Markets were once again driven this week by news and rumours surrounding the war between the US and Iran. Equities rallied earlier in the week because of promises of a peace agreement, only to pull back when fresh exchanges of fire erupted in the Strait of Hormuz.
The S&P 500 and Nasdaq powered to fresh highs on Thursday, with both having reached record closes multiple times this year. But US futures slipped early on Friday morning, and Asian markets opened lower as American forces struck targets in Iran. US President Donald Trump described the action as a “love tap” and insisted the ceasefire remains in effect.
As of now, we are seeing a disconnect between oil markets and equities markets. Oil prices are holding at around $100 per barrel, and oil futures still have a war premium baked in. Equities markets, particularly the S&P 500 and Nasdaq, appear to be pricing in a resolution to the war.
Investors are betting that the war will not derail the Artificial Intelligence (AI) trade. Five mega-cap tech companies – Alphabet, Nvidia, Amazon, Broadcom, and Apple – account for over half of S&P 500 gains since January. The Dow Jones Industrial Average (weighted towards ‘older’ economy companies) has lagged the gains of the Nasdaq and S&P 500.
With Trump seeming to seek an offramp from the war, many traders and investors will start to look ahead as to what will come next. If a genuine resolution materialises, we expect a broad resumption of the trades and trends that dominated markets before Israel and the US embarked on military action against Iran.
A backdrop of a weaker dollar and appetite for risk may give further support to emerging markets, which have outpaced developed world markets by climbing 21% this year. Asian indices with strong tech sectors may benefit. Resource-heavy economies like South Africa might see a bounce if precious metal prices resume their pre-war climb.
When it comes to US markets, corporate earnings and the US Federal Reserve are likely to set the pace. As of now, the US consumer has not yet felt the bite of elevated oil prices. But the possibility of a post-war inflationary hangover – similar to the COVID-19 morning-after – cannot be ruled out as supply chains catch up and oil inventories are rebuilt.
If inflation were to reignite and the job market remains buoyant, this would suggest that the Fed may need to hold interest rates higher for longer. Markets already accept that the war has delayed interest rate cuts, but signs of an even slower rate-cutting cycle may test market resilience.
Conversely, if inflation remains relatively muted and company earnings continue to surprise on the upside, this may create conditions for a wider rally outside the Big Tech sector. This would be welcome, given that seven stocks have generated the majority of the S&P 500’s returns this year.
European markets are as concentrated as those in the US. Just six companies account for over 90% of the gains in the Stoxx Europe 600 year-to-date. With less exposure to Big Tech, three European energy firms are driving 40% of the region’s returns. The FTSE 100 and Stoxx Europe, as such, might not benefit from lower energy prices.
Trump’s appetite for the war appears to be diminishing and he has political incentives to resolve the conflict. In the short term, a win would put him on a stronger footing ahead of a summit with China’s President Xi Jinping next week. Medium-term, high gas prices make for poor optics as the US prepares for mid-term elections.
The Iran War makes every sector call dependent on one variable: oil supply.
Against this backdrop, one of the biggest risks is that equities markets are not accounting for the possible after-effects of the war, nor the danger that the conflict drags on after negotiations fail. In the case of an escalation or longer-term conflict, markets may stumble if the expectation of a painless resolution is not met.
That said, many commentators were too pessimistic about the impact of Trump’s tariffs last year. Markets absorbed the shock better than almost anyone predicted. That is testament to the resilience of modern supply chains, the underlying strength of the US economy and the difficulty of making predictions through the fog of war.
“Equities are looking through the war, while oil continues to hold its war premium. [That’s] a disconnect that tells you markets have quietly concluded the worst-case scenario is fading and turned to a new page, even if the ink is not yet dry.”
– Hebe Chen, a senior market analyst at Vantage Global Prime in Sydney
“Given such profound risks, some might wonder why global markets – starting with US and Asian equities – have recently reached new highs. I see two reasons. First, investors expect that the ceasefire will somehow be made permanent soon, implying much lower oil prices. Second, there seems to be an assumption that the tailwinds from the AI and data-centre boom will remain much stronger than the headwinds from the war.”
– Nouriel Roubini, US economist
Global News
- Fresh clashes erupted on Thursday around the Strait of Hormuz, with the US launching what it described as defensive strikes on Iranian targets following attacks on three Navy destroyers. The escalation has raised concerns that the fragile ceasefire could collapse even as both sides continue discussing a possible agreement to end the conflict. Iran has yet to indicate whether it will accept US conditions linked to its uranium enrichment programme and the reopening of the Strait of Hormuz, although Trump insisted the ceasefire remains in effect.
