Global Markets Rise Amid Rising US-Iran Tensions Over Strait of Hormuz

Global financial markets opened the week with cautious optimism despite escalating geopolitical tensions between the United States and Iran over the strategic Strait of Hormuz. US President Donald Trump announced plans to declare the strait an American protectorate and warned citizens to prepare for rising fuel prices. Iranian Foreign Minister Abbas Araghchi responded firmly, stating the strait would only open or close under Iranian control and urged Washington to accept defeat, while no decision has yet been made on resuming negotiations.

Asian markets led gains, with South Korea's Kospi index surging 2.4%, Hong Kong's Hang Seng rising 1.6%, and Shanghai Composite up 0.8%. Japan's Nikkei remained nearly flat after second-quarter GDP growth of 1.1% annualized fell short of the expected 2%, reflecting weak domestic demand and higher energy costs linked to Middle East conflicts. Oxford Economics' chief Japan economist Norihiro Yamaguchi warned of continued inflationary pressures and eroding purchasing power.

In the US, futures showed mixed trends: Nasdaq futures rose 0.3%, S&P 500 futures edged up 0.1%, while Dow Jones futures declined 0.1%. Last week, the S&P 500 and Nasdaq posted their third consecutive weekly gains, led by a 7.3% jump in the energy sector amid strong oil company earnings and ongoing Strait of Hormuz uncertainty. Over 90% of S&P 500 companies have reported earnings, with overall profit growth near 50%, the strongest since mid-2021.

Oil prices remained stable around $88.9 per barrel for Brent crude despite the maritime blockade and tanker attacks, as global demand softens and US inventories partially rebound. Market analyst Phil Flynn noted the energy market's adaptability in circumventing supply disruptions. The Israeli shekel strengthened against the dollar, supported by positive trade data and subdued US inflation, though expectations of a Bank of Israel rate cut may moderate further gains.

In Israel, investors are closely monitoring recent escalations with Hezbollah on the northern border and ongoing political efforts to disarm Hamas. The Tel Aviv Stock Exchange ended the week mixed, with the TA-35 up 0.8% but the TA-90 down 2.2%, hitting its lowest level since December. The defense sector fell sharply by 7.8%, despite strong earnings from companies like Elbit Systems, attributed to high investor expectations. Conversely, the oil and gas index rose 3.2%, and banks gained 2.2% following positive earnings reports.

Technical indicators such as the Hindenburg Omen signal increased market volatility and potential corrections, though experts caution these are warnings rather than guarantees of a downturn. Analysts highlight ongoing challenges including seasonal volatility, rising bond yields, and geopolitical risks as investors navigate uncertain conditions.