Tensions in the Middle East have escalated, with the UAE accusing Iran of launching two missiles towards its territory, leading to the UAE cutting ties with Tehran. This comes amidst a prolonged U.S.-Iran stalemate regarding the Strait of Hormuz, where traffic remains a fraction of pre-war levels. Brent crude oil has risen for a fourth consecutive day, holding above $91 per barrel, as the standoff continues and the U.S. prepares to increase economic pressure on Tehran. There is ambiguity regarding the status of mines in Hormuz, with President Trump stating they are removed or detonated, but no clarity on ending the six-month-long conflict.
Globally, bond markets are experiencing a significant sell-off, with U.S. 10-year yields reaching 4.69%, their highest in almost a year. Thirty-year yields have surged to their highest since 2007, and other European and ANZ long-term bond yields are also at highs. This elevated yield environment, coupled with geopolitical uncertainty, is severely impacting equity markets. The S&P 500 and Nasdaq 100 closed negatively, and the STOXX gauge dropped about 3%. Asian equities are down approximately 2%, their worst day in three weeks, with the KOSPI dropping more than 5% due to tech losses.
The semiconductor sector is experiencing a deepening sell-off, with investors retreating due to elevated bond yields and geopolitical concerns. This decline is affecting tech stocks globally, particularly in Asia, where companies in China, Korea, Japan, and Taiwan are all seeing losses. High valuations of tech stocks, which rely on future earnings growth, are particularly vulnerable to rising costs from higher bond yields. Analysts note a "wall of paper" — a significant amount of debt and equity issuance — coming to markets, adding pressure as risk increases.
Despite the global market downturn, China's primary market shows resilience, with Unitree Robotics' IPO surging as much as 600% near its open before moderating to about 500%. This highlights a pattern of strong performance in Chinese primary markets, often favoring retail investors. Unitree Robotics, China's first publicly traded humanoid robot maker, is seen as strategically important amid the AI race between Beijing and the U.S. Meanwhile, Gulf Cooperation Council (GCC) economies, including Saudi Arabia, the UAE, and Kuwait, are demonstrating resilience driven by strong domestic demand, economic diversification, and robust investor confidence, according to Bloomberg Markets reporter Anthony Stephens and Nasser Saidi & Associates [nassersaidi.com].
