Global share markets came under pressure on Monday as renewed drone attacks in the Gulf, including a strike on a nuclear power plant in the UAE, drove oil prices and government bond yields higher, rekindling inflation concerns and testing investor confidence at a critical juncture.
The escalation comes as the Strait of Hormuz, the world’s most vital energy chokepoint, normally handling around 20% of global oil and gas trade, remains largely closed except for limited Iranian shipping. Tehran’s attempts to assert formal control over the waterway have created the most severe disruption to energy flows in decades.
“Right now, markets are panicking as they are pricing the possibility that the Strait of Hormuz remains closed,” said George Lagarias, chief economist at Forvis Mazars.
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Brent crude rose about 1% to around $110.50 per barrel, while U.S. crude climbed 1.2% to $106.72. Futures curves signaled deep concern over duration, with September contracts trading above $100 and December hitting contract highs as traders positioned for potentially extended shortages.
This energy surge fed directly into bond markets. U.S. 10-year Treasury yields climbed to a 15-month high of 4.631%, while 30-year yields reached 5.159%. Japan’s 10-year yield hit its highest level since 1996 after the government flagged fresh debt issuance to cushion war-related economic damage. Germany’s 10-year Bund yield rose to its highest in 15 years.
Higher energy costs are feeding into broader price pressures across supply chains, raising borrowing costs for governments, companies, and households alike. This dynamic increases the discount rate applied to future corporate cash flows, posing a particular challenge for high-valuation growth stocks.
Regional Equity Performance
Europe: The STOXX 600 index fell 0.5%, with Frankfurt, Paris, and London trading flat to down as much as 1.1%.
Asia: Japan’s Nikkei eased 1% after already falling 2% last week from record highs. South Korea’s benchmark rose modestly by 0.3%, supported by a nearly 4% gain in Samsung Electronics after a court issued a partial injunction against a planned union strike. MSCI’s broadest Asia-Pacific index outside Japan dropped 0.7%, while Chinese blue chips fell 0.6% following disappointing April retail sales and industrial output figures.
U.S. Futures: S&P 500 futures were down 0.4%, and Nasdaq futures slipped 0.2% ahead of the open.
Earnings Spotlight on AI Resilience
This week’s heavyweight earnings calendar adds significant scrutiny. Nvidia is scheduled to report results on Wednesday, with exceptionally high expectations following a strong run-up. Nvidia shares are up 36% since their March low, and the Philadelphia Semiconductor Index has surged more than 60% on explosive demand for AI infrastructure chips.
Retail earnings, led by Walmart, will also provide a crucial read on consumer resilience amid elevated energy prices and cost-of-living pressures.
Lagarias offered a relatively balanced view on the equity outlook despite rising bond volatility, noting: “As long as this is not a credit event, and we have no evidence to call this a credit event, then beyond the normal volatility seen for a market at all-time highs, I would be surprised if it causes a big rout in equities as well. It can be an excuse for some investors to take some money off the table, but I’d be surprised if we saw a proper correction on the back of this bond volatility.”
Currency, Gold, and Broader Market
Risk aversion supported the U.S. dollar, which benefits from America’s position as a net energy exporter. The euro held near $1.1630, while the pound steadied around $1.3353 after sharp losses last week tied to UK political instability. The dollar-yen pair remained elevated near 158.91, held back only by intervention threats.
Gold, typically a beneficiary during geopolitical stress and inflation scares, was little changed near $4,544 per ounce, reflecting mixed safe-haven flows so far.
The current situation underscores the global economy’s lingering vulnerability to energy supply shocks. A prolonged closure of the Strait of Hormuz could have cascading effects: higher inflation, tighter financial conditions, squeezed corporate margins (especially in energy-intensive sectors), and potential delays to monetary easing by major central banks.
G7 finance ministers gathering in Paris on Monday will discuss the Hormuz crisis and critical raw material supplies, but geopolitical divisions may limit meaningful coordinated action.
While markets have so far shown resilience, sustained high energy prices risk shifting the narrative from “soft landing” optimism to renewed stagflation concerns. The coming days, particularly Nvidia’s earnings, will serve as a litmus test for whether the AI-driven bull market can withstand these external shocks or if rising yields and inflation fears begin to weigh more heavily on sentiment.
Investors are essentially walking a tightrope of balancing strong corporate fundamentals in technology against mounting macroeconomic and geopolitical risks. How this tension resolves will likely set the tone for global markets through the remainder of the quarter.