Global equities retreated from record highs on Thursday as fresh attacks in the Middle East cast doubt on the prospect of a near-term ceasefire. Oil prices and bond yields climbed, while the U.S. dollar advanced for a third consecutive session. Bitcoin fell to its lowest level in over six weeks.
S&P 500 futures dipped 0.2%, signaling a potential end to the benchmark index's winning streak of more than a week. Nasdaq 100 futures declined 0.4%. Key earnings reports scheduled for Thursday include computer maker Dell Technologies, set to report after the market close. Results from Costco and discount retailer Dollar Tree will offer insights into the health of U.S. consumer spending.
The Europe-wide Stoxx 600 index fell 0.5%, slipping slightly from its February peak. European technology stocks held up relatively well despite weakness in Nasdaq futures. London's FTSE 100 dropped 0.7%; Paris's CAC 40 declined 0.2%. In Frankfurt, a 2.1% drop in pharmaceutical giant Bayer weighed on the DAX index, which fell 0.15%. Italy's FTSE MIB was flat, while Spain's IBEX 35 slipped 0.2%. The Dutch AEX index, with a heavy weighting in tech stocks, fell 0.3%.
Major Asian equity benchmarks ended their longest winning streak since February. Japan's Nikkei 225 average fell 0.5%, and South Korea's KOSPI closed 0.5% lower, ending a four-day rally. Hong Kong's Hang Seng Index dropped 1.3%. China was the only major Asian market to advance, with the Shanghai Composite Index rising 0.15%.
Brent crude oil rose 2.1% to above $96 a barrel following U.S. airstrikes on an Iranian military target. Bond prices fell and yields rose across most markets. Meanwhile, the Federal Reserve's preferred inflation gauge is set for release on Thursday, with expectations that the data will show a further move towards 4%.
**Renewed U.S.-Iran Clashes** Regarding the Middle East situation, the U.S. military stated it had launched a new strike against an Iranian drone operation, while Tehran claimed it had attacked a U.S. Air Force base in Kuwait. The day's developments indicated the conflict is expanding rather than stabilizing. Iran's Revolutionary Guard warned that any further U.S. military action would trigger a more decisive response, with Washington bearing full responsibility for all consequences. This statement eliminated any remaining doubt about Iran's intent: this was a deliberate, explicitly named retaliatory action, not an isolated incident.
With traffic through the Strait of Hormuz remaining at extremely low levels, Brent crude surged 2.5% to $96.6 per barrel. Although oil prices have retreated from four-year highs above $126 per barrel in late April, they remain 33% above pre-conflict levels and 50% higher than a year ago.
Analysts at ANZ stated, "Until there is news showing progress towards ending the conflict, traders are becoming increasingly cautious about holding long crude oil exposure. Crude supply remains constrained, and key points of disagreement are still unresolved." Concurrently, traders are awaiting official U.S. inventory data from the Energy Information Administration later, following significant stockpile declines due to supply disruptions.
Madison Cartwright, Senior Geoeconomics Analyst at Commonwealth Bank of Australia, said, "Within the next two weeks, we expect either a new ceasefire agreement to be reached, or the current truce will have broken down, with a full resumption of hostilities."
He assigned a 70% probability to a deal being reached but noted that the fate of the Strait of Hormuz remains uncertain. He added, "Insurance costs for passage through the Strait of Hormuz have become prohibitively high, and it is unclear how or at what price insurance will be restored. It is also unclear whether Iran will charge a toll or a similar fee under another name."
However, Mathias Heim, Chief Investment Officer at Belle Capital, argued that current market caution and concerns about overextended equity gains might be exaggerated.
Heim stated, "If a peace deal takes another two weeks or two months, I don't think the market will care as much anymore, unless there is a material breakout to the upside in oil prices. The real key factor is the AI capital expenditure cycle, which is driving profit growth and valuation multiples. Structurally, equities remain the preferred asset class."
The latest round of conflict between the U.S. and Iran shows the ceasefire remains fragile, although most traders still believe a deal is only a matter of time. Simultaneously, the risk of oil-driven inflation is rising, prompting central bank officials to increasingly warn that interest rates may need to be raised.
Aneeka Gupta, Director of Macroeconomic Research at WisdomTree, said, "The market is caught between two very different scenarios. One scenario is a deal followed by a strong cyclical recovery; the other is a conflict that deepens the stagflationary shock in the economy."
**PCE Data Surprise Risk** Market attention is now turning to U.S. Personal Consumption Expenditures (PCE) data, which includes the Fed's preferred inflation gauge. This will be the first major inflation reading since Kevin Warsh assumed the role of Fed Chair.
