Markets retreat as US–Iran tensions weigh, oil surges

Market Commentary

US equities pulled back on Thursday, snapping the recent rally as stalled progress in the US–Iran conflict weighed on sentiment. The S&P 500 and Nasdaq each slipped about 0.30% from prior record highs, while the Dow Jones fell nearly 200 points. Heightened geopolitical tensions dampened expectations of a near-term agreement with Washington and added pressure to interest rate expectations. Technology stocks retreated after recent outperformance, with mixed results from speculative AI names. Microsoft, Meta and Oracle declined by up to 4%, while Texas Instruments jumped 10% on strong guidance.

The US dollar index held near 98.6, close to a two-week high, as tensions remained elevated. Uncertainty around negotiations persisted, with US restrictions on Iranian maritime activity and disruptions through the Strait of Hormuz constraining regional trade flows. Meanwhile, the Federal Reserve is expected to keep the fed funds rate unchanged in the near term, with markets now pricing in a 26% probability of a 25-basis point cut in December, down from earlier expectations of two cuts this year. The US 10-year Treasury yield remained near 4.30%, reflecting the same geopolitical backdrop and interest rate outlook.

In Europe, the FTSE 100 fell for a fourth straight session as persistent tensions around the Strait of Hormuz weighed on sentiment. J Sainsbury dropped more than 4% on warnings around customer and profit pressures, while Relx slipped over 2% despite reaffirming its outlook. Ex-dividend names, including Fresnillo, BAE Systems and Legal & General, added to the drag, partially offset by a roughly 1% gain in London Stock Exchange Group on strong first-quarter revenue. Broader European markets closed mixed, with the STOXX 50 down 0.3% and the STOXX 600 marginally higher. Banks led the declines, with Santander, Deutsche Bank and BBVA each falling over 2%, alongside weakness in EssilorLuxottica and SAP. In contrast, L’Oréal surged 9% and Infineon rose more than 8% on the back of strong guidance from STMicroelectronics.

In Asia, Hong Kong inflation remained steady at 1.70% year-on-year in March, with higher fuel-related costs offset by contained price pressures across other categories. In Taiwan, M2 money supply growth accelerated to 5.79% year-on-year, supported by stronger lending and investment activity.

In South Africa, the FTSE/JSE All Share Index fell 1.37% 116 449, while the Top 40 index dropped 1.47% to 108 579. This decline followed a volatile period, with resources and property sectors under pressure. The market saw a reversal after a brief recovery, impacted by broader market sentiment. Building plan approvals declined 11.20% year-on-year in February, driven by weakness in non-residential and alterations activity.

Oil prices rose sharply, with Brent crude trading above $104 per barrel and WTI near $95, supported by renewed tensions in Iran and supply concerns. Commodity markets were mixed, with declines in platinum, silver, copper and gold, while lithium carbonate posted modest gains.