Global markets rally on easing geopolitical tensions and sharp commodity repricing

Market Commentary

US equities closed sharply higher on Wednesday, as investors remained optimistic that the two-week US–Iran ceasefire would hold. The White House also indicated that direct talks with Iran would proceed, although ongoing regional conflict—including Israeli strikes in Lebanon and Iranian strikes on Gulf states—kept some risk of escalation in focus. The Dow Jones surged 2.85%, marking its strongest session since April 2025. The S&P 500 gained 2.50%, while the Nasdaq Composite advanced 2.80%. Risk sentiment was further supported by a sharp decline in oil prices and continued softness in bond yields, helping offset concerns raised in the latest FOMC minutes regarding stagflation risks. High-beta AI-linked names led gains, with Nvidia, Meta, Tesla, AMD, and Micron rising between 4% and 10%. Airlines also rallied on the improved fuel cost outlook, with Delta Air Lines advancing 6% following its earnings release.

European markets rallied sharply, extending the global relief-driven tone after a US–Iran ceasefire announcement eased geopolitical risk and reduced concerns over energy supply disruptions. The pan-European STOXX 600 surged around 3.70%, marking its strongest session in a year, while the Euro STOXX 50 jumped approximately 4.60%, with gains led by cyclical and rate-sensitive sectors. Sector performance was broad-based, with banks rallying strongly on improved credit outlooks—Santander, UniCredit, and BNP Paribas all gained close to 8%. Industrials and technology also outperformed, with Siemens, Safran, and Schneider advancing more than 10%, while semiconductor names such as ASML and Infineon surged around 10% on improved risk appetite and renewed positioning in higher-beta growth segments.

Broader Asian markets extended the global risk-on rally, with sentiment supported by strong gains in US and European equities and improving regional risk appetite. Japan’s Nikkei 225 surged 5.30%, while the Topix added around 3%, led by strength in chipmakers such as Advantest alongside broader gains in metals and cyclicals. Hong Kong’s Hang Seng rose roughly 3%, reflecting sustained momentum in risk assets and firmer demand for equities across the region. Similarly, Chinese stocks closed sharply higher, with the Shanghai Composite rising 2.69% and the Shenzhen Component surging 4.79%, both reaching their highest levels in nearly three weeks as domestic sentiment improved.

South African markets posted strong gains, with equities, the rand, and government bonds all rallying as global risk appetite improved and geopolitical concerns eased. The rand strengthened to 16.37 against the US dollar at 18h00, briefly touching its strongest level in nearly a month, supported by increased demand for emerging market assets. South Africa also benefitted from lower oil prices, given its status as a net importer of crude oil and refined fuels. Government bonds rallied sharply, with the benchmark 2035 bond strengthening as yields fell to 8.70%, signalling a notable compression in risk premia. Local equities joined the rally, with the FTSE/JSE All Share Index up nearly 4%, as cyclical and rate-sensitive sectors benefitted from the improved global backdrop and easing energy price pressures.

Commodities reversed sharply on Wednesday, with oil prices falling as geopolitical risk premiums unwound. WTI crude oil futures tumbled more than 15% to around $95 per barrel, while Brent retreated significantly from recent highs above $110. Gold also eased from record levels, falling over 1% as safe-haven demand faded, with silver and industrial metals following lower on improved risk sentiment.