Global markets exhibited a mixed reaction as robust U.S. economic data clashed with escalating geopolitical tensions in the Middle East.
Stronger-than-expected ISM services and ADP jobs figures propelled U.S. equities higher, with Asian markets, notably South Korea's Kospi, staging a significant rebound of 9.6% after a historic selloff. However, the U.S. Senate's approval of attacks against Iran, intensifying the six-day U.S.-Israeli conflict, cast a shadow, driving oil prices higher, with Brent crude reaching $83.89 a barrel and WTI at $73.53.
The effective closure of the Strait of Hormuz, impacting a fifth of global oil supply, signals potential prolonged price pressure. This dual narrative significantly impacted monetary policy expectations, reducing bets on near-term Federal Reserve interest rate cuts. U.S. Treasury yields surged to a three-week high, with the 10-year yield climbing to 4.131%, and the dollar strengthened.
Gold also saw demand as a safe haven, rising 0.8% to $5,173.50 per troy ounce. European markets, conversely, opened lower, with indices like Italy's FTSE MIB and Germany's DAX experiencing declines.
China's announcement of a 4.5%-5.0% GDP growth target for 2026 received a muted market response. Investors now await Friday's non-farm payroll data for further clarity on U.S. economic health and its implications for inflation and interest rates.
