Crude oil prices surged on Wednesday after reports emerged that US intelligence indicated Israel might be planning an attack on Iranian nuclear sites, escalating geopolitical tensions and raising fears of a broader regional conflict.
Safe-haven gold prices also climbed nearly two percent, reflecting investor caution. However, CNN’s report had minimal negative impact on Asian stock markets during early trading, with most indices continuing the rally from the previous day.
Investors remain alert to developments in China-US relations, especially after Beijing criticized Washington for “bullying” over chip export restrictions—just days after both countries eased trade tensions by temporarily reducing retaliatory tariffs.
Following the CNN report citing multiple US officials, both major crude benchmarks rose by nearly two percent. The intelligence suggesting a possible Israeli strike on Iran’s nuclear facilities has sparked concerns that the already volatile Middle East situation, particularly amid Israel’s ongoing military actions in Gaza, could escalate into full-scale conflict.
“This is the clearest sign yet of how high the stakes are in the US-Iran nuclear talks and the lengths Israel may go to if Iran insists on maintaining its commercial nuclear capabilities,” Robert Rennie, at Westpac Banking Corp, told AFP.
“Crude will maintain a risk premium as long as the current talks appear to be going nowhere.”
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Since the start of the month, crude prices have climbed roughly 15%, buoyed by easing concerns over the global economic outlook and a relative cooling of tariff-related tensions.
Equity markets largely extended their Monday gains, fueled by optimism around ongoing trade discussions. Cities like Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei, and Manila outperformed Tokyo and Singapore in early trading.
However, the recent thaw in US-China trade relations hit a snag on Wednesday when Beijing criticized Washington’s “bullying” over new chip export restrictions. China also threatened retaliatory measures in response to efforts aimed at limiting its access to advanced semiconductors and critical supply chains.
These comments followed last week’s announcement by US officials, who issued guidelines cautioning companies that using Chinese-made high-tech AI chips—particularly Huawei’s Ascend processors—could lead to violations of US export controls.
Meanwhile, St. Louis Fed President Alberto Musalem warned that such restrictions could dampen economic growth and job creation, even as governments work to ease the harsh tariffs previously imposed by the Trump administration.
“Even after the de-escalation of May 12 (with China), they seem likely to have a significant impact on the near-term economic outlook,” Musalem said.
“On balance, tariffs are likely to dampen economic activity and lead to some further softening of the labour market.”
He added that committing to ignore higher inflation resulting from tariffs or to easing policy now risked underestimating both the level and persistence of inflation.
Atlanta Fed chief Raphael Bostic stated that Moody’s rating downgrade, along with Trump’s proposed tax cuts, could increase uncertainty and compel officials to maintain elevated interest rates.