After a fraught six-week period marked by conflict and uncertainty, global markets have retraced back to earlier highs as investors take comfort from signs of de-escalation and return their focus to earnings and macro fundamentals.
Markets were buoyed in part by talks that could open a diplomatic channel between the United States and Iran, and by the arrival in Tehran of a Pakistani mediator. These developments have reduced immediate war-driven risk premia and allowed market participants to reassess corporate and economic data rather than solely pricing geopolitical disruption.
Equity benchmarks responded quickly. MSCI’s all-country index reached a fresh high, while Japan’s Nikkei closed up 2.5% on Thursday to register a new record. South Korea’s KOSPI also climbed by more than 2%. Major U.S. indexes posted new highs earlier in the week, supported by encouraging results from large banks.
U.S. banking heavyweights largely impressed the market with first-quarter earnings announced earlier in the week, and the earnings calendar has now shifted focus to technology firms. Taiwan’s chip manufacturer TSMC reported another comfortable beat, adding further momentum to the sector. Across companies that have reported so far for the quarter, more than 80% have exceeded analysts’ expectations, a statistic that has underpinned optimism about corporate resilience.
Geopolitical developments beyond U.S.-Iran ties also contributed to a brighter tone. Reports that negotiations could occur between Israel and Lebanon, coupled with comments from President Trump that the leaders of both countries would speak, fed into the market’s relief. Separately, a source briefed by Tehran said Iran was considering proposals that might allow ships to transit via the Omani side of the Strait of Hormuz as part of discussions with the U.S. These reports helped ease some of the supply-risk pressure on energy markets.
Oil prices have reacted to the softer risk environment by remaining below the psychologically important $100 per barrel threshold. Nonetheless, both Brent and West Texas Intermediate rose by over 1% on Thursday, trading in the vicinity of $96 per barrel and $92 per barrel respectively.
Currency markets reflected the shift in risk sentiment. The dollar hovered near six-week lows, extending losses against major currencies for an eighth consecutive session on Wednesday and giving back the bulk of its earlier safe-haven appreciation since the outbreak of the Iran conflict.
Economic data added to the mixed but resilient picture. China’s economy expanded by 5.0% year on year in the first quarter, outpacing economists’ forecasts of 4.8% and sitting at the top end of Beijing’s full-year target range of 4.5% to 5.0%. The headline pace suggests a degree of resilience relative to much of Asia. Still, the data were not uniformly strong, as March showed slower retail sales growth and a moderation in industrial output, which clouded the near-term outlook.
In the United States, political developments intersected with financial policy. President Trump renewed public criticisms of the outgoing Federal Reserve Chair, Jerome Powell, once again suggesting he could be removed from the Fed board if he does not vacate his seat after his term as chair ends next month. Meanwhile, congressional hearings for Fed Chair nominee Kevin Warsh are scheduled to begin next week.
Looking to the immediate data pipeline and corporate calendar, market participants will monitor U.S. weekly jobless claims and March industrial production, alongside further corporate earnings from firms including BNY Mellon, Charles Schwab and PepsiCo.
For those following analysis and scheduled discussions, a webinar on April 23 will address the reconsideration of safe-haven assets in the current uncertain environment.
Chart of the day
China’s earlier-than-expected acceleration in the first quarter appeared largely driven by an export upswing that preceded the spike in energy costs associated with the Iran conflict. The 5.0% year-on-year result sits at the upper bound of official target ranges and underscores a divergence in resilience compared with many Asian economies, supported in part by sizable strategic oil reserves and a diversified energy mix.
Events to watch today
- U.S. weekly jobless claims - 8:30 a.m. EDT
- U.S. March industrial production - 9:15 a.m. EDT
- U.S. corporate earnings: BNY Mellon, Charles Schwab, PepsiCo
Investors are taking the current calm as an opportunity to reassess company earnings and macro signals after a period when geopolitical risk dominated pricing. The combination of strong bank earnings, continued outperformance from a major tech supplier, and a resilient Chinese growth print has provided enough comfort for markets to revisit fundamentals, although risks remain linked to the pace and durability of geopolitical developments and economic momentum.