World stocks fall in semiconductor rout; oil rises on Middle East escalation

By Sinéad Carew and Samuel Indyk

NEW YORK/LONDON, July 17 (Reuters) - Share indexes tumbled around the world on Friday, as heavyweight chip stocks plunged for a third consecutive day as investors reduced bets on artificial intelligence, with China's Moonshot releasing a large AI system.

Meanwhile oil prices rose as the United States and Iran expanded their attacks to hit key infrastructure. The United States struck bridges and an airport in Iran, and Tehran responded by hitting a power and desalination plant in Kuwait.

In the contested Strait of Hormuz, where the renewed conflict has again cut off global energy supplies, U.S. Marines boarded a tanker, and another ship was reported to have been hit by a projectile.

In its third straight day of losses, the Philadelphia semiconductor index dipped to a level 23.5% below its most recent record closing high, reached on June 22. It was last down more than 2% on the day.

While investors were shying away due to worries about rich tech valuations and the sustainability of AI capital spending growth, Mona Mahajan, head of investment strategy and asset allocation at Edward Jones, noted that energy stocks were rallying with oil prices.

Defensive assets such as government bonds were also in demand, along with safer equity sectors such as utilities.   

"We're seeing a bit of a defensive trade take hold this morning ... and at bottom of the list of sector performance is the AI technology part of the market," said Mahajan.

She said the sector had already risen "in a parabolic fashion, and we know those types of trades tend to not last indefinitely". 

She also pointed to the unveiling by Chinese AI startup Moonshot of Kimi K3, which it said was the world's largest open-weight AI system, delivering performance close to U.S. giant Anthropic's frontier model.

On Wall Street at 11:02 a.m. (1502 GMT) the Dow Jones Industrial Average was down 100.93 points, or 0.19%, at 52,452.04, the S&P 500 was down 64.07 points, or 0.85%, at 7,469.70 and the Nasdaq Composite was down 418.14 points, or 1.62%, at 25,463.81. 

MSCI's gauge of stocks around the globe fell 12.52 points, or 1.12%, to 1,109.17.

The pan-European STOXX 600 index fell 0.61%.

Losses were more severe in Asia, with MSCI's broadest index of Asia-Pacific shares excluding Japan finishing down 2.7%, while Japan's Nikkei tumbled 4%, putting it 12% below its recent peak.

Taiwan's stock market plunged more than 6% for its worst day since a selloff in April 2025 related to U.S. President Donald Trump's import tariffs.

In energy markets, U.S. crude rose 2.47% to $80.90 a barrel and Brent rose to $86.29 per barrel, up 2.45% on the day.

In the bond market, U.S. Treasury yields were lower after the latest round of economic data and were poised for a weekly decline as markets have largely priced out any chance of a rate hike from the Federal Reserve at its policy meeting in July.

The yield on benchmark U.S. 10-year notes fell 4.36 basis points to 4.525% while the 30-year bond yield fell 4.24 basis points to 5.0546%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 1.95 basis points to 4.137%.

In currencies, the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.03% to 100.74, with the euro down 0.01% at $1.144.

Against the Japanese yen, the dollar strengthened 0.01% to 162.4.

In precious metals, gold rose on Friday, but was on track for its biggest weekly loss in six as escalating U.S.-Iran tensions drove energy prices higher, fuelling inflation fears and reinforcing expectations of eventual U.S. interest rate hikes. Spot gold was up 0.74% at $3,999.49 an ounce. 

(Reporting by Sinéad Carew, Samuel Indyk and Rae Wee; Editing by Thomas Derpinghaus, Kirsten Donovan and Kevin Liffey)