Stocks dip on new Iran attacks as oil prices rise
U.S. futures and European stocks took a slight dip on Wednesday as tensions escalated in the Gulf region following stalled peace talks between the U.S. and Iran. Oil prices continued to rise for the third consecutive session amidst the hostilities.
In Europe, the STOXX 600 index fell by 0.4%, while futures for the U.S. S&P 500 slipped by 0.1%. Despite this, the AI bull run persisted in Asia, with stock indexes in Japan and Taiwan reaching record highs.
The situation in the Gulf took a turn for the worse as an Iranian missile attack damaged Kuwait’s airport, prompting the U.S. military to retaliate by targeting sites near the Strait of Hormuz. The ceasefire between the two nations was once again put to the test, with no concrete agreement reached despite tentative talks last week.
The Organisation for Economic Co-operation and Development warned that the ongoing conflict could significantly slow global growth to levels not seen since the 2008 financial crisis. If the situation persists into the next year, inflation could also spike sharply.
Oil prices edged closer to the $100 mark, with Brent crude climbing 2% to $98 a barrel. Market sentiment shifted from optimism regarding a potential memorandum of understanding to a more cautious approach as negotiations seemed to face obstacles.
Shares in major companies focused on private markets experienced a decline in both the U.S. and Europe after Switzerland’s Partners Group imposed limits on redemptions in a private equity fund. This move sent its shares plummeting by 16%, reflecting concerns in the troubled private credit sector.
In the currency market, the U.S. dollar index rose slightly to 99.36, while the dollar strengthened against the Japanese yen, reaching the 160 level that typically triggers nervousness about intervention from authorities in Tokyo.
On the tech front, the artificial intelligence sector remained resilient to geopolitical uncertainties, with Wall Street indexes achieving record highs on Tuesday. Marvell Technology saw its shares surge by 32.5% after Nvidia’s CEO hailed it as the next trillion-dollar company.
SoftBank surpassed Toyota as Japan’s most valuable company, driven by gains in the AI sector. SpaceX, primarily focused on AI, is reportedly planning to raise $75 billion in an initial public offering, indicating the continued hype surrounding AI technologies.
Despite the uncertainty surrounding the Middle East, market sentiment remained positive, with investors trying to navigate the complex geopolitical landscape. Rate cuts were initially anticipated before the Iran conflict, but now, markets have priced in approximately 18 basis points of U.S. rate increases for the year.
Inflation data accelerated last month, leading to expectations of a rate hike in Europe next week. Traders are also predicting a 75% chance of a June increase in Japan. U.S. 10-year Treasury yields rose by 3 bps to 4.485%, with private payrolls showing better-than-expected growth in May.
Overall, the global financial landscape remains volatile, with geopolitical tensions and economic data shaping market behavior. Investors are advised to stay informed and cautious in their decision-making process.
(Reporting by Tom Westbrook in Singapore and Harry Robertson in London; Editing by Sharon Singleton and Barbara Lewis)
