A look at the day ahead in European and global markets from

Ankur Banerjee

After five months of tracking events in the Strait of Hormuz,

investors are looking across the Arabian Peninsula as

Iranian-aligned Houthis, who control areas near the Bab

el-Mandeb strait in the Red Sea, open a new front in the crisis

in the Middle East.

The escalating and widening conflict has sent Brent futures to

$96 per barrel, the highest since early June, as investors worry

about depleting stockpiles after Houthis declared a naval

blockade against Saudi Arabia earlier this week. The threat has

led to tankers changing course in the Red Sea, ship-tracking

data showed.

Surging oil prices have revived fears of inflation, taking

short-term Treasury yields to the highest in 17 months as

traders wager a rate hike from the Federal Reserve could come

soon. Traders are now fully pricing in a hike in September.

The European Central Bank is due to announce its policy decision

later in the day, with the central bank all but certain to keep

interest rates unchanged. The ECB though is likely to hold the

door open to a rate hike in September, as a fresh jump in energy

prices threatens to put more upward pressure on inflation.

While geopolitical tensions and inflation fears simmer, markets

are also keeping an eye on earnings from tech bellwethers

Alphabet and Tesla to gauge if the vast

capital spending from AI hyperscalers is finally beginning to

yield results.

The Google-parent reported its best-ever quarter of growth for

its cloud computing unit, but that was not enough to satisfy

investor appetite as the focus moved to higher capital spending

plans for the year. The search giant now expects to spend

between $195 billion and $205 billion, up from $180 billion to

$190 billion.

That spells good news for Asian chipmakers, most of whom may end

up pocketing billions to build that infrastructure. South

Korea's KOSPI rose nearly 4%, led by SK Hynix ( SKHY )

and Samsung Electronics ( SSNLF ). European

futures point to a muted open so the mood may darken

soon as investors return to fretting about valuations, profit

growth and returns on huge capital spending.

More earnings this week will provide a clearer picture of

where we stand in the profitability vs capital spending tug of

war.

Key developments that could influence markets on Thursday:

Economic events: ECB policy decision, euro zone consumer

confidence data for July

(By Ankur Banerjee in Singapore)