Dollar reclaims safe-haven mantle

US equity markets delivered a mixed performance on Monday as investors weighed escalating tensions in the Middle East against resilient corporate earnings and economic data. The Nasdaq Composite advanced 0.4 per cent to 22,748.9 after a two day retreat, while the Dow Jones Industrial Average slipped 0.2 per cent to 48,904.8. The S&P 500 finished broadly unchanged at 6,881.6, leaving it about 17 per cent higher over the past year and only a few percentage points below record highs. Most sectors closed lower, led by consumer staples, though energy shares outperformed as oil prices surged. The recovery from sharp early losses indicated that investors had largely anticipated the geopolitical developments and were cautiously encouraged by the prospect that disruption may prove contained.

Heightened risk followed military strikes by the United States and Israel on Iran, with retaliatory actions adding to uncertainty across global markets. Oil prices rose strongly on concerns over flows through the Strait of Hormuz, supporting energy companies but prompting renewed inflation worries, reflected in higher US Treasury yields. In corporate news, Nvidia gained 3 per cent after announcing investments in Coherent and Lumentum. By contrast, AES fell sharply after agreeing to a take private deal backed in part by BlackRock, while Norwegian Cruise Line declined after issuing weaker forward guidance. Overall, the session underscored a market balancing solid fundamentals against mounting geopolitical and commodity related pressures.

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• Asian equities retreated sharply on Tuesday, led by South Korea’s KOSPI, which plunged 4.3 per cent amid profit taking and geopolitical strain. Japan’s Nikkei 225 fell over 2 per cent. Technology heavyweights SK Hynix and Samsung Electronics slid up to 8 per cent, while Hong Kong energy groups PetroChina and CNOOC Ltd gained on stronger oil prices.

• U.S. equity index futures declined overnight as escalating conflict between the United States, Israel, and Iran showed no signs of de-escalation, with S&P 500 futures down 0.6%, Nasdaq 100 futures falling 0.7%, and Dow Jones futures sliding nearly 0.6%. Nvidia and AMD dipped slightly after reports that the U.S. may impose limits on AI chip exports to China.

• European equities fell sharply on Monday as Middle East tensions escalated following Iran’s Supreme Leader’s killing. The Euro STOXX 50 dropped 2.5% and STOXX 600 fell 1.5%. Banks, luxury equities such as LVMH, Hermès, and Inditex, and auto shares including BMW and Volkswagen declined, while defense and energy shares advanced amid surging oil and natural gas prices.

• The U.S. dollar strengthened sharply following strikes on Iran, reaffirming its safe-haven role amid Middle East tensions. The dollar index rose nearly 1%, supported by robust Treasury markets and the U.S.’s net energy exporter status. Against the euro, the greenback gained, with EUR/USD trading at 1.1685, reflecting heightened investor caution.

• Oil markets remained volatile after prices surged more than 7 per cent amid escalating tensions between the United States and Iran, raising concerns over potential disruption in the Strait of Hormuz. Brent crude climbed to $79.28 and West Texas Intermediate reached $72.31, as Washington announced plans to mitigate rising energy costs and ease market pressures.

• US manufacturing expanded for a second month in February, with the ISM PMI at 52.4, beating forecasts. However, input prices jumped to their highest since October 2022, signalling rising inflation risks amid tariffs. New orders eased but remained strong, while employment stayed weak as firms managed headcount cautiously despite steady demand and exports.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

• European natural gas prices soared Monday after Iranian drone attacks forced QatarEnergy to halt LNG production, affecting nearly 20% of global exports. Dutch TTF futures jumped 46%, with Goldman Sachs warning a month-long Strait of Hormuz disruption could double prices. Extended closures would strain fuel-switching and storage, intensifying Europe’s energy crisis.

• Shares in drone and defence companies surged after US-Israeli strikes on Iran and Tehran’s retaliation heightened regional tensions. AeroVironment jumped 17%, Red Cat 26% and nLIGHT 14%, while Kratos, Unusual Machines and ZenaTech also rose. Major contractors Lockheed Martin and RTX gained over 3% as investors rotated into defence equities.

• Amazon reported that drone strikes in the Middle East damaged some of its data centres in the United Arab Emirates and Bahrain, disrupting cloud services and causing prolonged recovery. The outage affected financial institutions and core AWS services, highlighting risks to Big Tech infrastructure amid the conflict following strikes on Ayatollah Ali Khamenei.

• Nvidia will invest $2 billion each in Lumentum and Coherent to strengthen photonic technologies supporting faster AI data centre chips. The deals include purchase commitments and access to advanced optical products. The move aims to maintain Nvidia’s lead as rivals expand custom silicon, while boosting US manufacturing, research and production capacity.

