(REUTERS)

Global stocks fell and government bond yields rose on Monday as investors grappled with concerns over ​a fresh escalation in the Middle East conflict and valuations in AI-related stocks.

US and Iranian forces renewed exchanges of heavy missile and drone assaults.

The dollar rose with bond yields as investors increased the odds of a hike in interest rates from the Federal Reserve and other central banks, just ⁠a day before Chair Kevin Warsh is due to face Congress for the first time in his new role.

Brent crude climbed 3.8% to $78.86 a ​barrel, up from the recent trough of $70.14, while US crude added 4.11% to $74.36 a barrel.

US officials said about 20 vessels had been ​escorted through the strait in ‌the previous 24 hours, though ship tracking sites showed little traffic moving.

US inflation ‌figures for June on Tuesday could show some cooling in the headline rate of 4.2% as gasoline prices decline, ‌though some of that will reverse now that oil is rising anew. MSCI's main world stocks index fell 0.38%. Europe's STOXX 600 .STOXX was down 0.12%, with tech stocks falling 1.1%.

Nasdaq futures dropped 1.20% and S&P 500 futures were down 0.40%. Japan's Nikkei fell 1.9%.

South Korea's formerly red-hot KOSPI sank 7.6%, having already lost almost 8% ​last week, as leveraged bets on semiconductor shares came under pressure. The market has emerged as a key global barometer for chip-sector sentiment and further losses could ripple out more broadly.

South Korean chipmaker SK Hynix's US-listed shares jumped almost 14% in their Nasdaq debut on Friday.

For equity investors, a lot ​is now riding on the coming earnings season. The major banks kick off from Tuesday, while Netflix and General Electric are also on the docket.

The spike in oil ‌pushed 2-year Treasury yields to their highest since February 2025 at 4.2393%, while Fed ‌fund futures implied 39 basis points of policy tightening by the end of the year.

The dollar index was up 0.05% at 101.13, with the euro rising 0.05% to $1.1394.

The greenback added 0.24% on the yen to 162.12, regaining some of the ⁠ground lost on Friday when Japanese Finance Minister Satsuki Katayama floated an idea to encourage the $1.8 trillion Government Pension Investment Fund (GPIF) and other retirement vehicles ​to bring some of their money home.

The pound eased 0.14% to $1.3379 ahead of a pivotal week in British politics as Andy Burnham is expected to be formally anointed as Labour leader on ​Friday and named as prime minister on July 20.

In commodity markets, the rise in yields weighed on non-interest bearing gold, which ​slipped 1.5% to about $4,060 an ounce.