Oil tops $94 as Red Sea tensions lift energy stocks while investors brace for...

Global stocks edged higher on Wednesday as surging oil prices boosted energy shares, although U.S. equity futures retreated ahead of closely watched earnings from Alphabet and Tesla that could test investor confidence in the artificial intelligence-driven market rally.

Crude prices climbed to six-week highs after renewed security concerns in the Red Sea disrupted shipping, while investors also monitored developments in Japan after reports suggested the Bank of Japan was becoming more concerned about persistent inflation pressures.

The combination of higher energy prices, geopolitical risks and a busy earnings calendar left markets cautious despite gains across European equities.

The MSCI All-World Index rose 0.1%, while Europe's STOXX 600 advanced 0.6%, led by oil and gas companies that benefited from the jump in crude prices.

U.S. futures, however, pointed to a weaker open, with Nasdaq futures falling 0.6% and S&P 500 futures slipping 0.2%, reflecting investor caution ahead of earnings from two of the market's most influential technology companies.

Brent crude climbed 3.5% to $94.22 per barrel, its highest level since early June, after two oil tankers carrying Saudi crude to Asia reversed course in the Red Sea following renewed threats from Yemen's Iran-aligned Houthi militants.

The development renewed concerns about potential disruptions to one of the world's most important energy shipping routes, tempering hopes that geopolitical tensions in the Middle East were beginning to ease.

Higher oil prices have become a growing concern for investors because they threaten to reignite inflation at a time when major central banks are attempting to balance slowing economic growth with still-elevated price pressures. The rally in crude also lifted European energy stocks, making the sector one of the strongest performers in regional markets.

Big Tech Earnings Face Heightened Scrutiny

Attention is now shifting to quarterly earnings from Alphabet and Tesla, which are expected after the U.S. market closes. The results are being closely watched because they could provide fresh insight into whether the massive wave of AI-related capital expenditure is translating into sustainable earnings growth.

Alphabet is under pressure following delays to one of its flagship AI model releases, raising questions about its competitive position against rivals including OpenAI, Anthropic and rapidly advancing Chinese AI developers.

Tesla, meanwhile, is widely expected to report its first quarterly cash burn in more than two years, highlighting investor concerns over slowing electric vehicle demand, heavy spending on artificial intelligence and autonomous driving technologies, and the company's expanding robotics ambitions.

"Even the slightest doubt about the monetization of artificial intelligence or the return on infrastructure spending could call into question the main driver of the market rally over the past nearly two years," said John Plassard, head of investment strategy at Cité Gestion.

His comments amplify growing investor concerns that after driving equity markets to record highs, AI-related valuations now require stronger earnings growth to justify continued optimism.

Markets also digested a new trade policy announcement from U.S. President Donald Trump. The president said generic drugs imported into the United States will face no tariffs for two years beginning August 1, after which duties will rise to 100% for one year before increasing further to 200%.

The phased approach appears designed to give pharmaceutical companies time to shift manufacturing capacity while encouraging domestic production.

Earlier this week, Trump also imposed a 50% tariff on selected Canadian goods, adding another layer of uncertainty to the global trade environment.

Yen Steadies As BOJ Inflation Concerns Grow

Currency markets focused on Japan after Reuters reported that Bank of Japan officials are increasingly alert to upside inflation risks that could require interest rate increases sooner than financial markets currently expect.

The yen strengthened modestly to 162.98 per dollar after falling to its weakest level in roughly four decades on Tuesday.

Japanese Finance Minister Satsuki Katayama reiterated that authorities remain prepared to take "decisive action" in foreign exchange markets if necessary, although she declined to comment on specific exchange rate levels.

The weak yen, combined with rising energy prices, pushed Japan's imports to a record high in June. At the same time, exports exceeded expectations, supported by robust overseas demand for AI-related infrastructure and data-center equipment, alongside improved competitiveness from the depreciated currency.

However, the resurgence in oil prices is adding another challenge for policymakers preparing for upcoming monetary policy meetings. The European Central Bank is scheduled to announce its latest policy decision on Thursday, while the U.S. Federal Reserve meets next week.

Both central banks are widely expected to leave interest rates unchanged this month, but derivatives markets continue to price in at least one additional 25-basis-point rate increase in both the United States and the euro zone before year-end, according to LSEG data.

The prospect of higher borrowing costs has kept bond markets relatively stable. The yield on the benchmark 10-year U.S. Treasury note held at 4.63%, near a two-month high reached in the previous session.

Meanwhile, investors also sought traditional safe-haven assets. Gold rose 1.1% to a two-week high of about $4,120 per ounce, benefiting from heightened geopolitical uncertainty and expectations that inflationary pressures could remain elevated if energy prices continue to climb.

The coming days are likely to be pivotal for global markets, with investors weighing corporate earnings, central bank signals and geopolitical developments to assess whether the AI-driven equity rally can withstand a more challenging macroeconomic backdrop.