Data due Thursday is expected to show the U.S. PCE price index rose 3.8% year-over-year in April. This would mean inflation is a full percentage point higher than the February level, marking the largest two-month increase since 2021. Core inflation is forecast to rise 0.3% month-over-month and increase to 3.3% year-over-year, significantly above the Fed's 2% target.
The resurgence in inflation has prompted more Fed policymakers to call for abandoning an easing bias and even preparing for rate hikes.
Less than a day after Fed Governor Lisa Cook warned inflation was moving in the wrong direction, Minneapolis Fed President Neel Kashkari also stated consumer prices remained "too high." Fed Vice Chair Philip Jefferson cautioned that, while he expects the impact of tariffs and rising energy costs to fade, inflation risks remain skewed to the upside. South Korean policymakers also signaled on Thursday they are increasingly leaning towards raising borrowing costs in the coming months.
Holger Schmieding, Chief Economist at Berenberg, noted that given markets have abandoned expectations for Fed rate cuts in the foreseeable future, a significant bond market move is unlikely unless core PCE comes in well below expectations. Schmieding said, "As for whether and by how much the Fed might hike afterwards, we need to see if the Iran shock transmits to non-energy prices."
**Bond Market Sell-Off** U.S. Treasury yields rose across the curve. Data from Tradeweb showed the two-year yield increased by 3.7 basis points to 4.068%, while the 10-year yield climbed 3.9 basis points to 4.519%. Danske Bank analyst Filip Andersson said in a note, "Even though the U.S. reiterated that strikes on Iran were 'defensive' and that it intends to maintain the ceasefire, markets will likely remain sensitive to new headlines, and recent optimism about an imminent diplomatic deal is at risk of being questioned."
Eurozone government bond yields followed U.S. Treasuries higher. Thursday's market faced a large supply of bonds, including an Italian bond auction and syndicated sales from Austria and Portugal. Germany's 10-year Bund yield rose 2.7 basis points to 3.009%.
Concerns about rising oil prices also pressured government bonds in other countries on Thursday. Australia's 10-year bond yield rose 6 basis points, and New Zealand's equivalent yield increased 2 basis points. Japan's benchmark 10-year government bond yield edged up 0.5 basis points.
**Dollar Extends Gains for Third Day** Shifting Fed policy expectations supported the U.S. dollar. The dollar index, which tracks the currency against a basket of peers, was at 99.506, largely unchanged for the week. David Morrison, Market Strategist at Trade Nation, said, "I know there are a lot of dollar bears in the market, and that has been the case for a while. But there is always a counter-narrative. The dollar could see a bit of a rebound here."
The dollar hovered near a four-week high against the yen at 159.5, just below the 160 level that has previously triggered intervention by Japanese authorities. The euro slipped 0.1% to $1.161 and was on track for a 1.1% monthly loss. However, expectations that the European Central Bank will raise rates in June provided some support for the single currency.
ECB Chief Economist Philip Lane said on Thursday that policymakers must prevent rising energy costs from feeding into broader inflation expectations.
Gold prices extended losses from the previous session, accelerating their decline below $4,400. Ongoing concerns about the impact of the Iran conflict on inflation and interest rate prospects weighed on the metal. Analysts at Saxo Bank noted, "With crude oil prices surging again, U.S. Treasuries being sold off, and the dollar strengthening, fears that tightness in energy markets will continue to exert upward pressure on inflation have pushed gold to a two-month low." The bank also pointed out that rising fuel prices are increasing pressure on some countries to sell gold reserves to support their currencies and economies, which are being hit by higher import costs.
With a late-June deadline for U.S. tariff decisions approaching, a wave of hedging activity in the copper market has ignited a significant arbitrage opportunity between exchanges.
As the U.S. government nears a final deadline (end of June) for deciding whether to impose tariffs on refined copper imports, market hedging sentiment has intensified sharply, directly causing a significant widening of the arbitrage spread between copper prices on the COMEX and the LME.
The premium for U.S.-delivered copper continues to climb, diverting global copper flows to the U.S. market and tightening supply in other regions simultaneously—a scenario reminiscent of market anxiety in the same period of 2025.
Data shows the COMEX spot copper price is at a premium of about 3% over the LME price, while the March 2027 forward contract premium is nearing $1,000 per ton, equivalent to about 7% of the LME price.
Combined with signals from the U.S. government—a 15% tariff on refined copper starting early 2027, rising to 30% in early 2028—the COMEX premium has ample room to rise further.
