US Stocks Tumble as Fears of a Longer Conflict Increase – Nasdaq down 2.4%
Global financial markets remained highly volatile through the latest sessions, as investors continued to react to fresh developments surrounding the conflict in the Middle East. US equity markets closed firmly lower across the board, reflecting the cautious tone. The Dow Jones fell 1.01% to 45,960, while the S&P 500 dropped 1.74% to 6,477. The tech-heavy Nasdaq led the declines, sliding 2.38% to finish at 21,408, as investors reduced exposure to higher-risk assets heading into the weekend. In currency markets, the US dollar strengthened against the majors, with the DXY rising 0.34% to 99.94. Fixed income markets saw more pronounced moves, with US Treasury yields pushing higher across the curve. The 2-year yield climbed 10.1 basis points to 3.986%, while the 10-year yield rose 8.0 basis points to 4.12%, reflecting a repricing of interest rate expectations amid ongoing uncertainty. Commodity markets were once again driven by geopolitical developments. Oil prices surged, with Brent crude jumping 4.75% to $107.08 per barrel, while WTI crude gained 3.79% to $93.74 per barrel, as traders continued to price in supply disruptions for a longer period. In contrast, gold came under significant pressure, falling 2.88% to $4,376.11, as the stronger US dollar dominated any safe-haven flows.
Markets at Risk as Investors Look for Certainty
Ongoing concerns that the conflict in the Middle East could escalate into a more prolonged engagement weighed heavily on risk sentiment yesterday, despite comments from President Trump indicating a 10-day delay to proposed strikes on Iranian energy infrastructure and suggesting that negotiations are progressing. US equity markets closed firmly lower across the board, reflecting the cautious tone, and traders are expecting to see similar losses in the coming days if we do not start to see some concrete evidence that an end to hostilities is in sight. There has been a clear sea change in the last few days: markets are not reacting to possibilities and promises anymore, with last night’s moves a prime example. Expect more volatility in the coming sessions and days, and now it seems that only agreements from both sides will turn the tide in a more positive direction.
Quiet Calendar, But Busy Trading Day Ahead
Looking ahead, the economic calendar is relatively light, but market participants are bracing for another volatile session to close out the week, with geopolitical headlines expected to remain the primary driver of price action. The Asian session is expected to start on the back foot, following a poor day on Wall Street, and traders are expected to keep a close eye on newswires for any fresh updates. The European session will see a focus on UK markets early in the day, with Retail Sales (exp -0.6% m/m) data due out, but there is little else of note during the session. The New York session sees the release of the Revised University of Michigan Consumer Sentiment (53.9) and Inflation Expectations (last 3.4%) data, and we also hear from Fed members Barkin, Daly, and Paulson; however, again, Middle East updates are expected to dominate market flows into the weekend.
