Markets exhibit measured reaction to US strikes

General market commentary

Markets are entering the new week on edge following a sharp escalation in Middle East tensions, after the United States launched an airstrike on Iran’s nuclear facilities over the weekend in coordination with Israel. President Trump hailed the operation as a “spectacular military success”, but Iran’s vow of “everlasting consequences” has fuelled fears of retaliation, driving oil prices higher and sparking fresh concerns over inflation. These developments come just days after the Federal Reserve held interest rates steady for the fourth consecutive meeting, maintaining its benchmark at 4.25% to 4.5%. Although the decision was unanimous, policymakers appear increasingly divided, with seven foreseeing no rate cuts this year and eight still expecting two. With inflationary pressures from tariffs already building, the Fed now faces a more complicated path as it gauges the economic impact of elevated energy costs and geopolitical uncertainty.

Despite this backdrop, market performance last week was mixed. The S&P 500 fell 0.2 percent, while the Nasdaq edged up 0.2 percent and the Dow ended flat. Friday’s session was particularly volatile due to triple witching, with trading volumes surging above recent averages. Technology shares weighed on the indices, while energy equities gained amid rising oil prices. Economic data painted a nuanced picture: while headline retail sales declined, largely due to a post-tariff pullback in auto spending, core sales remained resilient. With the Fed likely to remain on pause through the summer and global risks complicating the outlook, investors may benefit from staying diversified. A mix of defensive equity exposure, quality fixed income, and selective opportunities in under-owned non-US equities could help navigate what promises to be a choppy and uncertain second half of the year.

Latest market and economic update

Asian equities fell on Monday as a U.S. strike on Iranian nuclear sites heightened geopolitical tensions, triggering fears of oil supply disruptions. Regional markets, including Japan, China, and Australia, declined despite some positive PMI data. Surging oil prices fuelled inflation concerns, weighing on investor sentiment and risk appetite across Asia.

US equity futures edged lower overnight, with S&P 500 futures down 0.3%, following surprise US airstrikes on Iranian nuclear sites. The move reignited Middle East tensions and lifted oil prices. President Trump’s warnings fuelled concerns of retaliation, with markets now bracing for potential disruption to oil flows through the Strait of Hormuz.

European equities rebounded on Friday, with the STOXX 50 rising 0.6 percent and the STOXX 600 up 0.1 percent, snapping a three-day losing streak amid easing fears over U.S. involvement in the Middle East. Travel and leisure shares led gains, with Kering, Unicredit and Societe Generale among the top performers, while Repsol, Eni and Iberdrola dragged as energy shares declined.

The US dollar index rose to around 99 on Monday, bolstered by safe-haven demand after US airstrikes on Iran. EUR/USD slipped to 1.1502 as geopolitical tensions and inflation concerns drove dollar strength. Investors now await key US data for further economic signals following the Fed’s cautious, data-driven approach.

Oil prices surged early Monday as US strikes on Iranian nuclear sites stoked fears of supply disruptions, with Brent briefly hitting $81. Concerns grew over Iran potentially blocking the Strait of Hormuz or targeting US bases. ANZ forecast prices averaging $90-$95 amid escalating Middle East tensions and possible sanctions.

Equities on the move

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

Tesla launched a small robotaxi trial in Austin, Texas, with self-driving cars carrying paying passengers under safety monitors. CEO Elon Musk hailed it as a decade-long achievement. The rollout faces regulatory scrutiny under new Texas laws and industry challenges, with Tesla relying solely on cameras for autonomous navigation amid cautious optimism.

Apple executives have held early talks about potentially acquiring AI startup Perplexity, which offers AI-driven search tools, although no formal offer or discussions with Perplexity’s management have taken place. This move aligns with Apple’s plans to integrate AI-powered search into its Safari browser and reflects growing competition among tech giants to enhance AI capabilities.

