Global Markets Open Amid Iran-US Tensions; Israeli Pharma IPO and Inflation Data Highlight Trading
Global stock markets opened today under the shadow of escalating tensions between Iran and the United States following intensified US strikes in northern Iran near Tehran. Asian markets showed mixed to sharp declines, led by South Korea's Kospi index plunging 6.7% after the central bank raised interest rates for the first time in over three years. Japan's Nikkei fell 2.7%, Shanghai dipped 0.8%, while Hong Kong's Hang Seng rose 1.9%, boosted by Alibaba's 5% surge after announcing AI integration with Apple services in China. Semiconductor stocks faced heavy selling pressure, with SK Hynix dropping over 11%, Samsung Electronics down more than 7%, and other tech firms also declining amid concerns over AI infrastructure spending.
In the US, futures indicated a stable to slightly positive open, with S&P 500 and Dow Jones futures up 0.1%. Israeli dual-listed stocks returned with negative arbitrage gaps, particularly in technology and pharmaceuticals, including Teva. The Tel Aviv Stock Exchange closed strongly yesterday, with the TA-35 index rising 2.7%, led by a 5.2% jump in banking stocks, attributed by Mizrahi Tefahot's chief economist Ronen Menachem to geopolitical tensions driving investors toward stable bank shares. Real estate, insurance, and technology sectors also posted gains.
Pharmaceutical manufacturer Rafa Medical debuted on the Tel Aviv Stock Exchange today, raising 600 million shekels through a secondary offering, significantly below initial targets due to challenging market conditions. Major shareholders, including controlling owner FIMI fund and company chairman Uri Yehudai, realized substantial exits.
Inflation data released yesterday showed significant easing in Israel, with June's consumer price index unchanged monthly and annual inflation dropping to 1.6%, the lowest in five years. This supports expectations for continued interest rate cuts by the Bank of Israel. Similarly, US inflation indicators came in softer than expected, reducing near-term rate hike concerns by the Federal Reserve. However, Fed Chair Kevin Warsh cautioned that the fight against inflation is not over, especially given Middle East tensions and AI-driven infrastructure spending potentially fueling price pressures.
Commodity markets saw the shekel stable near 3 per US dollar, while oil prices rose slightly for the fourth consecutive day amid renewed US strikes on Iranian military targets and ongoing maritime blockades in the Strait of Hormuz. Brent crude futures fell 0.4% this morning to $84.50 per barrel after recent gains. Analysts warn that prolonged conflict could push oil prices above $100 per barrel. Gold prices declined 0.7%, pressured by expectations of sustained higher interest rates despite geopolitical risks.
Looking ahead, US macroeconomic data due today, including retail sales and initial jobless claims, will influence market direction and Fed policy expectations. Meanwhile, the US government announced a 25% tariff on most Brazilian imports starting July 22, escalating trade tensions. In investment trends, UBS highlights the healthcare sector as an attractive opportunity, driven by strong demand for weight-loss drugs, a resurgence in biotech mergers and acquisitions, and AI advancements improving productivity across the sector. The healthcare ETF XLV has risen about 20% over the past year, signaling growing investor interest beyond technology stocks.
