Global stock markets started the new quarter cautiously, with MSCI's gauge of stocks across the globe falling 0.22% to 1,117.95 points. The Dow Jones Industrial Average decreased by 0.03% to 52,305.24, the S&P 500 by 0.22% to 7,483.23, and the Nasdaq Composite by 0.66% to 26,040.03. Federal Reserve Chair Kevin Warsh indicated that while inflation expectations have lowered, the central bank would maintain its 2% inflation target and not pursue loose monetary policy, which weighed on the dollar despite expectations of future rate hikes.
Oil prices dropped as optimism surrounding U.S.-Iran talks eased supply concerns, particularly after the reopening of the Strait of Hormuz. U.S. crude fell 2.03% to $68.09 a barrel, and Brent crude fell 2.44% to $71.17 a barrel. Despite these declines, both remain up almost 20% year-to-date. Analysts have also cut their 2026 oil price forecasts for the first time since the Iran war began, reflecting increased confidence in supply normalization. Phil Flynn, senior analyst for Price Futures Group, noted increased optimism as more oil moves through the Strait of Hormuz, suggesting future increased production.
Asian markets showed mixed performance, largely due to a sell-off in the artificial intelligence (AI) fueled chip sector, following a strong rally last quarter. Japan's Nikkei gained 0.6% after surging 37% last quarter, while South Korea's main index, the KOSPI, dropped over 2% to 8,303.41, influenced by investor profit-taking after a 68% rally driven by AI chip demand. Concerns about the yen, which touched fresh 40-year lows against the dollar before rebounding, also kept traders on alert for possible Japanese intervention. Data showed private employment in the U.S. rose by 98,000 jobs in June, below forecasts of 118,000.
European stocks also saw declines, with the pan-European STOXX 600 index falling 0.38% and Europe's broad FTSEurofirst 300 index falling 0.45%. Emerging market stocks fell 0.06%. The dollar index rose 0.17% to 10.41, while the euro was down 0.39% at $1.1376. Interest rate futures imply no Fed rate hike this month, but a hike in September is priced in. Traders are also looking ahead to U.S. economic data expected on Thursday, particularly the employment report.
