Risk appetite eases amid heightened geopolitical tensions

Market Commentary

Heightened geopolitical tensions dominated on Monday after the US and Iran intensified their military actions. At the same time, renewed threats from Yemen's Houthi movement to target Saudi-linked commercial shipping in the Red Sea further unsettled investors. Long-dated US Treasury yields moved higher, while elevated fuel prices increased concerns that inflationary pressures could persist. This reinforced expectations that the Federal Reserve (Fed) may still raise interest rates later this year.

Against this backdrop, US equities closed mostly lower as renewed concerns over the Middle East conflict weighed on broader market sentiment. The S&P 500 declined 0.20%, the Dow Jones Industrial Average fell 307 points and the Nasdaq 100 ended broadly flat. Treasury yields moved higher as energy-driven inflation concerns reinforced expectations that the Fed may still raise interest rates later this year. Major banks came under pressure, with JPMorgan and Bank of America declining 0.60% and 1.40%, respectively, while Applied Materials slipped 0.70%. Semiconductor shares, however, rebounded following the recent technology sell-off as investors continued to assess whether the largest artificial intelligence (AI) hyperscalers will maintain their pace of infrastructure spending in the coming quarters. Broadcom gained 2%, Micron advanced 1.90%, AMD rose 1.60%, Intel added 2.10%, and Alphabet gained 1.50% ahead of its guidance update later this week.

European shares finished largely unchanged, extending last week’s losses as a weakening macro backdrop and a busy corporate earnings calendar weighed on sentiment. The Euro STOXX 50 ended flat at 6 228, while the STOXX Europe 600 fell 0.30% to 639.9.

European natural gas prices climbed further after renewed US–Iran strikes added to inflationary pressures in the eurozone. The European Central Bank (ECB) is still widely expected to keep rates on hold this week, but markets view an additional hike later in the year. Bank stocks were mixed ahead of a heavy results slate: Santander slipped slightly, while UniCredit and BNP Paribas rose 0.50% and 1.10%, respectively. Luxury group LVMH fell more than 1.30% as higher global yields weighed on discretionary spending prospects. Ryanair plunged 5.20% after rising fuel costs hit 2Q26 earnings.

Elsewhere in Europe, the UK’s FTSE 100 slipped more than 0.50% on Monday, lagging its European counterparts. The pound fell to about $1.34 as markets digested the appointment of Andy Burnham as the UK’s new prime minister and weighed implications for monetary policy. Burnham, who replaced Keir Starmer unopposed, is the seventh prime minister in 10 years.

Asian markets finished mixed on Monday as AI- and semiconductor-driven positions were trimmed, while Chinese shares bucked the regional weakness, supported by value buying and state fund interventions. The Hang Seng gained over 2% on bargain hunting in value names and Beijing’s stimulus signals, while Shanghai increased 0.66% buoyed by strong showings from energy and commodity producers. The Nikkei did not trade due to the Marine Day public holiday.

On the commodity front, crude oil held steady at around $82.50 a barrel, near a five-week high, after trading sharply in both directions as markets weighed rising Middle East tensions against renewed diplomatic efforts. Brent crude meanwhile rose 1.23% to $89.18 a barrel. Precious metals were mixed, with gold down 0.17% at 21h22 SAST to $4 010.02 an ounce, while silver gained 1.21%.

Local equities closed lower as cautious global sentiment weighed on the market. The FTSE/JSE All Share Index fell 0.58%, while the Top 40 declined 0.60%. Resources ended the day down more than 1%, with Metals and Mining sliding 1.26%.