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Markets Turn Volatile as Iran War Fears Overshadow AI-Driven Rally
(MENAFN) Global markets swung into a mixed session Tuesday as fears over a potential reignition of the Iran conflict cast a long shadow over the previous day's tech and artificial intelligence-fueled surge.
Despite active US-Iran diplomatic negotiations, Tehran rattled markets by announcing a suspension of communications with Washington, citing Israel's escalating military activity in Lebanon as provocation. US President Donald Trump stepped in swiftly, engaging both Israel and Lebanese group Hezbollah following Tehran's move and announcing that both parties had agreed to cease attacks on one another — while insisting that negotiations with Iran are advancing rapidly, notwithstanding Tehran's suspension announcement.
Risk aversion has nevertheless taken hold across global markets, with no concrete path to peace yet in sight.
Brent crude oil slipped 1.3% Tuesday to $93.7 per barrel, paring back a sharp 3.8% surge recorded Monday, as cautious optimism over a potential peace deal edged out immediate supply fears tied to the fragile situation in the Strait of Hormuz.
On fixed income and currency markets, the US 10-Year Treasury yield eased two basis points to 4.44%, while the US Dollar Index dipped 0.1% to 99.2. Gold retreated 0.7% to $4,517 per ounce, pulled lower alongside the dollar and yields.
On Wall Street, a tech-driven rally powered US equities to fresh records Monday. Chipmaker Nvidia unveiled its next-generation RTX Spark chip, developed in collaboration with Microsoft — a blockbuster announcement that sent Nvidia's shares soaring 6.3% and supercharged broader AI-sector optimism.
Alphabet, the parent company of Google, added further fuel to the rally by announcing plans to issue $80 billion in shares to bankroll its AI infrastructure expansion.
Adding to the bullish backdrop, the US Institute for Supply Management manufacturing Purchasing Managers' Index (PMI) climbed to 54 in May — its strongest reading since May 2022 — driven by businesses front-loading orders amid supply chain disruptions and rising prices linked to the Middle East conflict.
Against this backdrop, the Dow Jones climbed 0.09% to an all-time high of 51,161.1 points, the S&P 500 advanced 0.26% to a record 7,617.66 points, and the Nasdaq surged 0.42% to a record 27,190.21 points on Monday. American indexes opened Tuesday in negative territory.
European markets closed Monday in the red as uncertainty over a US-Iran deal and the Strait of Hormuz standoff weighed on sentiment. Defense stocks bore the brunt of a broad sector sell-off, with tank transmission manufacturer Renk tumbling 8% and German defense giant Rheinmetall shedding over 6%. The DAX 40 fell 0.4%, the FTSE MIB 30 dropped 0.52%, the FTSE 100 shed 0.68%, and the CAC 40 declined 0.45%. European indexes opened Tuesday on a mixed footing.
On a brighter note, Germany's manufacturing PMI for May printed at 50.1, while the broader eurozone figure reached 51.6 — both surpassing analyst estimates. The eurozone's seasonally adjusted unemployment rate held steady at 6.3% in April, and the UK's manufacturing PMI hit a four-year high of 53.9. The European Central Bank is widely expected to adopt a hawkish tone as early as June, if not July.
Asian markets delivered a mixed picture. South Korea's annual inflation for May accelerated from 2.6% to 3.1%, exceeding forecasts and amplifying expectations that the Bank of Korea may lift interest rates in the months ahead. The US dollar/Japanese yen pair held flat at 159.7 as markets remained on alert for potential intervention by Japanese authorities. The Kospi Index fell 1.4% and the Nikkei 225 declined 1%, while the Hang Seng Index gained 1.5% and the Shanghai Composite traded largely unchanged.
Despite active US-Iran diplomatic negotiations, Tehran rattled markets by announcing a suspension of communications with Washington, citing Israel's escalating military activity in Lebanon as provocation. US President Donald Trump stepped in swiftly, engaging both Israel and Lebanese group Hezbollah following Tehran's move and announcing that both parties had agreed to cease attacks on one another — while insisting that negotiations with Iran are advancing rapidly, notwithstanding Tehran's suspension announcement.
Risk aversion has nevertheless taken hold across global markets, with no concrete path to peace yet in sight.
Brent crude oil slipped 1.3% Tuesday to $93.7 per barrel, paring back a sharp 3.8% surge recorded Monday, as cautious optimism over a potential peace deal edged out immediate supply fears tied to the fragile situation in the Strait of Hormuz.
On fixed income and currency markets, the US 10-Year Treasury yield eased two basis points to 4.44%, while the US Dollar Index dipped 0.1% to 99.2. Gold retreated 0.7% to $4,517 per ounce, pulled lower alongside the dollar and yields.
On Wall Street, a tech-driven rally powered US equities to fresh records Monday. Chipmaker Nvidia unveiled its next-generation RTX Spark chip, developed in collaboration with Microsoft — a blockbuster announcement that sent Nvidia's shares soaring 6.3% and supercharged broader AI-sector optimism.
Alphabet, the parent company of Google, added further fuel to the rally by announcing plans to issue $80 billion in shares to bankroll its AI infrastructure expansion.
Adding to the bullish backdrop, the US Institute for Supply Management manufacturing Purchasing Managers' Index (PMI) climbed to 54 in May — its strongest reading since May 2022 — driven by businesses front-loading orders amid supply chain disruptions and rising prices linked to the Middle East conflict.
Against this backdrop, the Dow Jones climbed 0.09% to an all-time high of 51,161.1 points, the S&P 500 advanced 0.26% to a record 7,617.66 points, and the Nasdaq surged 0.42% to a record 27,190.21 points on Monday. American indexes opened Tuesday in negative territory.
European markets closed Monday in the red as uncertainty over a US-Iran deal and the Strait of Hormuz standoff weighed on sentiment. Defense stocks bore the brunt of a broad sector sell-off, with tank transmission manufacturer Renk tumbling 8% and German defense giant Rheinmetall shedding over 6%. The DAX 40 fell 0.4%, the FTSE MIB 30 dropped 0.52%, the FTSE 100 shed 0.68%, and the CAC 40 declined 0.45%. European indexes opened Tuesday on a mixed footing.
On a brighter note, Germany's manufacturing PMI for May printed at 50.1, while the broader eurozone figure reached 51.6 — both surpassing analyst estimates. The eurozone's seasonally adjusted unemployment rate held steady at 6.3% in April, and the UK's manufacturing PMI hit a four-year high of 53.9. The European Central Bank is widely expected to adopt a hawkish tone as early as June, if not July.
Asian markets delivered a mixed picture. South Korea's annual inflation for May accelerated from 2.6% to 3.1%, exceeding forecasts and amplifying expectations that the Bank of Korea may lift interest rates in the months ahead. The US dollar/Japanese yen pair held flat at 159.7 as markets remained on alert for potential intervention by Japanese authorities. The Kospi Index fell 1.4% and the Nikkei 225 declined 1%, while the Hang Seng Index gained 1.5% and the Shanghai Composite traded largely unchanged.
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