Global markets experienced a flurry of activity on Friday in response to reports of Israeli attacks on Iran, exacerbating concerns over escalating tensions in the volatile Middle East region.
Equity markets saw a downturn as global shares eased, with oil prices witnessing a surge while U.S. bond yields retreated.
The MSCI All Country stock index dipped by 0.38%, retreating from its recent high of 785.62 points, although still maintaining a roughly 3% gain for the year. Meanwhile, in Europe, the STOXX index of 600 leading companies declined by 0.7%.
Investors turned to safe-haven assets such as the yen, Swiss franc, and gold, which was on track for its fifth consecutive week of gains. Oil prices initially spiked by $3 a barrel amid concerns of potential disruptions in Middle East oil supply. However, gains were pared following Iran’s denial of immediate retaliation plans.
Amidst the market volatility, U.S. Treasuries rallied, pushing down yields on the benchmark 10-year bond to 4.5899%.
The geopolitical tensions in the Middle East compounded existing market concerns, including the U.S. Federal Reserve’s reluctance to cut interest rates, disappointing semiconductor earnings, and rising inflation expectations.
Naka Matsuzawa, chief macro strategist at Nomura in Tokyo, emphasized the broader implications of the Middle East conflict on global inflation expectations, attributing the risk-off sentiment to fading rate-cut expectations by the Fed.
As U.S. stock index futures dipped by about 0.4%, attention turned to Netflix following a decline in its shares after-hours on Thursday. The streaming giant announced it would cease reporting subscriber numbers quarterly, signaling potential shifts in the streaming landscape.
Equity markets were further pressured by robust U.S. economic data, leading additional Fed officials to signal no immediate rush to lower interest rates. Chip-sector stocks took a hit amidst concerns of prolonged tight monetary policy and disappointment over Taiwan Semiconductor Manufacturing Co’s unchanged capital spending plans.
Amidst the market turbulence, gold prices edged higher, Brent futures surged, and Bitcoin saw a modest increase, highlighting the diverse responses of investors to the evolving geopolitical landscape.
In Asia-Pacific markets, the Nikkei in Japan fell by 2.6%, Taiwan’s stock benchmark declined by 3.8%, and Hong Kong’s Hang Seng lost 0.9%.
