Oil Hits $100 and AI Doubts Slam Global Markets in a One-Two Punch

A Perfect Storm Hits Global Markets

Two forces collided this week to rattle investors around the world: a deepening skepticism about the massive bets being placed on artificial intelligence, and an oil price spike that nobody was ready for. The result was one of the most turbulent stretches for global markets in months, sending stocks tumbling from Tokyo to New York and reigniting fears of inflation that many had hoped were fading into the rearview mirror.

Stocks in Asia fell sharply on Friday, July 25, after a steep Wall Street selloff, while oil surged above $100 a barrel for the first time in two months as an escalating Middle East conflict stoked fears of renewed inflation. Equity-index futures pointed to losses in Australia, Japan, and South Korea after the S&P 500 fell 1.2% — its biggest one-day drop in a month — and the tech-heavy Nasdaq 100 lost 1.9%.

AI's Trillion-Dollar Question

Global markets came under heavy pressure as a selloff in technology stocks accelerated, with investors questioning whether massive AI spending will generate sufficient returns. That anxiety was turbocharged when one of the world's biggest tech companies doubled down on its AI ambitions. On Thursday, Alphabet raised its capital spending forecast to as much as $205 billion this year. Rather than inspiring confidence, the announcement sent a chill through markets already on edge.

Regional chip bellwethers Samsung Electronics and SK Hynix — both beneficiaries of the global AI buildout — slumped more than 7%. In Tokyo, the Nikkei 225 declined 2.7%, led by losses for technology companies, with SoftBank Group — which has massive investments in artificial intelligence — tumbling 7.1%. "Investors are already feeling increasingly jittery about the sustainability of the AI rally," said Gerald Gan, chief investment officer at Reed Capital in Singapore.

Oil Ignites Old Inflation Fears

Just as the AI anxiety was building, energy markets delivered a gut punch. Brent surged 7% on Thursday to a two-month high of $102 per barrel amid supply disruption concerns, as Houthi rebels launched attacks on ships in the Red Sea. President Donald Trump vowed "major military punishment" for Iran and the Houthis after the Yemeni fighters struck two Saudi oil tankers in the Red Sea. A 38% jump in the commodity this month has reignited concerns about inflation, prompting traders to price in prospects for higher interest rates.

The spike in energy prices has revived prospects that inflationary pressures may prove more persistent, complicating the Federal Reserve's policy path. Money markets now fully price in a Fed interest-rate increase by September. "Oil prices rising at this clip pose a meaningful macro and market risk," said Matt Miskin, co-chief investment strategist at Manulife John Hancock Investments. Goldman Sachs predicted Brent crude could rally above $120 per barrel by the fourth quarter if Strait of Hormuz disruptions persist.

What Comes Next

Tech giants Apple, Microsoft, and Amazon are set to report earnings amid intensifying scrutiny of AI spending — results that could either calm nerves or pour fuel on the fire. Meanwhile, finance ministers from the Group of Seven have signaled they are prepared to release strategic oil reserves if needed to stabilize global supply and calm markets.

Kamakshya Trivedi, chief FX and emerging markets strategist at Goldman Sachs, told Bloomberg Television that he's more concerned about the energy shock and tech spending than tariffs. "I'm much more worried about the inflationary impulse that's coming out of the energy complex right now," he said. "The longer-term bigger factor here is the AI capex spend, and shifting views there are going to be a key driver of the cross-market response." With oil above $100 and AI's promised returns still unproven, investors face a summer of uncomfortable questions — and few easy answers.