Peace Out, Volatility In
Even a World Cup couldn’t distract markets from geopolitics last week. Renewed tension between Israel and Lebanon, alongside the effective end of the ceasefire between the United States and Iran, kept volatility firmly in the driving seat across global markets.
Despite these unsettled conditions, US markets held their ground, closing the week a little over one per cent higher. Europe, the UK, and Emerging Markets were all moderately weaker by comparison, underlining just how uneven investor sentiment has become in the current climate.
Oil Takes Centre Stage
Crude oil was a predictable source of strength, climbing 5% amid persistent tension between Washington and Tehran. The Strait of Hormuz remains the central flashpoint, with Iranian attacks on oil tankers once again threatening to close it. Russia’s suspension of diesel exports, following Ukrainian attacks on its refineries, has added further pressure to an already tight supply picture.
On the surface, this backdrop might suggest investors should be concerned. Yet there is a general belief that a diplomatic resolution between Iran and the United States will eventually be reached — a reminder that markets often price in more calm than headlines suggest.
Chart of the Week
Brent crude prices climbed sharply last week as renewed tensions in the Middle East heightened concerns over global oil supplies. With the Strait of Hormuz once again in focus and Russia’s diesel export suspension adding further pressure, markets have begun to price in a higher geopolitical risk premium.
Investors Rotate Toward Value
This uncertainty has crystallised investors’ minds around the need to take profits in some high-profile technology names, with more attention shifting toward semiconductor manufacturers. Korean memory chip maker SK Hynix raised $26.5 billion in the largest share offering ever completed by a non-US company, with shares closing the week 13% above their issue price. However, the start of this week has already seen significant profit-taking in Korean trading, with shares down double-digit percentages.
Elsewhere, corporate activity offered its own set of signals. UK-based airline easyJet welcomed a surprise counterbid from private equity group Apollo, which outbid rival Castlelake; the board accepted the offer and shares rose 20%. French tycoon Xavier Niel bought a 15% stake in Vodafone worth $6 billion, a move the market read as an endorsement of the company’s current strategy, sending shares up 11%. And Chinese e-commerce and cloud computing giant Alibaba rose more than 16% after reports that Beijing may permit AI companies to buy Nvidia H200 chips — a development expected to accelerate China’s AI infrastructure ambitions.
What We’re Watching This Week
Attention now turns to the start of second-quarter US earnings season, beginning with the major banks. Recent results have been strong, with many companies beating consensus forecasts and raising guidance. Expectations, however, are high: S&P 500 earnings are forecast to grow by 25% this year, meaning any disappointment could trigger sharp share price falls.
Investors will also be watching closely as new Federal Reserve Chair Kevin Warsh delivers his first testimony to Congress. Finally, June’s inflation data could prove a key market-moving event, with inflation having exceeded the central bank’s 2% target for more than five years. A softer reading may offer some hope that policymakers can chart a credible path back toward target.
At NEBA Financial Solutions, we believe periods of heightened volatility are precisely when disciplined, well-diversified portfolios earn their keep. Navigating geopolitical risk, sector rotation, and shifting central bank leadership requires a steady, long-term perspective — something we’re always happy to discuss with our clients.
This article is based on insights and analysis provided by David Gorman of TEAM.
