Oil surge and Middle East tensions weigh on global markets

Market Commentary

Global markets came under pressure on Monday after renewed US-Iran tensions pushed worries about energy supplies and inflation back into focus. Crude oil jumped more than 6%, trading above $80 a barrel by 19h12 SAST, after US President Donald Trump said the US would reinstate a blockade of Iranian vessels in the Strait of Hormuz and would impose a 20% levy on other cargo transiting the route. The announcements heightened uncertainty over shipping lanes and added to concerns about upward pressure on inflation.

US equities weakened as investors responded to the rising geopolitical risks and renewed concerns. The S&P 500 fell 0.60%, the Nasdaq 100 declined 2% and the Dow Jones Industrial Average lost more than 150 points. Technology shares led the declines, with Nvidia, AMD and Intel each falling more than 3%, while Micron dropped 12%. Treasury yields rose as markets continued to price in at least one interest rate hike this year, while investors also looked ahead to this week's US CPI and PPI data, together with Federal Reserve Chair Kevin Warsh's testimony before Congress.

European markets ended mixed as higher energy prices and rising sovereign bond yields weighed on sentiment. The Euro STOXX 50 and STOXX Europe 600 each edged 0.10% lower, while bank shares came under pressure. Technology stocks also weakened, although gains in major energy producers helped offset broader market losses. The UK's FTSE 100 finished little changed, supported by strength in oil companies and homebuilders.

Asian markets mostly declined as escalating Middle East tensions and higher oil prices weighed on investor sentiment. South Korea's KOSPI dropped 5%, while Japan's Nikkei 225 fell 1.92% amid broad-based weakness in semiconductor and artificial intelligence-related shares. Chinese equities also retreated, with the Shanghai Composite losing 2.06%.

South African equities closed lower on Monday, with the JSE All Share Index declining 0.32% as weakness across industrial, financial and resource shares outweighed gains in the property sector. The JSE Top 40 fell 0.39%, while the Industrial 25, Financial 15 and Resource 10 indices lost 0.45%, 0.38% and 0.27%, respectively. By 20:08 SAST, the rand had weakened against the major currencies, trading at R16.44 against the US dollar, R21.97 against the British pound and R18.73 against the euro. 

Precious metals also came under pressure, with gold declining to $3 993.63 per ounce, while silver and platinum ended lower by 20h08 SAST.