Global markets turn cautious as Iran tensions, economic data dominate outlook

Global markets adopted a more cautious stance as concerns over renewed tensions involving Iran weighed on sentiment after Iranian media reported explosions in several regions despite recent signals suggesting diplomatic progress.

US President Donald Trump had recently said negotiations were progressing positively, while also arguing that regional countries involved in a future agreement with Iran should join the Abraham Accords.

Despite expectations that tensions between the United States and Iran could ease and that the Strait of Hormuz could reopen, negotiations have yet to produce concrete results, raising concerns over whether recent declines in oil prices can be sustained.

A sharp decline in US crude inventories has also highlighted the importance of progress in ongoing negotiations.

Investors are also closely monitoring US economic growth figures and personal consumption spending data, a key inflation indicator tracked by the Federal Reserve, both scheduled for release later this week and expected to influence market direction.

Interest rates in the United States are expected to remain elevated for a longer period under incoming Federal Reserve Chair-designate Kevin Warsh.

The US 10-year Treasury yield declined by five basis points to 4.51%, while the US Dollar Index rose 0.1% to 99.1.

At the same time, Brent crude oil prices climbed 2.7% to $95.7 per barrel, while gold prices fell 0.9% to $4,531 per ounce.

The New York Stock Exchange remained closed Monday because of the Memorial Day holiday.

US indexes nevertheless opened higher Monday, although trading volume remained relatively limited as several markets in Asia and Europe were also closed due to holidays.

Meanwhile, Italy's stock market reached a record level of 50,326.88 points, supported by gains in energy and semiconductor companies and expectations that the European Central Bank could raise interest rates.

Analysts said the ECB could pursue additional tightening measures if a lasting peace agreement in the Middle East is not achieved.

Among major European indexes Monday, Germany’s DAX 40 gained 2.01%, France’s CAC 40 rose 1.76% and Italy’s FTSE MIB 30 increased 1.43%, while markets opened mixed Tuesday.

Asian markets also traded mixed amid geopolitical uncertainty as investors sought direction from developments surrounding Middle East negotiations.

Ryozo Himino, deputy governor of the Bank of Japan, said the timing of potential interest rate increases remained under assessment as markets continued to monitor developments in the Middle East.

The Kospi Index rose 2.8% to a record high of 8,131.15 points and Hong Kong’s Hang Seng Index added 0.5%, while Japan’s Nikkei 225 fell 0.3% and China’s Shanghai Composite Index declined 0.8% near the close.

*Writing by Emir Yildirim