Global Markets React to US-Saudi Nuclear Deal and Rising Middle East Tensions

Global stock markets opened with mixed trends amid significant geopolitical and economic developments. The US officially approved a multi-decade nuclear agreement with Saudi Arabia, valued at tens of billions of dollars, enabling a civilian nuclear program and potentially uranium enrichment, with major roles for American companies. The New York Times reported that this deal is separate from normalization conditions with Israel. Concurrently, the US military conducted its 11th consecutive night of strikes in Iran targeting operational centers and infrastructure to secure freedom of navigation in the Strait of Hormuz. These escalations contributed to a slight rise in oil prices, with Brent crude climbing over 1.5% to $92.38 per barrel, amid additional threats from Yemen's Houthi rebels to block Saudi oil shipments through the Bab al-Mandab Strait.

In financial markets, the Tel Aviv Stock Exchange is expected to open supported by positive futures and gains in tech and semiconductor stocks, including Tower Semiconductor and Ormat Technologies. However, some stocks like NICE and Brainwave face downward pressure. Yesterday, Tel Aviv indices closed higher, led by insurance and defense sectors, while biomed and real estate sectors declined. Major real estate transactions stirred the market, notably a 26% stake acquisition in G City for 661 million shekels.

US bond markets saw yields rise amid inflation concerns and oil price surges, with the 10-year Treasury yield reaching 4.64%, the highest in two months. In Israel, government bond yields increased slightly, with long-term bonds becoming potentially more attractive if the Bank of Israel continues cutting rates. The US dollar strengthened modestly against the shekel, trading around 3.05, influenced by mixed market sentiment and ongoing geopolitical risks.

On the macroeconomic front, President Trump announced a phased tariff policy on imported generic drugs starting August 1, aiming to incentivize domestic production. Meanwhile, the Federal Reserve under new leadership exhibits increased ambiguity regarding interest rate decisions, causing market uncertainty. Some Fed officials advocate for further tightening to curb inflation, while others foresee a more patient approach. Market derivatives currently price a 50% chance of a rate hike in September.

The technology sector, particularly momentum stocks and AI-related semiconductors, experienced a correction after a strong second quarter. Historical data suggests such pullbacks may offer attractive long-term entry points despite short-term volatility. Sector rotation is underway, with energy, retail, and banking stocks gaining ground as tech and chip stocks retreat. Analysts expect momentum indices to rebalance holdings to reflect new market leaders soon.