Global markets turn cautious as geopolitical risks reignite energy volatility

Market Commentary

Global markets took on a more cautious tone on Thursday as lingering geopolitical tensions and uncertainty around energy supply interrupted the prior session’s risk-on momentum. Earlier optimism that easing tensions would drive a sustained decline in oil prices has begun to fade, prompting a broader reassessment across asset classes.

In the US, equities were broadly flat following Wednesday’s rally, as improving risk appetite gave way to renewed caution. Investor sentiment softened amid rising tensions between the US and Iran, which reignited concerns around the stability of energy flows through the Strait of Hormuz—reversing part of the sharp pullback in oil prices and bond yields seen in the prior session. At the same time, FOMC minutes pointed to increased caution among policymakers regarding conflict-driven inflationary pressures, with attention now turning to the upcoming CPI release for further direction.

This more defensive backdrop carried into Europe, where equities closed lower, giving back a portion of their recent gains. The Eurozone’s STOXX 50 fell 0.60% to 5 878, while the STOXX 600 declined 0.40% to 611, as rising bond yields and higher energy prices weighed on sentiment. Financials came under pressure, with Santander, BBVA, and Nordea each down 1.50%, while energy-intensive industrials such as Airbus and Siemens dropped more than 2%. In contrast, energy producers outperformed, with Eni and TotalEnergies gaining over 3% in line with firmer oil prices.

Asian markets followed suit, with Chinese equities also closing in negative territory. The Shanghai Composite fell 0.80% to below 4 000, while the Shenzhen Component declined 0.30% to around 14 000, as regional risk appetite remained subdued. Beyond global drivers, investors are also focused on China’s latest inflation data, expected to show a modest uptick in consumer prices and a return to producer price growth for the first time since September 2022.

Locally, South African equities mirrored the softer global trend, with the FTSE/JSE All Share Index declining 1.10% to approximately 118 205 points. The move was largely driven by profit-taking in resource stocks amid weaker precious metal prices, although banks and large-cap industrials showed relative resilience.

In commodities, price action reflected the same crosscurrents. Oil extended its rebound, with Brent crude rising above $99 per barrel as supply risks re-emerged, while gold retreated from recent record highs to the mid-$4 700s per ounce. The pullback in gold suggests some profit-taking, although prices remain elevated on a year-on-year basis. Overall, markets continue to navigate a delicate balance between persistent geopolitical risks, shifting inflation expectations, and a still-hawkish global policy environment.