The Week in Review

The Big Picture

Two themes collided this week: a Persian Gulf flashpoint and a tech-led selloff that exposed the fragility beneath the year’s equity gains. US-Iran exchanges in the Gulf pushed oil prices higher mid-week, kept risk appetite uneven, and injected enough uncertainty to stall any dip-buying conviction. Meanwhile, the VIX ended at 18.41, up 9.71% on the week despite Friday’s partial pullback — a signal that traders repriced tail risk upward even as headline indices absorbed the blow unevenly. Bond markets told a steadier story: UST10Y fell to 4.37%, a 52-week low, suggesting flight-to-safety demand remained real underneath the surface noise. The German 10Y hit 2.86%, also at its 52-week floor, as EURIBOR3M dipped to 2.29%. The rate complex, in short, was pricing caution while equity markets were still debating the narrative.

Inflation added a political dimension. With US inflation topping 4%, President Trump publicly eased pressure on Fed Chair Kevin Warsh — a notable reversal that markets read as acknowledgment that monetary policy cannot be bullied into cuts. Peace-talk headlines around the Gulf conflict offered a Friday reprieve, with US futures climbing on reports of resumed negotiations, but the damage to sentiment was already done.

US Markets

The Nasdaq bore the week’s heaviest blow, dropping -4.60%, while the S&P 500 fell -1.95%. The Dow Jones Industrial Average bucked the trend entirely, closing up +0.60% — a clean signal of sector rotation out of growth and into defensives and value. Tech crowding, persistent inflation above 4%, and the BIS warning about systemic risk in AI-driven investment combined to shake high-multiple names. The Dow’s resilience confirms the divergence is structural, not noise.

EU Markets

European markets held up better in relative terms, though the divergence was uneven. The STOXX 600 slipped just -0.20%, while the DAX fell -1.42%, weighed down by Germany’s structural export vulnerability — a theme the WSJ spotlighted this week as openness becomes liability rather than advantage. The FTSE 100 outperformed convincingly at +1.04%, supported by energy exposure as Gulf tensions lifted oil, and by sterling-hedged multinationals benefiting from a stable EUR/USD at 1.14.

Asia Markets

Asia bore the worst of it. The KOSPI collapsed -7.08% on the week to ₩8,411, posting a bruising -5.81% on Friday alone — the region’s sharpest single-session loss. The Hang Seng fell -5.24% to HK$22,672, pressured by Gulf risk and persistent China demand concerns. The Nikkei 225 dropped -2.65% to ¥69,361, with Friday’s -4.15% session move underscoring how quickly yen safe-haven flows and export worries compound. The Shanghai Composite slid -1.55% to 4,027 CNY. Only the ASX 200 held its ground, down just -0.73% to A$8,764, closing Friday marginally positive at +0.18%.

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