Markets Close Lower Amid Rising Geopolitical Tensions

Rising tensions in the Middle East weighed on equity markets, which ended the week in the red, as U.S. crude oil prices spiked over 7% on Friday, fueling market unease. Global equities, as measured by the MSCI All Country World Index, slipped 0.21% for the week. U.S. equities also declined, with the S&P 500 falling 0.36%. The weekly losses came after a sharp reversal on Friday, which erased gains from earlier in the week.

U.S. Crude Oil Prices

As noted above, U.S. crude oil prices jumped more than 7% on Friday, hitting a four-month high after Israeli strikes on Iranian nuclear facilities raised fears of supply disruptions and inflationary pressures. Crude traded around $73 per barrel by Friday afternoon, up nearly 12% for the week.

U.S. Economy

It was a data-heavy week, with several key reports painting a mixed but reassuring picture of the U.S. economy. The Consumer Price Index rose 0.1% in May, below expectations, while the annual inflation rate held steady at 2.4%, easing fears over tariff-driven price pressures. In the bond market, a 30-year Treasury auction on Thursday drew strong demand, with yields falling to 4.84% from 4.91% the day prior, helping to soothe concerns after yields briefly rose above 5.00%. Consumer sentiment also improved, with the University of Michigan’s preliminary June reading rising to 60.5 from 52.2 in late May, as inflation worries appeared to ease among respondents.

Looking Ahead

The U.S. Federal Reserve is expected to keep interest rates steady at the conclusion of its two-day policy meeting on Wednesday. However, expectations for rate cuts later this year remain. As of Friday, interest rate futures reflected market pricing for at least one (potentially up to three quarter-point cuts) by year-end, according to CME Group’s FedWatch tool.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.

Author

Mike Horwath

Mike heads the internal Investment Committee that is responsible for the investment direction of the firm. He works closely with Diversified’s financial planners to support the investment side of the lifelong financial planning process. Lastly, it’s Mike’s responsibility to oversee the ever-changing global investment landscape and work with the planners to evaluate the impact on each of our client’s strategies.

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