Oil jumps on report of Israel prepping Iran strike

Crude prices surged Wednesday after a report revealed U.S. intelligence indicated Israel may be planning a strike on Iran’s nuclear facilities, heightening geopolitical tensions and sparking fears of a wider regional conflict.

While safe-haven gold climbed nearly 2%, CNN's report seemed to have minimal impact on Asian equities in early trading, with most markets continuing the previous day's rally.

Still, investors are keeping a close watch on U.S.-China relations after Beijing accused Washington of "bullying" over its latest chip export restrictions. The rebuke comes just over a week after both sides temporarily eased trade tensions by reducing steep retaliatory tariffs.

Crude oil prices jumped nearly two percent after CNN cited multiple U.S. officials who said intelligence suggested Israel was preparing to strike Iranian nuclear facilities. The report added to concerns that a sharp escalation could plunge the Middle East into wider conflict, with the region already tense amid Israel’s ongoing military operations in Gaza.

“This is the clearest sign yet of how high the stakes are in U.S.-Iran nuclear negotiations—and the lengths Israel may go to if Iran continues pursuing its commercial nuclear ambitions,” said Robert Rennie of Westpac Banking Corp. “Crude will maintain a risk premium as long as the current talks appear stalled.”

Oil prices have already climbed around 15 percent this month, supported by easing economic concerns and a temporary thaw in U.S.-China tariff disputes.

Meanwhile, equities continued to build on Monday’s rally, buoyed by optimism over trade negotiations. Markets in Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei, and Manila outperformed Tokyo and Singapore.

However, the fragile U.S.-China detente suffered a blow Wednesday when Beijing condemned Washington’s updated chip controls, warning of countermeasures targeting restrictions on Chinese access to advanced semiconductors and global supply chains.

The backlash followed fresh U.S. guidelines cautioning firms that use of Chinese-made AI semiconductors—particularly Huawei's Ascend chips—could put them in violation of export rules.

On the monetary front, several Federal Reserve officials signaled reluctance to cut interest rates soon, citing potential inflationary pressure from President Trump’s proposed tariffs and tax policies.

St. Louis Fed President Alberto Musalem cautioned that such trade measures could hamper economic growth and job creation, even as the U.S. and China attempt to cool their tariff war.

“Despite the May 12 easing in trade tensions, tariffs are likely to weigh on near-term economic prospects,” Musalem said. “They may soften labor market conditions and dampen overall activity.”

He further warned that preemptively loosening monetary policy in response to inflation from tariffs could risk underestimating its persistence.

Atlanta Fed President Raphael Bostic added that uncertainty from a recent Moody’s ratings downgrade and proposed tax changes could further complicate the Fed’s path forward, potentially requiring interest rates to remain elevated longer than previously anticipated.

Key figures at around 0230 GMT
West Texas Intermediate: UP 1.9 percent at $63.22 per barrel
Brent North Sea Crude: UP 1.8 percent at $66.56 per barrel
Tokyo - Nikkei 225: DOWN 0.1 percent at 37,491.80 (break)
Hong Kong - Hang Seng Index: UP 0.5 percent at 23,806.59
Shanghai - Composite: UP 0.2 percent at 3,386.46
Euro/dollar: UP at $1.1322 from $1.1284 on Tuesday
Pound/dollar: UP at $1.3425 from $1.3391
Dollar/yen: DOWN at 144.07 yen from 144.47 yen
Euro/pound: UP at 84.32 pence from 84.26 pence
New York - Dow: DOWN 0.3 percent at 42,677.24 (close)
London - FTSE 100: UP 0.9 percent at 8,781.12 (close)