AI optimism lifts markets despite ongoing US-Iran uncertainty

Market Commentary

US equities advanced to fresh record highs on Tuesday as continued strength in AI-related shares offset ongoing uncertainty surrounding US-Iran negotiations. The S&P 500, Nasdaq 100 and Dow Jones Industrial Average all recovered earlier losses, supported by strong gains across semiconductor and AI infrastructure companies. Broadcom rose 5% ahead of its earnings release, while Qualcomm, ON Semiconductor and Lam Research gained more than 5%. Hewlett Packard Enterprise surged 30% following an AI-driven guidance upgrade, while Marvell Technology jumped 20% after Nvidia CEO Jensen Huang suggested it could become the next trillion-dollar company.

Against this backdrop, the yield on the US 10-year Treasury note remained above 4.45% as stronger-than-expected economic data reinforced expectations of restrictive monetary policy. Job openings reached their highest level in more than a year, while manufacturing activity remained stronger than anticipated. Although oil prices eased from recent highs, uncertainty surrounding US-Iran negotiations continued to support expectations that interest rates could remain elevated for longer.

European equities also moved higher, with the Euro STOXX 50 gaining 1.20% and the STOXX Europe 600 rising 0.70%. Technology shares led the advance after SK Hynix announced plans to double wafer capacity, boosting sentiment across the semiconductor sector. ASML climbed 5%, Infineon gained 9.50% and STMicroelectronics surged 15% after raising its earnings target. Preliminary Eurozone inflation data showed headline inflation rose to 3.20%, while core inflation increased to 2.50%, reinforcing expectations of a European Central Bank rate hike next week.

Asian markets delivered a mixed performance. Chinese equities rebounded from one-month lows, supported by gains in AI-related shares, with the Shanghai Composite rising 0.43%. In contrast, Japan’s Nikkei 225 slipped 0.30% as investors weighed ongoing geopolitical uncertainty and expectations of further interest rate increases by the Bank of Japan.

Locally, the rand strengthened to around R16.20 against the US dollar, supported by firmer precious metal prices. South Africa’s RMB/BER Business Confidence Index declined to 39 in 2Q26, while the South African Reserve Bank reiterated its commitment to returning inflation to its 3% target following last week’s interest rate increase.

Commodity markets remained focused on developments in the Middle East. Brent crude traded around $95 a barrel and WTI around $92 as markets assessed conflicting signals regarding a potential US-Iran agreement. Gold recovered to above $4 500 per ounce, while silver climbed above $76. Platinum remained around $1 950 per ounce as elevated geopolitical uncertainty continued to support expectations of higher interest rates for longer.