Markets turn cautiously risk-on as traders price in reduced geopolitical risk in the Middle East.
Global markets shifted back into a cautious risk-on mood as investors rotated into technology stocks, while oil prices declined and gold struggled to recover. The move came after signals that Israel and Iran were pausing direct attacks, easing immediate geopolitical concerns.
Nasdaq 100 futures climbed 0.7%, signalling a second consecutive day of gains for technology stocks after last week’s decline, while S&P 500 futures rose 0.4%. The rebound was most pronounced in Asia, where South Korea’s chip-heavy Kospi index surged 8.2%, making it the strongest performer among major regional markets.
European markets also opened firmer, with the Stoxx 600 rising 0.5%, as investors returned to the artificial intelligence trade and reassessed geopolitical risks after a volatile period across equities, oil, and gold.
Oil drops as risk premium fades
The shift in sentiment was most visible in energy markets, where Brent crude fell 2% to around $92 per barrel after reports that Israel and Iran had agreed to pause direct attacks. US President Donald Trump also reiterated claims that a potential peace deal with Tehran was nearing, further easing concerns about an immediate escalation into a broader regional conflict.
The decline in oil prices helped ease inflation concerns, as a sustained rise in crude would have increased fuel costs, heightened the risk of tighter central bank policy, and added pressure on consumer spending.
US Treasuries also saw modest gains, with the yield on the 10-year note slipping by one basis point to 4.55%, as investors scaled back expectations of additional US interest-rate hikes.
AI trade gets a second wind
The renewed strength in markets indicates that investors remain willing to buy into technology stocks on dips, even after a short pause in the AI-driven rally that previously pushed equities to record highs.
OpenAI’s confidential filing for an initial public offering further reinforced investor appetite for AI-related companies, while Amazon.com Inc.’s record Canadian dollar bond issuance highlighted continued strong demand for funding from major technology firms.
Overall, the latest market gains suggest investors are becoming more selective, but remain firmly engaged with the broader growth themes of artificial intelligence, cloud computing, and semiconductor demand.
Gold loses support from Middle East risk
Gold stayed under pressure as markets responded to easing geopolitical tensions in the Middle East. The metal traded near $4,300 an ounce, with reduced safe-haven demand limiting its recovery.
Ahmad Assiri noted that gold prices had fallen back toward the $4,300 per ounce level as investors reacted to de-escalating tensions between Israel and Iran.
Ahmad Assiri said overnight developments point to a modest cooling in tensions between Israel and Iran, after both sides signalled a halt to direct military exchanges following US-led efforts.
He noted that Israel had indicated it would refrain from launching additional strikes on Iran for now, while Tehran declared its latest military operation concluded.
“The headlines suggest that markets may be witnessing the release of accumulated tensions, rather than the beginning of a new episode of escalation many had feared,” he said.
This shift has reduced demand for traditional safe-haven assets, although traders remain alert to any renewed military activity involving Lebanon, key shipping routes, or energy infrastructure.
Markets still watching for fresh escalation
Oil prices fell after earlier gains, with Brent crude having risen as much as 5% at the start of the week on fears that the conflict could widen and threaten regional supply routes.
Ahmad Assiri said the benchmark has since given back most of those gains as de-escalation headlines reduced immediate risk concerns.
“The price action suggests that a significant portion of the geopolitical risk premium has faded, although markets remain sensitive to developments that could extend supply disruptions or keep energy security concerns elevated over a longer horizon,” he said.
Gold’s performance reflects a similar dynamic. The metal has tested the $4,300 level and remains broadly flat for the year, with investor positioning closely tied to the evolving geopolitical outlook.
“Gold has also remained under pressure, testing the $4,300 level and leaving the metal broadly unchanged on a year-to-date basis. Its recent price action highlights how closely investor positioning has become tied to the evolving geopolitical narrative, with fading tensions continuing to weigh on sentiment toward the precious metal.”
