US Stocks Stop Falling Despite Increasing Oil Prices – Europe Market Wrap

Global markets remained under pressure as renewed fighting between Israel and Iran fueled a sharp rise in oil prices, while investors continued to question the sustainability of the AI-driven rally that has powered equities to record highs.

US equity futures recovered modestly after Friday’s technology-led selloff, with S&P 500 futures rising 0.3% and Nasdaq 100 futures gaining 0.7%. The rebound came despite a deterioration in broader risk sentiment as geopolitical tensions and inflation concerns intensified.

Brent crude surged 4.1% to nearly $97 a barrel after Israel retaliated against Iranian missile attacks, raising fears of further disruption across the region. The move higher in oil added to inflation concerns and reinforced expectations that the Fed may need to keep policy restrictive for longer.

Treasuries weakened as traders increased bets on further Fed tightening, pushing the 10-year Treasury yield 3 bps higher to 4.56%. Rising yields added pressure across rate-sensitive sectors and weighed on global risk assets.

The risk-off tone was more pronounced across international markets. Asia’s benchmark equity index fell 3.2%, led by an 8.3% slump in South Korea’s Kospi, while Europe’s Stoxx 600 declined 0.4%. Construction and retail shares underperformed as higher yields and inflation expectations weighed on interest-rate-sensitive sectors.

Investors enter the week facing a combination of geopolitical uncertainty, rising energy prices, higher bond yields and growing concerns that the powerful AI-fueled rally may have become overstretched. The latest exchange of missile strikes between Israel and Iran marks one of the most significant challenges yet to the fragile ceasefire established earlier this year.