The U.S. dollar strengthened on Monday as uncertainty clouded a tentative U.S.-Iran peace deal following escalating tensions. According to reports from The Economic Times, President Donald Trump threatened to restart the war in the Middle East while Tehran announced it had closed the Strait of Hormuz. The latest developments show rising geopolitical tensions between Israel and Iran are generating renewed concerns that the conflict could re-escalate and develop into a broader regional dispute. As reported by Reuters, Israel struck an Iranian petrochemical facility over the weekend, which it said had been involved in the production of ballistic missiles, prompting Iran to respond with missile attacks targeting Israeli sites. Meanwhile, Houthi forces in Yemen stated that they would restrict vessels linked to Israel in the Red Sea—a vital maritime corridor for the energy supply chain between Europe and Asia. The U.S. dollar is rising against its major peers as investors continue to favour the relative strength of the U.S. economy, with last week's hawkish Fed meeting reinforcing views that U.S. interest rates could remain higher for longer than those in Europe or the UK.
Shipping data showed the number of ships passing through the Strait of Hormuz fell sharply on Sunday after Tehran's announcement, lifting oil prices significantly. As reported by The Economic Times, Brent crude futures climbed 1.30% to $81.62 a barrel. Chris Weston, head of research at Pepperstone, noted that "ultimately, what matters to markets is the flow of cargo through the Strait of Hormuz," with the physical market remaining tight and providing support for oil prices. The latest geopolitical developments, including the potential restriction of vessels in the Red Sea, could further impact energy supply chains and maintain upward pressure on oil prices. The weakness spread into Asia, where the Kospi fell 10%, while chip stocks tumbled amid concerns that the AI trade has become overstretched.
Amazon shares have declined by 11% from their record high, breaking below a key technical level as selling pressure persists. According to market analysis, price action is exhibiting a reversal pattern that could imply a deeper contraction if geopolitical tensions further aggravate existing inflation concerns. From a technical perspective, Amazon's share price maintains its primary long-term bullish trajectory, but the recent breakdown suggests near-term weakness amid broader market volatility. The decline comes as investors reassess the company's prospects amid the current geopolitical backdrop and inflationary pressures.
European stocks are falling sharply as the technology sell-off in the U.S. and Asia spreads into Europe. The Nasdaq 100 closed 1.3% lower overnight, weighed down by a 16% drop in SpaceX after a bond sale unnerved investors and a sharp decline in mega-cap stocks, with Alphabet falling 5%, Microsoft down 3.2%, and Amazon dropping 4%. The weakness spread into Asia, where the Kospi fell 10%, while chip stocks tumbled amid concerns that the AI trade has become overstretched. In Europe, the DAX is trading more than 1% lower as the global retreat in technology stocks weighs on sentiment. Chipmaker Infineon is among the laggards, falling 3.4%. The DAX is particularly vulnerable to any slowdown in global growth given its large exposure to exporters and industrial firms, with weak domestic data and a softer global tech backdrop creating a difficult combination for the index.
The British pound eased in early trading as traders assessed political tumult in Britain, where Prime Minister Keir Starmer was considering his political future after rival Andy Burnham's decisive election victory to parliament. According to The Economic Times, the pound was 0.24% weaker at $1.32055, while the euro softened 0.1% to $1.1462. Sir Keir Starmer announced his resignation as Prime Minister and leader of the Labour Party yesterday, with Andy Burnham the frontrunner to replace him after Starmer laid out a timetable for his departure and several potential rivals backed a swift transition. If no serious challengers emerge, Burnham could be installed as Prime Minister as soon as July 17. The market reaction to Starmer's resignation has been relatively muted, suggesting investors see fiscal policy and economic fundamentals as more important than the change in leadership itself. Attention will now turn to Burnham's economic agenda and who he appoints as Chancellor, with the key question being whether the new administration prioritises fiscal discipline or attempts to boost growth through higher spending.
