Global markets turned more cautious after hopes for a lasting ceasefire between the United States and Iran weakened.

President Donald Trump described the month-old ceasefire as “on life support,” signaling that negotiations between Washington and Tehran remain far apart.

The deteriorating outlook renewed concerns about prolonged disruptions in the Strait of Hormuz, a critical shipping route for global oil supplies.

Brent crude futures climbed roughly 2% to around $106 per barrel as investors priced in increasing risks of sustained energy supply disruptions.

Longer-dated oil contracts also moved higher, reflecting expectations that instability could persist for months.

AI Stock Rally Loses Momentum

The recent powerful rally in global technology and semiconductor stocks showed signs of cooling as investors shifted focus back toward geopolitical and inflation risks.

South Korea’s KOSPI index, which had been one of the strongest-performing global equity markets due to enthusiasm surrounding artificial intelligence and semiconductor demand, dropped approximately 3.5%.

The decline weighed on broader Asian markets and interrupted momentum in chip-related equities that had surged on strong AI spending expectations.

Futures tied to the S&P 500 and Nasdaq also moved lower as investors reduced exposure to higher-risk assets ahead of key economic data releases.

European Markets Slide on Energy and Political Concerns

European equities also weakened as rising oil prices increased concerns about inflation and economic growth.

The pan-European STOXX 600 index fell more than 1% during trading, remaining below its pre-war highs reached earlier this year.

Energy-dependent European economies continue facing heightened vulnerability due to elevated fuel costs and ongoing uncertainty surrounding Middle East shipping routes.

At the same time, political concerns in the United Kingdom added further pressure to bond markets and investor sentiment.

Investors Await Critical US Inflation Data

Market attention has increasingly shifted toward upcoming US inflation data, which could heavily influence expectations for Federal Reserve policy.

Economists expect headline consumer inflation to accelerate following higher energy costs tied to the Middle East conflict.

Any indication that inflation remains stubbornly elevated could strengthen expectations that the Federal Reserve may delay interest rate cuts or potentially consider additional tightening.

That possibility has contributed to rising global bond yields and increased volatility across financial markets.

The benchmark US 10-year Treasury yield climbed again as investors reassessed monetary policy expectations.

Dollar Strengthens as Investors Seek Safety

The US dollar strengthened against most major currencies as investors moved toward safer assets amid rising geopolitical uncertainty.

The dollar gained against the Japanese yen following comments from US Treasury Secretary Scott Bessent regarding close coordination with Japan on foreign exchange stability.

The euro and Australian dollar also weakened as markets priced in slower global growth and higher energy-related inflation risks.

Currency markets remain highly sensitive to developments surrounding the Iran conflict, global oil flows, and central bank policy expectations.

Trump-Xi Meeting Remains in Focus

Investors are also closely monitoring President Trump’s upcoming visit to China for meetings with President Xi Jinping.

While expectations for major breakthroughs remain limited, markets are hoping both sides avoid escalating tensions through new tariffs or additional export restrictions.

Investors continue focusing particularly on semiconductor policy, artificial intelligence infrastructure, and trade stability between the world’s two largest economies.

Even limited signs of stability could help calm markets currently balancing AI-driven optimism against growing geopolitical and inflation pressures.