Global risk sentiment cooled sharply on Friday as a dramatic fall in South Korean equities spread into technology sectors across markets and sent investors toward the safety of higher yields and higher-priced crude.
Deutsche Bank strategists encapsulated the shift early in the session, saying markets had "lost momentum after President Trump said the US doesn’t need the Strait of Hormuz open 'at all'." That comment, coupled with other statements from the president and heightened tension in the Gulf, helped push oil prices higher and amplify concerns about potential disruptions to energy flows.
Markets on the move
Friday’s risk-off tone manifested first in Asia, where the KOSPI index registered a steep decline. The index fell 6.1% after briefly trading above the 8,000 mark earlier in the day. The rout centered on some of the market’s biggest technology and memory-chip producers and quickly crossed borders into global semiconductor stocks.
- Samsung Electronics slid 8.6%.
- SK Hynix dropped 7.7%.
- In U.S. premarket trade, memory-chip maker Micron Technology was down 2.2%.
Mainland Chinese equities, by contrast, were more resilient and performed better than many regional peers despite the broader weakness across Asian markets.
Global equities pressured
Following the Asian selloff, U.S. equity futures turned lower. Contracts tied to the S&P 500 declined about 0.8% while Nasdaq 100 futures were off roughly 1.1%. European bourses also lost ground: Germany’s DAX fell 1.2%, and both the FTSE 100 and France’s CAC 40 slipped by close to 1% each.
The pullback came after a period of strong rallies in recent weeks. Investors cited geopolitical uncertainty and rising bond yields as additional headwinds. In the U.K., political developments added to market focus, after Prime Minister Keir Starmer faced renewed internal pressure following a parliamentary vacancy that could allow Greater Manchester Mayor Andy Burnham to enter Parliament.
Oil surges, headed for weekly gains
Energy markets reacted sharply to the heightened Gulf tensions. Brent futures rose about 2.9% to $108.75, while U.S. crude futures climbed 3.2% to $104.42. Both contracts were on track for substantial weekly gains amid fears the Strait of Hormuz was effectively closed and diplomatic efforts to resolve the conflict were stalling.
The price jump followed President Trump saying he was "losing patience" with Iran, comments that intensified market concern about a prolonged disruption to flows of crude through the Gulf. The Strait of Hormuz remains a focal point for traders because it handles a meaningful portion of global crude exports.
"Notwithstanding the current prognosis of horrifically low oil inventories, it appears that the focus is progressively shifting towards demand destruction, hence the reluctance to revisit the March or April summits. Of course, such a jump cannot be ruled out in the event of an escalation," Tamas Varga, analyst at PVM Oil Associates, said.
Trump departs Beijing after summit with Xi
President Trump left Beijing on Air Force One after more than two hours of talks with Chinese President Xi Jinping. The summit yielded few concrete policy announcements, but markets noted a warmer tone between the leaders, which some investors found mildly reassuring.
Trump said both nations wanted the conflict with Iran to end and reiterated that Iran should not obtain nuclear weapons. He also asserted the two sides had reached "fantastic trade deals," although he provided no details. Chinese officials described the meeting as producing "a series of new common understandings." Comments suggesting a possible easing in trade tensions - including Trump saying U.S.-China relations would be "better than ever" and state media reporting Xi told American executives that China’s "doors to the outside world will open wider and wider" - offered limited comfort to markets already coping with broader risk aversion.
Some analysts, however, judged the trip’s headlines as lacking market-moving substance. "We didn’t think any of the headlines from Trump’s trip were narrative-shifting at all," Vital Knowledge analyst Adam Crisafulli wrote.
Bonds sell off, yields climb
Government bonds across major markets sold off Friday as investors recalibrated inflation risks and central bank policy expectations. Deutsche Bank strategists pointed to tepid demand at recent Treasury bill auctions - even as the Treasury increased auction sizes in recent weeks - as a contributor to the selloff in U.S. rates.
On the U.S. curve, the two-year Treasury yield rose above 4.05%, while the 10-year yield approached 4.52%. In Japan, the 20-year government bond yield jumped to its highest level since 1996 after producer prices there came in stronger than expected, reinforcing speculation that the Bank of Japan could continue tightening policy. European bond futures also fell on the wider move out of safe-haven debt.
What investors will watch next
Looking ahead, market participants were set to focus on U.S. data releases that could influence the near-term macro narrative: industrial production figures for April and the Empire State manufacturing survey for May. Those data points are expected to feed into assessments of economic momentum and monetary policy direction, particularly as yields and inflation expectations remain in focus.
For now, trading floors and portfolio managers navigated a landscape where geopolitics, energy supply risks, and rising yields combined to sap the recent enthusiasm that had propelled equities higher in prior weeks.