Markets at a glance
Asian shares slipped on Monday amid renewed Middle East tensions that pushed oil higher and forced up sovereign yields. The unrest centred on a series of drone strikes, including an attack that sparked a fire at a nuclear power plant in the United Arab Emirates, and Saudi reports that three drones were intercepted. U.S. President Donald Trump warned Iran must act "fast" to reach a deal, while the Strait of Hormuz was reported to be largely closed to shipping except for a trickle as Tehran seeks to formalise control of the strategic waterway.
Those developments helped lift benchmark crude prices. Brent was trading up 1.2% at $110.63 a barrel and U.S. crude climbed 1.0% to $106.42 a barrel on Monday. Analysts at Capital Economics warned that the closure of the strait is rapidly draining global oil inventories and that inventories could reach critical levels by the end of June, creating conditions that could push Brent to $130-140 per barrel or higher. The research firm added that if the strait remained closed through year-end and oil averaged roughly $150 per barrel into 2027, inflation in the UK and euro zone could approach 10%, returning rates to recent peaks and precipitating a global recession.
Bond moves and central bank risk
Concerns that sustained high energy costs would feed further inflation exerted pressure on global government bond markets last week and carried into Monday. Yields on U.S. 10-year Treasuries stood at 4.584%, following a surge of 23 basis points over the previous week, while 30-year yields were around 5.109% after jumping 18 basis points on the week. Those moves have raised worries that central banks may need to tighten policy to contain inflation risks, and market odds for a Fed rate increase this year are now viewed as roughly even at 50-50.
Investors will be watching the minutes from the Federal Reserve's most recent meeting, due on Wednesday, for insight into how much pressure there was within the committee to shift toward a more neutral stance and away from any easing bias.
Asian equity performance
Regionally, Japan's Nikkei eased 0.4% on Monday after a 2% fall last week that followed record highs. South Korean equity markets cooled but remained under pressure, falling 2.1% as demand-driven gains in semiconductors earlier this year paused. MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.6%.
China's markets, which hit their highest levels in more than four years last week, face domestic data releases on April retail sales and industrial output that will test the sustainability of recent gains.
AI sector and corporate earnings focus
Wall Street futures were negative in early trade, with S&P 500 futures down about 0.4% and Nasdaq futures off roughly 0.5%. While U.S. equities have been supported by encouraging corporate results, Citi analysts noted that roughly half of the recent boost to reported earnings stemmed from one-off items such as tariff adjustments and asset revaluations. The bank's research highlighted a narrow base of contributors to earnings upside, identifying 20 stocks that delivered the majority of the lift to index profits and noting forward guidance increases were similarly concentrated.
The concentration of profit gains has raised calls for broader participation if the rally is to continue. Citi analysts said that widening the earnings contribution across more companies will likely require a clearer trajectory for a resolution to the Iran conflict and a winding down of related geopolitical risks.
All eyes this week are on Nvidia, whose quarterly results are due on Wednesday and will be viewed as a pivotal test of the AI trade. Nvidia shares have climbed about 36% since the March lows, while the Philadelphia SE semiconductor index has surged more than 60% as demand for chips tied to AI infrastructure has driven sectoral gains. Investors will be looking for evidence that revenue and guidance can meet sky-high expectations.
Also slated to report this week are a group of major retailers, with Walmart among the leaders, offering a window into consumer resilience in the face of elevated energy costs.
Currency and commodity moves
Heightened risk aversion generally benefited the U.S. dollar, which is supported by its status as the world's most liquid currency and by the U.S. being a net energy exporter relative to Europe and much of Asia. The euro traded near $1.1620 after a 1.4% decline last week, while the pound remained weak at $1.3318, down 2.3% over the same period amid political instability that added to gilt market pressure. The dollar was firm against the yen at 158.64, with Japan's potential intervention seen as a constraint on further yen weakness around the 160.00 level.
Gold was largely flat at $4,540 an ounce, drawing little demand so far as a safe haven or inflation hedge despite the heightened geopolitical and inflationary concerns.
Market governance and policy coordination
G7 finance ministers were scheduled to convene in Paris on Monday to deliberate on the Strait of Hormuz and supplies of critical raw materials. The meeting comes as geopolitical differences among members threaten to test group cohesion even as officials seek coordinated responses to the evolving disruptions.
Investment tools and stock screening
Market participants considering exposure to Nvidia or the broader AI trade have access to quantitative screening tools that evaluate companies across many financial metrics. One such AI-driven stock selection tool referenced the performance of past identified winners, including Super Micro Computer and AppLovin, as part of its evaluation process for current opportunities. That tool examines fundamentals, momentum, and valuation across hundreds of companies to identify potential ideas, including whether Nvidia features in any model strategies.
Investors will be monitoring geopolitical developments, oil and bond markets, upcoming corporate earnings, and central bank communications for clues about whether recent gains in risk assets can broaden beyond a narrow set of contributors.