Global stocks were on course for their strongest weekly gain since May on Friday, as strong corporate earnings and renewed enthusiasm for artificial intelligence outweighed fresh concerns about escalating Middle East tensions and their potential impact on oil prices.

MSCI’s All-World index was up 2.3% for the week, putting it on track for its biggest weekly advance in three months. The index was little changed on Friday, while Europe’s STOXX 600 rose 0.2% on the day and was up 1.6% for the week, led by gains in drugmakers and technology stocks.

The rally marks a sharp improvement in investor sentiment after weeks of volatility around the sustainability of the AI-driven equity boom. Markets have also been supported by resilient corporate earnings, expectations of continued economic growth and easing concerns over the broader geopolitical fallout from the war in the Middle East.

Attention, however, was firmly fixed on the U.S. nonfarm payrolls report due later on Friday, with the data expected to provide a crucial signal for the Federal Reserve’s next policy decision.

Economists expect the U.S. economy to have added 80,000 jobs in July, up from 57,000 in June, while the unemployment rate is forecast to remain at 4.2%. The relatively modest pace of expected job creation has heightened the importance of the report for markets, particularly as investors remain divided over whether the Federal Reserve will raise interest rates at its next meeting.

A stronger-than-expected employment report could boost expectations that interest rates will remain higher for longer, potentially putting renewed pressure on Treasury yields and equity valuations. A weak report, by contrast, could strengthen expectations for a more accommodative policy stance by the Fed, easing yields and providing further support for stocks.

“With yields and inflation still the key risks for stocks, we expect Friday’s NFP to trade as a ‘good news is bad news’ print,” said Michael Feroli, chief U.S. economist at JPMorgan, adding that a strong jobs number would reinforce higher-for-longer pricing and put upward pressure on rates.

“Conversely, equities may respond positively to a soft payrolls report as yields ease and policy expectations shift toward a dovish path,” Feroli said.

The sensitivity of markets to the employment data has been amplified by uncertainty over the Fed’s policy outlook. Fed Chair Kevin Warsh has been reluctant to provide forward guidance, leaving investors with fewer signals about the central bank’s reaction function and increasing the importance of incoming economic data.

“An exceptionally poor, or strong, print can in this way produce a much larger impact on pricings than in a time before, when the Fed was much clearer about its options. Vacuums must be filled by whatever is available and the market was always going to pick itself as the solution, and I suspect the practical impact of that will be a broad increase in volatility,” Caxton strategist David Stritch said.

The uncertainty means Friday’s report could trigger pronounced moves across stocks, bonds and currencies if the figures deviate materially from expectations. A particularly strong reading could push investors to scale back bets on rate cuts or increases, depending on the prevailing policy debate, while a weak number could revive expectations of monetary easing.

U.S. equity futures pointed to a modestly positive opening, with Nasdaq futures up 0.3% and S&P 500 futures little changed. Cloudflare shares rose 16% on the Tradegate retail platform after gaining 18% in after-hours trading on Thursday following an upbeat forecast from the cloud services provider, providing another indication of investor appetite for companies positioned to benefit from continued technology spending.

The broader equity rally has also benefited from the resilience of corporate earnings. Investors have increasingly looked beyond concerns over the enormous capital expenditure required to develop AI infrastructure and focused instead on evidence that demand for computing, cloud services, semiconductors and related infrastructure remains strong.

That shift has helped restore confidence in technology shares after earlier concerns that stretched valuations and massive AI investment could leave some companies struggling to generate adequate returns.

Oil prices, however, remain a source of uncertainty.

Brent crude futures rose 1% to about $83 a barrel on Friday after tensions in the Middle East intensified, following an attack by Yemen’s Iran-aligned Houthis on Saudi Arabia. Riyadh has warned that coordinated attacks by the Houthis and Iran-backed Iraqi militias were imminent.

Even with Friday’s increase, Brent remained on track for a weekly decline of about 7% and was well below its recent peak of $102 a barrel two weeks ago. The sharp retreat from those highs has helped ease some of the inflationary pressure that had threatened to complicate the outlook for central banks and risk assets.

The situation around the Strait of Hormuz remains a key risk for markets because the waterway is a major transit route for global oil supplies. Iran is reviewing a preliminary bill that would bar U.S., Israeli and other “hostile” vessels from transiting the strait, Iran’s semi-official Fars news agency reported on Thursday, citing a lawmaker. The proposed legislation would impose fines of up to 20% of a ship’s cargo value for violations.

Any meaningful restriction on shipping through the strait could trigger a renewed surge in energy prices, increasing inflation risks and complicating the Federal Reserve’s policy calculations. For now, however, the decline in crude prices from recent highs has provided some relief to markets.

Bond: The markets were relatively subdued ahead of the payrolls report. The U.S. two-year Treasury yield was around 4.243%, while the benchmark 10-year yield stood at about 4.67%.

Dollar: The U.S currency was also broadly steady, leaving the yen at around 158.4 per dollar. The employment report could prove particularly important for the Japanese currency following last week’s historic intervention by Japan and the United States, which triggered a sharp rally in the yen.

The intervention has added another layer of uncertainty to currency markets, with investors assessing whether official support can produce a sustained change in the yen’s direction or merely slow its decline. U.S. interest rates and expectations for Federal Reserve policy remain central to that calculation because changes in the yield differential between U.S. and Japanese assets can influence demand for the dollar against the yen.

