Global stocks hold firm on AI boom despite oil surges amid Gulf clashes
Global stock markets pushed to historic highs on Monday, driven by an unyielding artificial intelligence (AI) boom that effectively shielded investors from geopolitical anxieties. The rally brushed off news of fresh military exchanges in the Gulf, which threatened the reopening of the crucial Strait of Hormuz and pushed international oil prices sharply upward.
While diplomatic teams from Washington and Tehran are reportedly working to salvage a peace deal, U.S. President Donald Trump took to social media to downplay the immediate friction, advising the public to “just sit back and relax.”
Despite the calm tone from the White House, tensions on the ground spiked over the weekend. U.S. Defense Secretary Pete Hegseth stated over the weekend that Washington was fully prepared to resume offensive operations against Iran if negotiations collapsed.
READ ALSO: Global oil prices surge pass $90 amid fresh US-Iran strikes, Israeli advancement into Lebanon
By Monday, reports emerged that U.S. forces had struck several Iranian targets over the weekend, drawing retaliatory strikes from Tehran. Concurrently, Kuwaiti air defenses were reportedly active, intercepting incoming missile and drone strikes.
The military escalation immediately reverberated through energy markets. Brent crude futures jumped nearly 3%, trading at $94 per barrel. While the surge benefits oil-exporting nations, the inflationary pressure triggered a sell-off in government bonds, as investors increasingly expect central banks to hold interest rates higher for longer to combat rising costs.
AI dominance keeps equity markets afloat
Despite the looming shadow of conflict, equity markets remained incredibly resilient. The MSCI All-World index gained 0.13% to trade around record highs. From Tokyo to Seoul, major Asian indices hit or neared all-time peaks, sustained by an insatiable global appetite for AI-related technology.
The sheer scale of the tech rally was highlighted by striking data out of South Korea, where May exports grew at their fastest annual pace in over forty years, hitting a record $87.75 billion—heavily driven by semiconductor and tech demand. In Taiwan, Nvidia CEO Jensen Huang is set to open the Computex trade show on Monday, where he is expected to unveil new products and emphasize the region’s critical role in the global AI supply chain.
“Even though there have been attacks from both sides, the market is holding on to the fact that negotiations are ongoing, and an elusive Iran/U.S. deal to end the war in the Middle East and to reopen the Strait of Hormuz will still be found,” noted Kathleen Brooks, research director at XTB. However, she warned that investors must closely watch upcoming macroeconomic data, adding that “any delay in reaching a deal could knock market sentiment.”
The optimistic momentum followed a stellar performance on Wall Street last Friday, which saw major indexes hit record closing highs, led by a 0.75% gain on the Dow Jones. Ahead of the opening bell on Monday, S&P 500 futures rose 0.3% while Nasdaq futures firmed up by 0.5%.
In contrast, European markets ticked marginally lower. While energy and oil stocks gained from the rising crude prices, those wins were wiped out by losses in the airline and defense sectors.
The inflationary signals from the oil market kept bond yields under pressure. U.S. 10-year Treasury yields ticked up to 4.46%, while German 10-year bund yields rose 4.2 basis points to 2.98%.
Global investors are bracing for a heavy week of economic indicators, including speeches from several Federal Reserve officials, the ISM manufacturing survey, and the highly anticipated U.S. May payrolls report due on Friday.
Market analysts forecast a solid employment increase of 85,000 jobs, which would keep the U.S. unemployment rate steady at 4.3%. Any figures stronger than expected could heighten expectations of an imminent interest rate hike.
“The lineup of Federal Reserve speakers throughout the week should continue to reinforce a balanced two-way policy approach, with officials remaining open to both rate hikes and rate cuts depending on incoming data,” said Chris Weston, chief market strategist at Pepperstone. Weston noted that expectations are building that the Fed may gradually move toward a more neutral policy stance rather than an aggressive easing bias.
Currently, financial markets are pricing in a 50-50 chance of a U.S. rate hike by the end of the year. This sentiment has kept the U.S. dollar firm against major currencies, particularly the Japanese yen. On Monday, the dollar rose 0.12% against the yen to trade at 159.46, sitting just below the critical 160 threshold—a level many analysts believe could force Japanese authorities to intervene to support their currency.