**Stocks in Focus** Discount retailer Dollar Tree saw its shares surge over 11% after reporting adjusted earnings per share of $1.74 for the first quarter, significantly beating the FactSet analyst consensus of $1.53. The company's revenue, current quarter, and full-year guidance all exceeded market expectations. Additionally, Dollar Tree announced a partnership with delivery platform DoorDash to offer on-demand delivery from its stores.
Salesforce shares fell 1%. According to LSEG data, the cloud software provider issued current-quarter revenue guidance of $11.27 billion to $11.35 billion, below the analyst consensus of $11.36 billion. However, Salesforce raised its full-year earnings guidance range, and its Q1 revenue and earnings both exceeded expectations.
Medical device supplier Agilent Technologies raised its full-year adjusted EPS guidance to $6.00-$6.10 (from a prior range of $5.90-$6.04), sending its shares up 9%. The company's Q2 revenue and profit both surpassed market expectations.
Best Buy shares jumped nearly 8% after reporting Q1 revenue and earnings that exceeded expectations. Comparable store sales grew 2% year-over-year, led by performance in gaming, computers, mobile phones, and services. The company also reaffirmed its full-year guidance.
Marvell Technology provided an optimistic outlook for the current quarter (adjusted EPS of $0.93 and revenue of $2.7 billion, better than market expectations of $0.90 and $2.6 billion), yet its shares still fell nearly 3%. Q1 revenue and profit also exceeded expectations.
Hormel Foods shares rose 10% after reporting Q1 adjusted EPS of $0.40 (FactSet consensus $0.35). Revenue was largely in line with market expectations.
Everpure (formerly Pure Storage) reported Q1 non-GAAP gross margin in line with expectations, but adjusted earnings and revenue exceeded forecasts. Despite issuing current-quarter and full-year operating profit guidance above market expectations, its shares fell over 10%.
Cloud data platform provider Snowflake soared nearly 37%. The company announced a $6 billion commitment to Amazon Web Services (AWS) over five years. Q1 results beat expectations: adjusted EPS of $0.39 and revenue of $1.39 billion (LSEG consensus $0.32 and $1.32 billion).
Snowflake's earnings report boosted software peers: Datadog shares were up 6% pre-market, and ServiceNow rose over 5.5%.
Chip design software maker Synopsys fell over 2.5%. The company reached an agreement with activist investor Elliott Investment Management to appoint Jesse Cohn to its board, effective June 1. Q2 results beat expectations: adjusted EPS of $3.35 and revenue of $2.28 billion.
Cloud computing company Nutanix rose 2%. Fiscal Q3 adjusted earnings and revenue exceeded expectations, with non-GAAP operating margin reaching 22.3% (analyst expectation 16.9%).
Cloud software services provider Braze reported Q1 adjusted EPS of $0.10, matching the LSEG consensus, but its gross margin of 67.4% fell short of the 68.8% market expectation. Full-year non-GAAP operating profit guidance of $70 million to $74 million (FactSet consensus $71.3 million) led to a 10% drop in its share price.
Burlington Stores fell 3.5% despite reporting Q1 revenue and earnings that beat expectations, issuing current-quarter and full-year guidance above market forecasts, and planning to open a net 115 new stores for the full year.
Kohl's shares rose nearly 11% after reporting a Q1 loss per share of $0.13 (FactSet consensus loss of $0.19), a smaller loss than expected. Revenue was in line with expectations.
Energy technology company American Superconductor forecast current-quarter adjusted EPS above $0.17 and revenue above $85 million, but FactSet consensus was $0.22 and $87.1 million, leading to a nearly 7% drop in its share price.
Financial institution software provider nCino raised its full-year revenue guidance to $642 million-$646 million (from a prior range of $639 million-$643 million), sending its shares up 12.5%.
Reports that the former Trump administration is negotiating funding for certain drone companies led to sector-wide gains: Unusual Machines up 28%, Red Cat Holdings up 14%, Kratos Defense & Security Solutions up 10%.
Dell Technologies shares rose 4% after signing a $9.7 billion contract with the U.S. Department of Defense to provide a full suite of software.
Dutch cloud computing services provider Nebius rose 10% after a hedge fund run by a former OpenAI employee disclosed a 5.6% stake in the company.
Fertitta Entertainment announced a $17.6 billion all-cash acquisition of Caesars Entertainment, sending its shares up 2%. Fertitta stated the deal would combine two top-tier hotel and casino groups.
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