Global markets concluded the second quarter of 2026 on a strong note, driven by a rebound in technology shares, easing tensions in the Middle East, and falling oil prices. This positive sentiment has lifted investor risk appetite, leading to expectations of the best quarter for US stocks in six years. While investors remain cautious about persistent high US interest rates and elevated inflation, the focus has shifted back to AI-driven growth and the upcoming Q3 2026 reporting season.
Technology stocks saw a significant rebound as investors bought into the recent AI-led dip. Wall Street closed firmly higher, with the Nasdaq outperforming after renewed strength in major AI-related companies helped it recover much of last week's losses. The Dow Jones also reached a new record high, supported by broad-based buying following signs that US-Iran tensions are easing despite sporadic military exchanges. This market turnaround is also reflected in oil prices, with Brent crude falling below $73 per barrel, erasing almost all of the geopolitical premium built up during the conflict. The reopening of shipping through the Strait of Hormuz and eased restrictions on Iranian oil exports have improved the global supply outlook.
Despite the positive equity market performance, bond and currency markets remain more cautious. The US dollar continues to strengthen, heading for its strongest quarterly performance in almost a year, reflecting expectations that the Federal Reserve will maintain restrictive policies for longer. The Japanese Yen weakened to a four-decade low near ¥162 per dollar, raising speculation about potential intervention by Japanese authorities. Gold suffered its weakest month since 2008, and its fourth consecutive month of losses, now trading around $3,965 per ounce, as investor sentiment shifted away from defensive assets following eased geopolitical tensions. Investors are also preparing for upcoming macroeconomic data, including the US non-farm payrolls report later in the week, and Federal Reserve Chair Kevin Warsh's speech at the ECB's Sintra conference. Asian markets, particularly Japan's Nikkei (up 38%) and South Korea's KOSPI (up 70%), completed record-breaking quarters, largely fueled by strong demand for semiconductor companies and AI-related investments.
