Global markets traded on a mixed trend due to concerns over the indirect effects of re-escalating tensions in the Middle East on inflation and monetary policy worldwide, while all eyes turned to the Fed’s meeting minutes to be released on Wednesday.
The continuation of military maneuvers in the Middle East heightened the geopolitical risk perception in the markets, with US and Iranian delegations set to meet for talks in the near future.
US Central Command said more than 80 Iranian targets were struck and that American forces are deployed and on standby.
Iranian parliament speaker Mohammad Bagher Qalibaf said the US attacks violated the memorandum of understanding between the two countries, emphasizing that results cannot be reached through bullying and coercion.
Brent crude oil surged 5.2% on Tuesday with renewed tensions, its fastest daily hike since April 29, reaching $75.8 per barrel. Brent crude is trading up 0.2% at $75.9 per barrel on Wednesday.
Rising oil prices, fueled by concerns that regional peace efforts will not be sustainable, are threatening the inflation outlook.
Market expectations for the timing of the Fed's hawkish moves have shifted in response to recent developments. The Fed is 77% likely to raise interest rates in September, according to other forecasts, and it could do so as early as 2027.
Analysts believe that potential clues in the Fed's meeting minutes, which will be released on Wednesday, will provide insight into monetary policy.
Meanwhile, rising chip costs put pressure on the technology and semiconductor sectors, and China's DeepSeek's own artificial intelligence (AI) chip fueled the fire.
Analysts expect the developments to intensify concerns over US chipmakers’ competitive edge and AI investments.
At the same time, the US trade deficit widened 42.2% month-on-month in May to $77.6 billion, its highest since March 2025.
Short-term inflation expectations among US consumers increased to 3.7% in June, the highest level since September 2023.
The US 10-Year Treasury yield rose 10 basis points to 4.56% on Tuesday before settling at 4.55% at the start of Wednesday.
The US Dollar Index rose 0.3% on Tuesday to 101.2 amid concerns that the Fed may tighten its monetary policy. The index is at 101.1 on Wednesday, down 0.1%.
Gold fell 1.4% on Tuesday due to a stronger dollar and rising bonds, closing at $4,106 per ounce, while trading up 0.5% on Wednesday at $4,125.
Chip companies saw a wave of selloffs as Marvell Technology shares dropped 7.5%, Lam Research 6.9%, AMD and Applied Materials 6.5% each, Micron Technology 4.7%, Qualcomm 1.9%, and Broadcom around 1%.
The S&P 500 fell 0.45%, the Nasdaq 1.16%, and the Dow Jones 0.25% on Tuesday. American indexes opened Wednesday mixed.
Meanwhile, European stock markets fell on Tuesday, with the exception of the UK, which benefited from rising demand for energy stocks, while all eyes are on British political developments.
Nigel Farage, the leader of the far-right Reform UK party, resigned from parliament after his failure to report donations was revealed, but he has stated that he will run again in the by-election to fill his vacant seat.
The European Commission has developed an action plan to address the growing risks that advanced AI models pose, particularly in aiding cyberattacks.
Germany’s industrial production climbed 0.9% on a monthly basis in May, above estimates, while the seasonally adjusted industrial production showed no change on an annual basis.
The UK's FTSE 100 rose 0.1%, while France's CAC 40 fell 0.51%, Germany's DAX 40 dropped 1.37%, and Italy's FTSE MIB 30 declined 0.95% on Tuesday.
At the same time, chip sector developments and geopolitical risks threatening energy supplies drove the mixed trend near the close in Asian markets.
China’s DeepSeek reportedly developed its own AI chip, supporting a positive outlook in Chinese and Hong Kong stock markets.
Chinese semiconductor giant SMIC’s shares surged 7.2%.
Japan’s current account surplus stood at around $24.45 billion for May, according to data released on Wednesday.
Near the close, Japan's Nikkei 225 fell 0.66%, South Korea's Kospi Index declined 4.35%, China's Shanghai Composite Index rose 0.3%, and Hong Kong's Hang Seng Index gained 2.46%.
