Equities split on Middle East tensions as oil surges to five‑year highs

Market Commentary

US equities extended their retreat from record highs on Monday amid escalating tensions with Iran, which threaten to prolong elevated energy prices. The S&P 500 and Nasdaq 100 each fell 0.50% from their peaks, while the Dow shed over 400 points.

The UAE faced missile threats for the first time since the US-enforced ceasefire, as Washington and Tehran traded denials over strikes on US naval assets and commercial ships exiting the Persian Gulf. Energy surges drove oil prices higher, pushing the 10-year Treasury yield to 4.46%, its highest since July 2025, heightening inflation fears after last week's hawkish Fed dissents.

Artificial intelligence (AI) infrastructure stocks, particularly vulnerable to risk-off sentiment given speculative positioning, dropped with Nvidia, Broadcom, AMD, Qualcomm, and Intel declining 1.50%–6%. Berkshire Hathaway slipped despite stronger-than-expected revenues in its first quarter, while Palantir rose 1% ahead of post-market earnings.

European stocks closed sharply lower, hit hard by the worsening US-Iran conflict that threatens to prolong the region's energy crisis. The Eurozone STOXX 50 plunged 2% to 5 770, while the pan-European STOXX 600 fell 1% to 605. A fresh oil price surge lifted bond yields, with markets betting on the European Central Bank hiking the rate next month. Banks including Santander, BBVA and Allianz dropped 3%-5% on higher credit costs; industrials and tech suffered from elevated power prices, with Schneider and ASML each down 3%. Carmakers Mercedes-Benz, BMW and Volkswagen shed ~3% after President Donald Trump's 25% tariff threat on EU autos.

In stark contrast, Asian equities bucked the trend, surging to record highs on a tech-led Wall Street rally. Tech shares drove gains across key benchmarks following strong US earnings, boosted by news of fresh Iranian peace proposals with the US. The Nikkei rose 0.38%, Shanghai Composite gained 0.13% and Hong Kong's Hang Seng jumped over 1%.

Locally, the JSE underperformed: JSE All Share Index fell 0.45%, with the Top 40 and JSE SAPI each down 0.50%. Metals and Mining weakened as precious metals plunged with gold falling close to 2% an ounce, while silver declined over 3%, followed by platinum at over 2%.

Commodities swung wildly as Brent crude futures leaped over 5% trading at $113 per barrel – the highest since May 2022 – amid heightened Middle East risks, including Iranian missile strikes on the UAE and threats to restrict Strait of Hormuz shipping. Energy infrastructure and tankers faced fresh disruptions, stoking fears of supply interruptions and broader economic impacts.