Markets on edge as US–Iran tensions resurface

Market Commentary

US equities declined on Monday, pausing last week’s rally as geopolitical tensions and energy supply risks weighed on sentiment. The S&P 500 and Nasdaq 100 fell around 0.50%, while the Dow Jones slipped 0.30%, with losses led by major technology stocks. Microsoft, Meta, Nvidia, and Oracle each dropped roughly 1.50%, while Tesla fell nearly 3% ahead of earnings and Intel lost more than 1%.

The US 10-year Treasury yield was little changed at around 4.25%, easing from earlier gains and holding near one-month lows. Markets continued to assess setbacks in US–Iran peace talks after the US seized an Iranian cargo ship, prompting retaliation threats from Tehran and casting doubt on whether negotiations will resume before the 14-day ceasefire expires. Oil prices edged higher, while persistent inflation concerns kept borrowing costs elevated. Focus now shifts to today’s Senate confirmation hearing for Kevin Warsh as the next Federal Reserve Chair. The dollar index was steady at 98.1, near pre-conflict levels, supported by ongoing inflation concerns and expectations of a relatively tight Federal Reserve policy stance.

European equities closed lower, with sentiment pressured by renewed geopolitical tensions and a sharp rise in energy prices. The STOXX 50 fell 1.20% to 5 982, while the STOXX 600 declined 0.60% to 621, as higher oil and gas prices weighed on industrials and elevated sovereign yields dragged on banks. UniCredit dropped 5.30%, while SAP and EssilorLuxottica fell around 4% ahead of earnings. In the UK, the FTSE 100 lost about 0.50%, with broad-based weakness across cyclicals. Rolls-Royce declined over 3.50%, while miners came under pressure—Antofagasta (-4.50%), Fresnillo (-3%), and Endeavour (-1.20%). Travel stocks also weakened, with EasyJet down over 3% and IAG off 2.10%, and major banks falling between 1.40% and 2.50%. Energy stocks outperformed, with BP (+2.60%) and Shell (+2.20%) supported by roughly 6% gains in oil and gas prices.

In Asia, Japan’s Nikkei 225 rose 0.60% to 58 825 and the Topix gained 0.43% to 3 777, supported by strength in artificial intelligence-related stocks. Gains were led by SoftBank Group (+5.50%), Lasertec (+5.40%), and Unitika (+21.40%), while declines were seen in Kawasaki Kisen (-3.80%) and Tokyo Gas (-3.70%). China’s Shanghai Composite rose 0.78% to 4 083, led by China Eastern Airlines (+4.08%) and China Construction Bank (+3.08%).

South Africa’s 10-year bond yield rose to around 8.35%, up from 8.19% on 17 April 2026, as higher oil prices reinforced inflation concerns. South African Reserve Bank Governor Lesetja Kganyago signalled that rate hikes remain possible, citing rising fuel and fertiliser costs and the risk of second-round inflation effects. The rand weakened towards R16.40/$ at 18h00 as safe-haven demand supported the dollar. Escalating geopolitical tensions, including the closure of the Strait of Hormuz, added to inflation risks and uncertainty around the interest rate outlook.

Brent crude rose more than 5% to $96 per barrel, following a 9.10% drop on Friday, as disruptions in the Strait of Hormuz intensified. Gold declined 0.60% to $4 805.82 per ounce, with June futures down around 1.20%, while silver and platinum also weakened.