Global stock markets saw significant turbulence in the first half of 2026 due to the Iran war and an AI-driven boom. The MSCI All-Country World index jumped almost 10%, or roughly $7 trillion, in market capitalization. This period included the best second quarter since 2020, with South Korea’s stock market surging by 100% and the Nikkei up almost 40%. The war initially caused a $9 trillion drop in March, pushing oil to $120 a barrel and dashing hopes for lower interest rates. However, most of the second-quarter gains were fueled by an AI rally, particularly in Asian markets.
Despite the overall positive market performance, there are underlying concerns. The "Magnificent Seven" tech giants have collectively underperformed the MSCI world index, and the Bank for International Settlements has warned about potential strife if AI returns disappoint. The Japanese yen has reached a 40-year low against the dollar, trading around ¥161.93, despite attempts by the Japanese government to prop it up by spending ¥11.7 trillion ($72.25 billion). This currency weakness is now considered a key global risk point.
Looking ahead, investors are anticipating a lively second half of the year. The UK awaits a new prime minister, the yen remains fragile, and new U.S. Federal Reserve chief Kevin Warsh is sounding hawkish, reinforcing expectations for potentially tighter monetary policy amid resilient U.S. economic reports. Donald Trump is also gearing up for the November U.S. midterms. Analysts like Equity Bank’s Robertson fear a blitz of upcoming IPOs could signify "peak AI" before year-end, while Standard Chartered’s Patrick Dupont-Liot senses an "undertone of risk" in the markets. Oil prices have retreated to pre-conflict levels, and gold has lost some of its shine, experiencing a 14% quarterly drop, its largest since 2013.
