 5% as equities plummet following Trump's announcement that truce with Iran has ended

Oil prices experienced a significant surge, while stock markets took a downturn on Wednesday, following US President Donald Trump's announcement that the ceasefire with Iran had ended, amid renewed clashes in the Middle East, sparked by Iranian attacks on ships in the strategic Strait of Hormuz shipping route.

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At a NATO summit in Turkey, Trump declared the ceasefire "over", yet remained open to further negotiations, leaving the door ajar for potential diplomatic efforts.

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International benchmark Brent North Sea crude saw a substantial increase of over five percent, reaching approximately $78 per barrel, while the primary US contract, West Texas Intermediate, also rallied by five percent.

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In European markets, Paris and Frankfurt experienced declines of around two percent, whereas London saw a drop of nearly 1.5 percent by midday, as geopolitical tensions escalated.

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According to Kathleen Brooks, research director at trading group XTB, "geopolitical risks are rising" for markets, posing a significant threat to global economic stability.

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The US had launched extensive strikes on Iran earlier in the week, in response to attacks on ships in the Strait of Hormuz, prompting a wave of reprisals against American bases in the Gulf, and Washington also revoked a temporary sanctions waiver for Iranian oil.

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Kathleen Brooks noted that for the Brent crude oil price to extend gains above $80 per barrel, a significant escalation of tensions, such as another US naval blockade of the Strait of Hormuz, would be necessary, which would prevent Iran from selling its oil.

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Asian equities also suffered losses, as the geopolitical tensions compounded concerns over excessive investment in the tech sector, particularly in AI, with Seoul's Kospi sinking more than five percent and losing over 20 percent since reaching a record high last month.

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Samsung and rival SK hynix both saw their stocks tumble around six percent, following a significant decline on Tuesday, despite Samsung's forecast of a roughly 19-fold jump in second-quarter operating profit, driven by strong AI chip demand.

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Dan Coatsworth, head of markets at AJ Bell, observed that "investors have been spooked in recent weeks by fears of excessive spending in the AI world and rich valuations in parts of the tech space, causing widespread profit-taking", leading to a downturn in the sector.

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Losses were also reported in Tokyo and Shanghai, while Hong Kong's market rose three percent, as traders sought out undervalued Chinese tech stocks, with Alibaba surging over 12 percent, and JD.com and Tencent each gaining almost four percent.

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The dollar strengthened against its peers, as concerns over a potential disruption to Middle East oil supplies fueled fears of prolonged inflation, putting pressure on the Federal Reserve to raise interest rates.

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Key figures at around 1100 GMT included Brent North Sea Crude, which was up 5.1 percent at $77.93 a barrel, and West Texas Intermediate, which rose 5.0 percent to $73.95 a barrel.

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London's FTSE 100 was down 1.4 percent at 10,516.16 points, while Paris's CAC 40 and Frankfurt's DAX declined 2.0 percent and 2.1 percent, respectively, to 8,265.75 and 24,929.06 points.

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Seoul's Kospi closed down 5.4 percent at 7,246.79, Tokyo's Nikkei 225 fell 2.1 percent to 66,819.05, and Shanghai's Composite dropped 0.5 percent to 3,970.88.

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Hong Kong's Hang Seng Index rose 3.0 percent to 24,199.46, while New York's Dow was down 0.3 percent at 52,925.15.

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The euro/dollar and pound/dollar exchange rates were down at $1.1406 and $1.3344, respectively, while the dollar/yen rate was up at 162.49 yen, and the euro/pound rate rose to 85.49 pence.