• ASML plans to expand beyond EUV lithography into advanced chip packaging and larger AI chip tools, aiming to support multi-level “skyscraper” chips. CTO Marco Pieters highlighted AI integration to speed control software and inspections. The company seeks long-term growth, leveraging its optics expertise, with shares up 30% in 2026 and trading at a premium to peers.

• Tesla gained market share in parts of Europe in February, with registrations rising 55% in France, 74% in Spain and 32% in Norway, though falling in the Netherlands and Denmark. The rebound follows two years of declining sales. Despite improvement, its regional market share remains well below recent peak levels.

• Shares in Norwegian Cruise Line fell 10% after fourth-quarter revenue of $2.24 billion missed forecasts, though earnings slightly beat expectations. The company issued weak 2026 guidance, projecting full-year EPS of $2.38 and flagging softer bookings. Analysts warned of pressure beyond the first quarter, while activist investor scrutiny appears to be intensifying.

• Bank of Ireland expects artificial intelligence to deliver around 20% of its planned €250 million cost savings by 2028, with a greater impact thereafter. The lender sees net interest income reaching €4 billion beyond 2028. Workforce reductions will mainly occur through natural attrition as part of its broader efficiency and technology strategy.

• JPMorgan Chase CEO Jamie Dimon said artificial intelligence could reduce the work week to four days and called for government-led retraining for the AI era. Speaking on Bloomberg TV, he noted the US economy is stable, expects the Iran conflict to slightly boost inflation, and highlighted JPMorgan’s cautious, non–winner-takes-all AI approach.

• JPMorgan views geopolitical tensions as a buying opportunity, citing resilient activity, limited downside, softening inflation, and AI-driven deflation. Analyst Mislav Matejka recommends adding exposure during volatility, with the bank remaining overweight on international, emerging market, and Eurozone equities.

• Evercore ISI says the S&P 500’s early 2026 volatility is a buying opportunity, with EPS forecasts raised to $304. Strong earnings, a solid economy and few systemic risks support growth. Pullbacks toward 6,520 are expected to hold. Technology, materials and industrials are poised for the strongest EPS growth, while AI-related weakness offers entry points.

• Citi upgraded UK equities to Overweight, saying their strong exposure to commodities, defensive sectors and aerospace and defence offers protection amid rising geopolitical tensions and higher oil prices, expected above $80 per barrel. The bank downgraded Japan to Underweight, noting it typically underperforms during oil price spikes despite supportive domestic earnings trends.

• Jefferies expects metals and mining shares to keep outperforming as war in Iran heightens geopolitical and inflation risks. A potential Strait of Hormuz closure could disrupt aluminium and iron ore supplies and raise energy costs. Commodities offer an inflation hedge, supporting prices. Preferred shares include Freeport-McMoRan, Glencore, Anglo American and Alcoa.

• Bank of America raised price targets for ExxonMobil to $151 and Chevron to $206, citing higher risk premiums from Middle East tensions. While Iranian production remains largely intact, disruptions in the Strait of Hormuz have pushed crude prices sharply higher, benefiting oil and LNG equities, with impacts possibly temporary.

• JPMorgan reinstated an Overweight rating on Netflix with a $120 target after it withdrew from a Warner Bros acquisition battle, praising its M&A discipline. Shares have rebounded strongly. The bank highlighted solid subscriber growth, margin expansion and cash flow prospects, forecasting double-digit revenue growth and higher buybacks through 2026.

• Piper Sandler upgraded CrowdStrike to Overweight after an 18% share price fall, arguing AI disruption fears are overstated. It set a $520 target, citing strong innovation, consolidation tailwinds and expansion into identity security. AI is seen as boosting demand, positioning CrowdStrike and peers such as Palo Alto Networks for recovery.

• Goldman Sachs downgraded Novo Nordisk to Neutral from Buy, cutting its 12-month target to DKK260 after REDEFINE-4 trial results lowered CagriSema and cagrilintide sales forecasts. Peak sales were halved, and 2026-2030 revenue, profit and EPS estimates were reduced. Shares have fallen 27% year-to-date, with the equity now a “show-me story.”

• Deutsche Bank upgraded Aixtron to Buy, raising its target to €31 after strong Q4 2025 orders. Despite cautious 2026 guidance and a soft Q1 outlook, investors are optimistic. Management expects a transitional year with flat revenues, as a silicon carbide trough is offset by AI-driven optoelectronics laser growth, setting up acceleration from 2027.

Upcoming data and events

On Tuesday, key economic releases include EU and Italian inflation for February, US logistics and optimism indexes, API crude oil stocks, Australian Q4 GDP, and China’s February manufacturing PMIs. Corporate earnings feature CrowdStrike, Sea Limited, AutoZone, Thales, ASM International, and Fresnillo.