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

We are back to war watching, as if the June ceasefire never happened. After weeks of dozing through simmering U.S.-Iran tensions, investors got a rude awakening overnight: oil prices surged 7% to top $100 a barrel, and inflation is again on everyone's list of fears.

The shock came from the Red Sea, where Iran-aligned Houthis attacked two Saudi oil tankers, threatening to choke off another vital Middle East artery for global oil supplies. President Donald Trump was not subtle, threatening "major military punishment" and fuelling fears the conflict is widening.

With the world already running low on oil reserves, the risk is that a protracted energy shock stokes global inflation and de-anchors inflation expectations, a central bank's nightmare. Brent is up nearly 40% this month.

Longer-dated Treasuries bore the brunt of the selling, with 30-year Treasury yields now marching towards a 19-year peak of 5.201%. Benchmark 10-year yields hit a new 18-month top of 4.7135% on Friday.

Any lingering hopes of central bank policy easing have evaporated. Markets now see a one-in-three chance of a rate hike from the Federal Reserve as soon as next week, a sea change from merely a week ago, and are fully priced for two moves by January next year.

The broader worries of oil and rates sent Asian shares deep in the red, with South Korea's KOSPI down 6% and Japan's Nikkei sliding 2.8%. Local semiconductors couldn't even find relief in Intel Corp's ( INTC ) bumper results that sent its shares up over 4% after the bell.

Adding to the gloom, the AI trade is showing further signs of fatigue, with investors growing uneasy about higher capex plans by tech giants. Tesla shares tumbled around 14% on Wall Street after it posted its first cash burn in two years. Alphabet fell about 7%, with the Google parent also burning through cash as it ramped up AI spending.

Amid all the mayhem Trump's latest tariff wheeze raised barely an eyebrow, though the timing of making U.S consumers pay yet more for imports seems economically dubious.

Nasdaq futures are a shade lower, but European bourses are headed for a steady open. All eyes are on PMI surveys due in Europe, Britain and the United States.

The U.S. measure is seen holding on to its relative strength. Any upside surprises could see investors push the chance of a July Fed rate hike to 50/50.

Key developments that could influence markets on Friday:

-- UK retail sales data for June

-- UK, EU, US flash manufacturing, services and composite PMIs for July