Global financial markets had been recovering after the United States and Iran agreed to a temporary ceasefire following months of conflict that disrupted oil supplies and rattled investors. However, renewed military exchanges, tighter U.S. sanctions on Iranian oil exports and uncertainty over the future of the agreement have revived concerns about energy security, inflation and the outlook for the global economy.
Oil jumps as Trump declares Iran memorandum ‘over’
Oil prices surged more than 5% on Wednesday while global stocks and government bonds fell after U.S. President Donald Trump declared that the memorandum of understanding signed with Iran to end the Gulf conflict was “over.”
Speaking in Ankara ahead of the NATO summit, Trump said he no longer wanted to engage with Tehran.
“As far as I’m concerned, it’s just a waste of time dealing with them,” he said.
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Investor sentiment had already weakened after fresh exchanges of attacks between U.S. and Iranian forces in the Gulf.
Brent crude futures climbed 5% to around $78 a barrel, recording their biggest one-day gain since late May.
Higher oil revives inflation concerns
Although crude prices remain well below the wartime highs above $120 a barrel, the latest rally renewed concerns that higher energy costs could slow progress in bringing inflation under control.
Government bond markets reacted sharply as investors reassessed inflation risks.
The yield on benchmark 10-year U.S. Treasury notes rose for a seventh consecutive session to a one-month high of 4.56%, while German and Italian 10-year bond yields also posted their largest daily increases in a month.
Recent data showing that the U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1983 has further heightened concerns over the market’s ability to absorb another major supply disruption.
Analysts said the continued operation of the Strait of Hormuz remains the key factor determining whether energy markets remain stable.
Global equities retreat as investors seek safety
European shares fell 1.6%, putting the STOXX 600 on course for its biggest one-day decline since March.
U.S. stock futures also weakened, while the VIX volatility index climbed nearly 13%, reflecting increased investor demand for downside protection.
The renewed geopolitical uncertainty added to pressure already building in equity markets after investors began rotating out of high-flying semiconductor and artificial intelligence stocks.
AI sector loses momentum
Samsung Electronics shares fell for a second straight session despite reporting a 19-fold increase in quarterly profit.
Investors remain concerned that demand for memory chips could soften during the second half of the year as supply constraints ease across parts of the AI industry.
Market participants have increasingly shifted investments toward financial, consumer and other defensive sectors after months of heavy buying in AI-related companies.
Analysts also noted that rising capital expenditure among technology firms is reducing the cash available for shareholder returns such as buybacks, prompting investors to reassess lofty valuations across the sector.
Dollar strengthens ahead of Fed minutes
The U.S. dollar strengthened against major currencies as investors sought safer assets.
The euro slipped to just above $1.14, while the Japanese yen remained near 40-year lows against the dollar, keeping markets alert for possible intervention by Japanese authorities.
Attention is now turning to the release of minutes from the Federal Reserve’s latest policy meeting later on Wednesday, with investors looking for fresh clues on the U.S. interest-rate outlook under Fed Chair Kevin Warsh.
Future outlook
Financial markets are likely to remain highly sensitive to developments in the Middle East after Trump’s comments cast doubt on the durability of the U.S.-Iran ceasefire framework. Any further escalation that disrupts shipping through the Strait of Hormuz or restricts oil exports could push crude prices higher, reignite inflation concerns and complicate central bank policy decisions. At the same time, investors are expected to closely monitor upcoming corporate earnings and Federal Reserve signals to determine whether geopolitical risks or weakening momentum in AI-related stocks become the dominant driver of global markets in the weeks ahead.
With information from Reuters.
