Equities wobble as Middle East tensions flare

Equities are attempting to stabilise during the European session after a weaker performance in Asia overnight, where sentiment was hit by reports of renewed US strikes in southern Iran.

 
The latest developments have pushed geopolitical tensions back into focus after markets had spent much of last week leaning into hopes of a broader peace framework between the US and Iran. Oil prices initially rebounded on the headlines as traders rebuilt some geopolitical premium into crude, though the reaction across broader risk assets has so far remained relatively contained. That resilience stands in contrast to the strong performance seen in US equities on Wednesday, when the S&P 500 and Nasdaq pushed to fresh all-time highs despite rising yields and lingering macro uncertainty. The rally was largely driven by continued optimism around AI and strong corporate earnings, particularly after encouraging commentary from semiconductor names reinforced confidence in hyperscaler demand and the broader capex cycle.

This leaves markets in a more delicate position heading into the end of the week. Investors are still broadly positioned for a de-escalation scenario in the Middle East, but recent headlines are a reminder that the path toward any agreement remains fragile. The fact that equities have held up relatively well despite rising oil and renewed geopolitical risk suggests the earnings narrative continues to dominate for now, although momentum in big tech has started to cool slightly at the margins