Race to safe havens as Israel strikes Iran

General market commentary

Equity markets closed broadly higher on Thursday, buoyed by encouraging macroeconomic data and strong corporate results from the technology sector. Steady jobless claims and slightly softer-than-expected producer price inflation provided reassurance that the labour market remains resilient while inflation continues its gradual descent. Utility and technology shares led the gains, supported by falling bond yields, with the U.S. 10-year Treasury yield retreating to 4.36%. A well-received 30-year bond auction further underscored robust investor appetite for government debt. Meanwhile, optimism surrounding AI was reignited by Oracle’s earnings, which showed a sharp uptick in demand for AI-related cloud services, sending its shares up over 13% to a record high and lifting sentiment across the broader technology ecosystem.

Outside the US, markets presented a more cautious tone. Asian equities ended mostly lower as investors digested reports of a U.S.–China agreement to ease restrictions on tech and rare-earth exports. European bourses also declined, led by weakness in leisure and travel shares following a fatal Air India crash involving a Boeing Dreamliner, which in turn pressured Boeing shares nearly 5% lower. Adding to the geopolitical strain, news of an Israeli military strike on Iran rattled markets in early Friday trading. U.S. equity futures tumbled, oil prices surged nearly 5%, and safe havens like gold, the yen, and the Swiss franc rose as investors sought shelter. The US dollar also firmed, as investors returned to the greenback amid rising geopolitical risks and ahead of key nuclear talks in Oman.

Latest market and economic update

Asian markets fell sharply on Friday following Israel’s military strike on Iran, which heightened geopolitical tensions and spurred a flight to safe-haven assets. Major indices across the region, including Japan’s Nikkei 225, South Korea’s Kospi, and India’s Sensex, all posted losses of around 1% or more, while oil prices surged over 10% on fears of further escalation.

US equity futures fell sharply this morning, with contracts tied to the Dow, S&P 500, and Nasdaq all declining more than 1% following Israel’s preemptive strike on Iran, which marked a significant escalation in Middle East tensions. In after-hours trading, shares of luxury furniture retailer RH surged 20% after reporting stronger-than-expected earnings, offering a rare bright spot amid broader market caution.

European equities declined yesterday amid renewed trade tensions, with the STOXX 50 falling 1.3% and the STOXX 600 slipping 0.3% after President Trump announced plans for unilateral tariff measures. Major decliners included Deutsche Telekom, down over 3.5%, ASML and Inditex, which lost nearly 2% and 1.7% respectively, while blue-chip names such as SAP, LVMH, Linde, and L'Oréal also edged lower, weighing on the broader market.

The US dollar rebounded sharply on Friday, with the dollar index climbing above 98 as heightened geopolitical tensions in the Middle East spurred safe-haven demand. The euro slipped in response, with EUR/USD currently trading at 1.1533, as investors rotated back into the greenback following its recent slide to multi-year lows amid soft inflation data and renewed Fed rate cut expectations.

Oil prices soared in Asian trading on Friday after Israel launched a major pre-emptive airstrike on Iran, targeting military and nuclear sites and raising fears of a broader Middle East conflict. Brent crude surged 8.5% to $75.15 per barrel, while WTI jumped 8.4% to $73.68, as markets priced in a heightened geopolitical risk premium and potential supply disruptions.

Equities on the move

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

Nvidia will exclude China from its revenue and profit forecasts due to stringent US trade restrictions on chip sales, warning of downside risks for 2026 if sales do not resume. The export controls have already cost Nvidia $2.5 billion in Q1 sales, with an expected $8 billion hit in Q2, effectively barring the company from China’s $50 billion data centre market until new product designs and US approval are secured.

Apple has set an internal target of spring 2026 for the release of its delayed Siri voice assistant upgrade, which will enhance Siri’s capabilities by accessing users’ personal data and on-screen activities. The update, expected as part of the iOS 26.4 release, is a significant step in Apple’s broader artificial intelligence strategy, although no official release date has yet been announced.

Advanced Micro Devices unveiled its new MI350 and MI400 series AI chips, aiming to compete directly with Nvidia’s Blackwell processors, during its "Advancing AI" event. CEO Lisa Su outlined AMD’s product roadmap aligned with Nvidia’s release schedule, highlighting the company’s efforts to expand its market share in the AI chip sector with enhanced software and hardware capabilities.

Adobe raised its full-year revenue and profit forecasts, driven by strong demand for its AI-powered creative software tools like Firefly, which enables image and video generation from simple text prompts. Despite a slow first quarter due to macroeconomic challenges, the company saw a notable recovery in Q2 and expects continued growth, with its Q3 outlook also surpassing analyst estimates.

Boeing shares fell by 4.8% and GE Aerospace dropped 2.2% following the Air India crash, reflecting investor worries about potential impacts on aircraft deliveries and engine operations. Analysts say the market will await investigation results, with concerns focused on possible system issues that could ground fleets and delay deliveries.

Fintech firm Chime’s IPO opened at $43, up 59% from its $27 price, and closed at $37.11, raising $864 million from 32 million shares, led by Morgan Stanley, Goldman Sachs, and J.P. Morgan. The company, with 8.6 million active members, saw revenue grow to $1.673 billion in 2024 and $518.7 million in Q1 2025, with adjusted EBITDA rising to $25.09 million.

AppLovin shares came under pressure yesterday after Culper Research accused the company of hiding its Chinese ownership and operations, raising national security concerns. The report claims undisclosed ties to Chinese entities, contradicting the CEO, and suggests the company’s merger interest in TikTok’s non-Chinese business is a last-ditch effort to lift its shares.

MP Materials shares surged after reports the Trump administration may use the Defense Production Act to prioritise and fund rare earth projects deemed critical to national security. As the sole US producer of these vital minerals, MP Materials could benefit significantly from increased government support amid efforts to reduce reliance on foreign, particularly Chinese, sources.

Reddit’s user base declined for a third straight month in May, with Piper Sandler data showing a 6 million drop driven by falling engagement with feed ad units, alongside slowing U.S. and international audience growth. Meanwhile, the broader digital advertising market is strengthening, with Pinterest and Meta showing improved ad performance and efficiency.

Barclays downgraded several major European insurers, including Allianz, Swiss Re and Zurich, citing limited earnings momentum, full valuations and external risks such as FX pressures and potential U.S. tax changes. While AXA and Munich Re remain the firm’s top picks due to capital flexibility and stronger return potential, the sector overall is seen as offering limited upside.

Jefferies raised its price target on Oracle to $220, maintaining a “Buy” rating, citing strong cloud momentum and robust forward guidance. The firm highlighted accelerating infrastructure growth and rising backlog as signs of sustained demand, with total cloud revenue expected to grow over 40% in fiscal 2026.

Stifel resumed coverage of Monster Beverage with a Buy rating and a $72 price target, citing stronger U.S. sales, accelerating international growth, and product innovation as key drivers. The firm also highlighted overseas expansion as Monster’s biggest long-term opportunity and sees improving sales momentum supporting future gains.

Wolfe Research upgraded Datadog to Outperform and raised its price target to $150, citing stronger-than-expected positioning in AI and positive takeaways from its DASH user conference. The firm highlighted renewed customer confidence, expanded product offerings, and improved growth forecasts as key reasons for the upgrade.

Upcoming data and events

Today, investors will focus on the University of Michigan’s June Consumer Sentiment Index and the Baker Hughes U.S. Rig Count, both key indicators of economic confidence and energy sector activity.

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