Geopolitics set the tone for markets last week. Escalating hostilities between the United States and Iran pushed oil prices sharply higher, reviving inflation concerns just as softer American price data had begun to build the case for easier monetary policy. The combination proved uncomfortable for equity investors: rising energy costs, elevated bond yields, and fresh doubts about the pace of artificial-intelligence spending converged to produce a broad retreat in technology shares, even as energy stocks and value-oriented names held up considerably better.

Equities

US indices ended the week lower, with the S&P 500 down 1.6 percent, the Nasdaq off 2.9 percent, and the Dow slipping 0.9 percent. Semiconductor stocks bore the brunt of the selling as investors questioned whether the current level of AI-related capital expenditure can be sustained. Beneath the surface, however, the picture was less bleak: energy shares rallied alongside crude, and the average stock fared better than the technology-heavy benchmarks suggest. The earnings season has started well, with roughly 90 percent of the S&P 500 companies that have reported so far exceeding expectations. Europe proved more resilient, the STOXX 600 ending the week broadly steady as earnings and takeover activity offset Middle East concerns, though Germany's DAX softened into Friday's close. Asia was the week's clear laggard: Japan's chip-heavy Nikkei 225 fell 6.4 percent, its worst week in some time, while Hong Kong's Hang Seng also lost ground.

Rates & Credit

Government bonds ended the week close to where they began. The 10-year US Treasury yield finished near 4.55 percent, little changed, as investors weighed softer inflation readings against the inflationary implications of dearer oil. The two-year yield closed at 4.18 percent, leaving the curve modestly positive at around 37 basis points, with longer-dated Treasuries underperforming slightly. In Europe, the 10-year Bund yield climbed above 3.1 percent, its highest level since May, as rising energy prices reinforced expectations of further European Central Bank tightening, and French OATs tracked the move higher.

Currencies

The dollar headed for a modest weekly decline after subdued US inflation data, with EUR/USD ending the week around 1.14. The yen remained the notable weak spot, trading near 162 to the dollar, close to its softest level in four decades, as markets saw little sign of decisive support from Tokyo. Sterling drifted lower to around 1.34 amid political uncertainty surrounding the UK leadership transition, while the Swiss franc firmed on safe-haven demand, taking USD/CHF down toward 0.81. In emerging markets, the Mexican peso and Brazilian real were steady near 17.4 and 5.08 respectively, their wide real-rate cushions continuing to attract carry investors.

Commodities & Gold

Oil dominated the commodity complex. Brent crude ended the week near $88 a barrel, a gain of more than 10 percent, with WTI settling near $80, as the intensifying US–Iran conflict raised fears of broader regional disruption. Gold, by contrast, slipped below $4,000 an ounce, down more than 3 percent in its largest weekly loss in six weeks — an unusual response to geopolitical stress, but one that reflects concern that higher oil prices will keep interest rates elevated. Copper fell below $6.20 a pound on Friday, surrendering earlier gains that had been driven by supply disruptions in Chile.

The Week Ahead

Attention now turns to Thursday's European Central Bank meeting, where policymakers are widely expected to hold rates steady following last month's quarter-point increase. The People's Bank of China also sets its loan prime rates. The AI trade faces a further test from earnings at Alphabet, Tesla, Intel, and GE Vernova, while US flash PMIs and a full slate of UK data — inflation, employment, and retail sales — round out the calendar. Developments in the Middle East remain the principal wild card.