Oil spike and Middle East tensions drive global market caution

Market Commentary

Global markets traded cautiously on Thursday as tensions in the Middle East pushed crude oil prices above $80 per barrel, reviving concerns about a potential global growth slowdown and renewed inflation pressures. Reports of an Iranian strike on an oil tanker in the Gulf heightened fears of supply disruptions along a key global energy shipping route, sending ripples across financial markets and prompting investors to scale back exposure to risk assets.

US equities extended their losses as the energy shock weighed on growth-sensitive sectors. The Dow Jones fell 1.80%, while the S&P 500 and Nasdaq slipped 0.81% and 0.61% respectively, as investors rotated out of cyclically exposed industrial and materials stocks. Caterpillar lost 3.60% and GE Aerospace dropped 3.40% amid concerns over supply chain disruptions and margin pressure. Financial heavyweights also came under strain, with Goldman Sachs declining 3.70% and Morgan Stanley falling 3% as volatility in the bond market added to the cautious tone.

European markets followed Wall Street lower, reflecting the region’s heightened sensitivity to energy price shocks. The Eurozone’s STOXX 50 declined 1.70%, while the broader STOXX 600 slipped 1.40%. Hostilities between Iran and Israel showed little sign of easing, with Iran continuing strikes on energy, transport and civilian infrastructure across Gulf Cooperation Council states, intensifying the surge in energy costs. Rising natural gas prices pushed bond yields higher and triggered renewed selling in banking stocks, with Banco Santander, UniCredit and Deutsche Bank each falling close to 3%. Industrial names were also pressured by the prospect of persistently higher power costs, as Siemens and Safran dropped more than 3%, while logistics giant DHL Group slid 4.60% amid growing shipping bottlenecks along one of the world’s most vital oil transit corridors.

Asian markets, however, showed relative resilience as investors balanced geopolitical risks against supportive policy signals from China. The Shanghai Composite rose 0.66%, while the Shenzhen Composite and CSI 300 gained 1.23% and 1% respectively, led by technology and power stocks following renewed commitments to high-tech investment at the Two Sessions policy meetings. Japan’s Nikkei jumped 2.86%, rebounding sharply from earlier losses with gains across technology and financial shares. In Hong Kong, the Hang Seng edged up 0.28%, supported by mainland market strength despite late profit-taking in Alibaba, as turnover reached HKD 322 billion.

On the local front, South African equities faced pressure as global risk aversion and rising energy prices filtered through to domestic markets. The FTSE/JSE All Share Index declined 0.78%, with the weaker rand – trading below R16.40 against the US dollar – adding to the cautious sentiment. Resource counters weighed heavily on performance as Impala Platinum fell 7.56% and Northam Platinum dropped 3.71% amid volatility in metals prices. Industrials offered some support, however, with the sector gaining 0.82% as Sasol advanced 4.24% and Woolworths added 2.88%, while the Financial 15 index slipped 0.83% in line with the softer global banking backdrop.

In commodities, the broader GSCI index eased 0.68% as traders reassessed the balance between geopolitical risks and supply outlooks. Oil remained volatile, with WTI settling around $78.55 per barrel as fears of supply disruptions along the Gulf shipping artery were partly offset by expectations of adequate global supply. Precious metals were mixed, with gold hovering near $2 850 per ounce as safe-haven demand moderated, while platinum edged 0.10% higher to $1 031 per ounce.