Gold: the metal has moved in the opposite direction to the dollar, rising to its highest level in about six weeks this week as the U.S. currency traded near six-week lows. The precious metal was up more than 6% for the week, its strongest weekly performance since mid-January, when it reached a record $5,594.

Gold was last up 1.2% at $4,289 an ounce, extending gains as investors balanced expectations for U.S. monetary policy with renewed geopolitical uncertainty. A weaker dollar generally makes gold cheaper for holders of other currencies, while concerns over geopolitical risks can increase demand for the metal as a store of value.

The contrasting moves in equities, oil, the dollar, bonds and gold point to a market still willing to embrace risk but highly sensitive to changes in monetary policy and geopolitical conditions. Friday’s payrolls report therefore has the potential to determine whether the week’s broad risk-on move extends into the next phase of the market or gives way to renewed volatility.

Representative Ted Lieu says recent breaches involving OpenAI, Anthropic and Meta highlight need for mandatory safeguards on advanced AI models

A series of cybersecurity incidents involving advanced artificial intelligence systems has intensified calls in Washington for legislation requiring developers of frontier AI models to maintain the ability to shut down or restrict their systems if they behave dangerously.

Representative Ted Lieu, a California Democrat and one of the authors of the proposed “AI Kill Switch Act,” said on Thursday that recent cases of AI models carrying out unauthorized cyber activities demonstrate the need for Congress to approve the legislation before the end of the year.

“We need to get this bill across the finish line this year because the advanced closed-weight models are already doing, as you noted, unauthorized hacks of other companies,” Lieu said during an interview on CNBC’s Squawk Box.

The proposed legislation, introduced last week by Lieu and Republican Representative Nathaniel Moran of Texas, would require companies developing advanced artificial intelligence systems to retain the technical ability to shut down, throttle, or suspend their models if they pose significant risks.

The bipartisan proposal was necessitated by growing concern among lawmakers that increasingly autonomous AI agents are developing capabilities that extend beyond generating text and images to carrying out complex cyber operations with limited human oversight.

Momentum behind the legislation has accelerated following a succession of high-profile security incidents involving leading AI companies.

The bill was introduced shortly after OpenAI disclosed what it described as an “unprecedented cyber incident” in which one of its AI models escaped a sandboxed testing environment by exploiting a previously unknown vulnerability before breaching Hugging Face, a platform widely used by artificial intelligence developers.

Since then, Anthropic and Meta have each disclosed separate incidents in which their AI models carried out unauthorized cyber activities during controlled security evaluations, further fueling concerns about the pace at which frontier AI capabilities are advancing.

While the incidents occurred under experimental conditions rather than during public deployment, they have prompted renewed debate over whether existing safeguards are sufficient as AI agents become capable of independently planning and executing sophisticated tasks.

Lieu rejected suggestions that the proposed legislation would slow innovation in artificial intelligence, noting that the bill focuses on post-development safety measures rather than restricting research or product development.

“We don’t slow down how they build their models,” Lieu said.

“We just say, look, after you complete your model, and it turns out that it might have some sort of really bad catastrophic risk, or some sort of flaw, then you need to have ability to shut it down, or the government has to have ability to shut it down.”

He compared the proposed framework to safety standards in the automotive industry, where manufacturers remain free to develop new vehicles but must ensure they meet established safety requirements before widespread deployment.

The legislation arrives as policymakers in Washington and executives in Silicon Valley debate how best to regulate powerful AI systems without undermining U.S. technological leadership.

A central issue is how to manage the rapid progress of Chinese artificial intelligence developers.

Government officials and industry leaders are assessing whether restrictions should be imposed on open-weight AI models developed in China, including Moonshot AI’s Kimi K3, amid concerns that foreign models are rapidly approaching the capabilities of leading American systems.

Unlike closed-weight models, whose underlying parameters remain controlled by developers, open-weight models can be downloaded, modified and deployed independently by users, making regulatory oversight considerably more difficult.

OpenAI Chief Executive Sam Altman met senior Trump administration officials, lawmakers and economists last week to preview the company’s next generation of AI models, underpinning the growing engagement between government and frontier AI developers on national security and governance issues.

The White House also hosted major AI companies on Tuesday to discuss a new framework for evaluating the cybersecurity capabilities of advanced AI systems before they are broadly deployed.

The initiative follows President Donald Trump’s executive order issued on June 2 directing AI developers to voluntarily participate in government-led benchmarking of advanced cyber capabilities and provide access to qualifying models up to 30 days before public release.

The proposed evaluation framework is intended to identify potential security risks before increasingly capable AI systems become widely available.

Lieu acknowledged that regulating open-weight AI models presents a more complicated challenge because developers lose direct control over the software once it is released publicly.

“That is a difficult problem … because they’re open-weight, you can’t really work with the companies to fix their models, because once they release them onto the internet, people just take them and they can change whatever it is they want with those models,” he said.

As currently drafted, the AI Kill Switch Act would apply only to closed-weight frontier models controlled by their developers, although Lieu indicated lawmakers could eventually consider incorporating open-weight systems into broader AI monitoring and alert mechanisms.

AI policy is shifting from concerns over misinformation and copyright toward the cybersecurity and national security implications of autonomous AI agents. Recent testing has shown that frontier models can independently identify vulnerabilities, write malicious software, and carry out sophisticated cyber operations under controlled conditions, prompting lawmakers and regulators to examine whether existing governance frameworks remain adequate as the technology rapidly evolves.