Global markets turned cautious as rising oil prices and stalled US-Iran negotiations weighed on risk sentiment, halting the recent equity rally.
Oil remained the dominant driver, with Brent crude oil climbing above $103 per barrel, supported by continued disruptions around the Strait of Hormuz—an artery responsible for nearly 20% of global oil shipments. The lack of progress in diplomatic talks added further uncertainty, reinforcing inflation concerns across markets.
Equities pulled back following a strong April rally. S&P 500 futures declined around 0.5%, alongside weakness in Nasdaq 100 futures, as investors took profits after record highs driven by AI optimism and strong corporate earnings. In Asia, the MSCI Asia Pacific Index fell 0.6%, reflecting broad-based risk-off sentiment.
Bond markets also came under pressure. US Treasury yields extended gains, with the 10-year yield rising toward 4.32%, while the US Dollar strengthened modestly as investors sought safety amid geopolitical uncertainty.
In Europe, economic data added to concerns. Eurozone activity unexpectedly contracted for the first time since 2024, signaling potential growth headwinds as energy costs rise. Meanwhile, in the UK, stronger-than-expected PMI data—Services at 52 and Manufacturing at 53.6—reinforced expectations that the Bank of England may need to keep rates higher for longer. Markets are now pricing in around 62 basis points of tightening this year.
Commodities showed mixed performance beyond oil. Gold declined 0.8% to hover above $4,700 per ounce, while silver dropped 2%. In crypto, Bitcoin traded slightly lower near $77,800, reflecting reduced risk appetite.
On the corporate and geopolitical front, energy firms signaled tight supply conditions, with European refineries maximizing jet fuel production. At the same time, China is reportedly considering a slower pace of consumer lending rate cuts, while advising companies to seek refunds on US tariffs—highlighting ongoing global trade and policy adjustments.
Overall, markets are entering a consolidation phase, with oil-driven inflation risks and geopolitical uncertainty replacing the optimism that fueled April’s rally. Investors now turn their focus to upcoming US data releases for further clues on how rising energy costs may impact economic momentum.
By Amir Amidian
Senior Market Analyst | Zylostar