Meta is expanding its wearable tech with Oakley, releasing AI-powered smart glasses called Oakley Meta HSTN, featuring a hands-free camera, open-ear speakers, and water resistance. Priced at $499, they’ll launch in July across several regions, following the success of Ray-Ban Meta glasses, as competitors like Snap and Google invest too.

Novo Nordisk reported that its experimental weight-loss drug CagriSema showed mainly mild-to-moderate side effects and positive results, including significant weight loss and improved blood sugar, in two late-stage trials. The company plans to seek regulatory approval in early 2026, expecting to launch the drug by early 2027 as a promising alternative to Eli Lilly’s tirzepatide.

Stellantis is considering options for its luxury brand Maserati, including a possible sale, Reuters reported. The evaluation began before new CEO Antonio Filosa’s appointment, with Chair John Elkann overseeing the process. Consulting firm McKinsey was hired to assess the impact of U.S. tariffs, with the review still in early stages.

UniCredit CEO Andrea Orcel said the bank will likely withdraw its offer for Banco BPM due to government restrictions and legal challenges. Despite scaling back Russian operations, compliance remains difficult. UniCredit dismissed plans for Commerzbank acquisition, emphasising growth without M&A, and raised concerns over irregularities in Monte dei Paschi’s stake sale.

Accenture reported a second consecutive drop in quarterly new bookings, impacted by reduced US government spending and economic uncertainty, despite beating revenue and profit estimates. To adapt, it launched a new AI-focused business unit, reinvention services, while raising its annual revenue growth forecast to 6–7%.

Kroger raised its 2025 sales growth forecast to 2.25%-3.25% and plans to cut prices to attract cautious consumers amid tariff-driven inflation concerns. Despite a $100 million impairment from store closures, the grocer beat Q1 sales and earnings estimates, maintaining its profit target and reviewing ecommerce operations post-Ocado split.

CarMax reported strong first-quarter results, with revenue up 6.1% to $7.55 billion and used vehicle sales rising 9% year-on-year. Gross profit increased 12.8%, helped by record profit per unit. Auto finance income fell 3.6% due to higher loan loss provisions, while the company repurchased $199.8 million in shares.

Pivotal Research raised Netflix’s price target to $1,600, citing its strong global position, growing ad-supported tier, and strategic investments in sports and content. The firm highlighted Netflix’s scale, free cash flow, and AI potential, while noting risks like content costs and shifting subscriber reporting practices.

Oppenheimer raised Amazon’s price target to $250, citing improved trade conditions and stronger margins, especially a significant boost in e-commerce gross margins for 2025 and 2026. The firm maintained AWS estimates and highlighted CEO Andy Jassy’s AI-driven plans to control headcount, supporting an upgraded profit outlook.

Wells Fargo upgraded Mondelez to Overweight with a $78 target, citing strong price execution, easing inflation, and attractive valuation. Despite record chocolate prices, demand remains resilient, supporting sales growth and margin expansion. Mondelez trades at a discount to peers despite higher expected EPS growth, making it a unique, steady share.

Morgan Stanley cut its price target on LVMH shares from €560 to €510, citing sharper-than-expected earnings pressure due to operating deleverage and adverse FX impacts. It lowered 2025 forecasts for sales, EBIT margin, and EPS, highlighting weaker demand from key markets like Chinese tourists. Despite near-term challenges, the bank remains positive on LVMH’s long-term prospects.

Barclays upgraded Tui to “overweight” and raised its price target to €11, citing improved earnings momentum, reduced debt, and resilient travel demand. Despite doubts about Tui’s long-term strategy, the firm forecasts rising EBIT, net income, and dividend resumption in 2025, highlighting Tui’s strong assets and market position in leisure travel.

Upcoming data and events

This week, investors will closely monitor Middle East tensions after the US struck Iranian nuclear sites, raising fears of broader conflict. Attention also turns to Fed Chair Powell’s congressional testimony for policy signals. Key US data and flash PMIs from the US, Eurozone, Japan, and India will guide market sentiment.

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