Markets volatile as energy and geopolitical risks persist

Market Commentary

European stocks closed mixed on Monday as investors monitored ongoing tensions in the Middle East and their implications for inflation, energy supply and monetary policy expectations. The Eurozone’s STOXX 50 fell 0.30% to 5 895, while the pan-European STOXX 600 ended broadly flat at 612. Luxury and consumer discretionary names led declines, with LVMH falling more than 4%, while Hermes and L’Oréal dropped around 3%. In contrast, Schneider Electric gained 2.30% and Siemens rose 1.40% ahead of its earnings release later this week. London’s FTSE 100 edged higher, supported by gains in heavyweight energy shares as Brent crude climbed back above $103 per barrel. Shell and BP added 0.70% and 1%, respectively, while Compass rose more than 2% after raising full-year profit guidance. International Airlines Group also advanced about 5.50% following stronger first-quarter results.

US equity indices were mixed, with the S&P 500, Nasdaq 100 and Dow Jones hovering near the flatline as markets weighed the economic impact of elevated oil prices and the sustainability of the artificial intelligence (AI) rally. Reuters reported that President Donald Trump rejected Iran’s latest peace counterproposal as “totally unacceptable”, prolonging disruptions to shipping flows through the Persian Gulf. Despite higher energy prices and rising bond yields, equities remained close to record highs following the recent earnings-driven rally. AI hyperscalers weakened, with Meta, Tesla and Microsoft falling, while chipmakers including AMD, Nvidia and Broadcom advanced. Moderna and Pfizer also gained amid concerns over a Hantavirus outbreak.

Asian markets were supported by stronger Chinese data and expectations surrounding a meeting later this week between President Trump and Chinese President Xi Jinping. China’s annual inflation rate accelerated to 1.20% in April, exceeding expectations, while exports surged 14.10% year-on-year to a record high. China’s 10-year government bond yield eased to around 1.76%, while Japan’s 10-year yield climbed to roughly 2.49% as higher oil prices intensified inflation concerns. Minutes from the Bank of Japan’s March meeting showed policymakers see scope for further rate hikes should energy-related inflation pressures persist.

South African markets remained sensitive to both domestic political developments and global energy risks. The rand strengthened toward 16.3 against the US dollar, supported by firmer precious metal prices and a broadly stable dollar. South African Reserve Bank Governor Lesetja Kganyago said the central bank is keeping its options open on interest rates as Middle East tensions and elevated oil prices continue to pose inflation risks. Meanwhile, South Africa’s 10-year bond yield rose toward 8.69% amid renewed political uncertainty following the Constitutional Court ruling related to the 2022 Phala Phala scandal.

Commodities extended gains as ongoing disruptions in the Strait of Hormuz continued to tighten global supply conditions. Brent crude rose above $103 per barrel after President Trump rejected Iran’s latest response to US peace proposals, while gold climbed toward $4 730 per ounce and silver surged more than 6% to near two-month highs. Copper futures also reached record levels above $6.4 per pound as supply disruptions and continued AI-related infrastructure demand supported prices.