Risk appetite has fallen sharply amid the conflict between Israel and Iran

The US stocks fell sharply on Friday amid weakening risk appetite after Iran condemned Israel’s airstrikes as a “declaration of war” and responded with missile strikes. The strikes targeted Iran’s nuclear and military facilities, significantly increasing geopolitical tensions and causing concern in global markets. At the end of Friday, the Dow Jones Index (US30) fell by 1.79% (-1.38% for the week). The S&P 500 (US500) Index fell by 1.13% (-0.46% for the week). The Nasdaq (US100) Technology Index closed lower by 1.29% (-0.68% for the week). Financial and technology companies led the losses: Nvidia fell by 2.1%, Apple declined by 1.4%, and Visa and Mastercard fell by more than 4%. Airline stocks also fell: American, Delta, and United declined by 4.5–5%. Meanwhile, energy and defense stocks did well as oil prices jumped nearly 7%. On the other hand, inflation expectations showed a noticeable improvement: inflation expectations for the year ahead fell sharply to 5.1% in June from 6.6% in May, while long-term inflation expectations fell for the second month in a row, dropping to 4.1% from 4.2%.

European stock markets were mostly down on Friday. The German DAX (DE40) fell by 1.07% (-3.03% for the week), the French CAC 40 (FR40) closed down 1.04% (-1.43% for the week), the Spanish IBEX35 (ES35) lost 1.27% (-2.23% for the week), and the British FTSE 100 (UK100) closed down 0.39% (+0.14% for the week). The Eurozone trade surplus in April 2025 fell to €9.9 billion from €13.6 billion a year earlier and was below market expectations of €18.2 billion. This also marked a sharp decline from March’s record high of €37.3 billion, with the decline mainly due to a sharp reduction in the chemical products surplus following the introduction of new US tariffs. European stock markets opened cautiously on Monday as investors monitored the escalating conflict between Israel and Iran, which risks escalating into a broader regional crisis. Military action continued over the weekend, with both countries striking energy infrastructure, causing oil prices to rise further. Iran also warned that it could block the Strait of Hormuz, a key bottleneck for global oil supplies.

The Swiss franc traded at around 0.81 per US dollar, close to its highest levels since 2011, amid a broad flight to safety triggered by escalating tensions in the Middle East. In addition to geopolitical risk, several other factors contributed to the strengthening of the franc, which has risen by about 10% this year. These include uncertainty over President Trump’s trade policy and a broad weakening of the dollar caused by lower inflation data and growing concerns about the US economic and fiscal outlook. Domestically, the Swiss National Bank (SNB) may soon reintroduce negative interest rates. Markets widely expect the SNB to cut its key rate this week.

WTI oil prices jumped by 7.2% on Friday and settled just below $73 per barrel on Friday. On Monday, oil prices continued to rise to $75 per barrel. Israel launched an attack on the giant South Pars gas field in the Persian Gulf over the weekend, forcing the production platform to shut down, following airstrikes on Iran’s nuclear facilities and military leadership last week. Although the strikes have not yet led to a halt in Iranian oil exports, markets fear the worst-case scenario, in which Tehran disrupts supplies through the Strait of Hormuz, a vital shipping route.

Asian markets were mostly down last week. Japan’s Nikkei 225 (JP225) fell 0.51%, China’s FTSE China A50 (CHA50) declined 0.29%, Hong Kong’s Hang Seng (HK50) fell 0.35%, and Australia’s ASX 200 (AU200) showed a positive result of 0.10% over the past week. Hong Kong stocks are down for the third consecutive session, despite strong economic data from China. Mainland retail sales in May grew at their fastest pace in 15 months, while industrial production grew at its slowest pace in six months, and the unemployment rate fell to a six-month low.