Geopolitical tensions escalate after U.S. President terminates memorandum of understanding with Iran, sparking risk-off moves in equities and bonds.
Oil prices surged 5% to $78 a barrel after President Donald Trump declared the memorandum of understanding with Iran over following overnight attacks. The move triggered a sell-off in global markets, with European stocks dropping 1.1% and the Nasdaq down 0.6%. Government bond yields rose, while the dollar strengthened amid heightened geopolitical uncertainty.
Earlier this year, similar spikes in oil prices and bond yields contributed to a near 10% market correction, though the economy demonstrated resilience. Analysts noted that recent OPEC production increases had eased supply concerns, potentially muting the market’s reaction compared to prior periods.
Investors adopted a cautious stance, with risk-off sentiment prevailing, though strategists suggested the response may be less severe than in previous geopolitical flare-ups.