- Global markets ended the week firmer despite renewed Middle East volatility, as strong AI-driven technology earnings continued to support investor sentiment. The S&P 500 and Nasdaq reached fresh record highs during the week, led by gains in major technology shares including Nvidia and Microsoft. S&P 500 earnings are now expected to rise about 28% year-on-year, driven by AI-related investment and strong technology-sector performance. Oil prices remained volatile amid renewed tensions involving Iran and the Strait of Hormuz, although Brent crude stayed below recent highs. Stronger-than-expected US economic data supported confidence in the economy, while elevated bond yields reflected reduced expectations for near-term Federal Reserve rate cuts.
- Analysts said on Thursday that energy, transport and chemical prices could remain elevated for an extended period even if a permanent US-Iran peace deal leads to the reopening of the Strait of Hormuz. Rising fuel costs and travel disruptions linked to the Iran conflict are increasing pressure on small and medium-sized businesses globally, with higher transport and energy prices squeezing margins across sectors such as tourism, aviation, farming, and retail. Some businesses have also faced delays and cancellations due to shipping disruptions in the Strait of Hormuz.
- Fed officials are warning that inflation risks are increasing, with St. Louis Fed President Alberto Musalem saying on Wednesday that interest rates may need to remain higher for longer or rise further if price pressures persist. Chicago Fed President Austan Goolsbee also warned that supply shocks linked to the Iran conflict could complicate efforts to bring inflation back to target, reinforcing market expectations that the Fed is unlikely to cut interest rates in the near term.
- US consumer borrowing increased by $24.9 billion in March, the largest monthly rise since late 2022, according to Fed data released on Thursday, as Americans increased both credit-card borrowing and longer-term loans despite mounting pressure on household finances. At the same time, executives across US retail, restaurant and consumer-goods sectors are becoming increasingly concerned about pressure on household budgets as fuel prices surge following the Middle East conflict, particularly among lower-income consumers facing shrinking savings and reduced discretionary spending power.
- US job openings fell slightly in March while hiring rebounded, signalling continued stabilisation in the broader labour market despite economic uncertainty, according to US Bureau of Labor Statistics data released on Tuesday. This comes as technology-sector layoffs continued to rise as companies pursued AI-related efficiency measures, with employers announcing 85,411 planned job cuts so far this year, up 33% from the same period in 2025, according to Challenger, Gray & Christmas data published on Thursday. By contrast, overall private-sector layoff announcements were about 10% lower in the first four months of 2026 than a year earlier.
- The US trade deficit widened in March as imports continued to outpace exports, reflecting resilient consumer and business demand despite growing geopolitical and economic uncertainty, according to US Commerce Department data released on Tuesday. The goods and services trade gap increased 4.4% from the previous month to $60.3 billion, with higher imports of automobiles, consumer goods and capital equipment outweighing gains in exports, including stronger shipments of crude oil and petroleum products.
- A US federal trade court on Thursday ruled that Trump’s 10% global tariffs were unlawful after small businesses and mostly Democrat-led states challenged the measures. The court blocked the administration from enforcing the tariffs against the companies involved in the case and against Washington State, though it did not extend the ruling nationwide. The broader implications for other importers remain unclear, with next steps likely to depend on whether the administration appeals the ruling.
- Alphabet moved closer to overtaking Nvidia as the world’s most valuable company after a sharp rally in its shares lifted its market value to about $4.67 trillion on Tuesday. Investor optimism has been driven by strong growth in Google Cloud and the company’s expanding AI business, including gains in custom AI chips, while Nvidia’s valuation has come under pressure amid concerns about slowing demand growth and OpenAI’s missed targets. Alphabet’s shares have risen about 24% this year compared with Nvidia’s 7%.
- Samsung Electronics reached a $1 trillion market valuation on Wednesday, becoming the second Asian company after Taiwan Semiconductor Manufacturing Company to achieve the milestone, as surging demand for AI chips continued to drive a sharp rally in semiconductor stocks. Shares in the world’s largest memory-chip maker have more than quadrupled over the past year, supported by strong demand for high-bandwidth memory used in AI systems.
- Eli Lilly’s diabetes treatment Mounjaro became the world’s top-selling medicine in the first quarter after generating $8.7 billion in sales, overtaking Merck’s cancer drug Keytruda at $7.9 billion, as competition in the obesity and diabetes market continued to intensify. The results came as Novo Nordisk’s slightly improved its 2026 outlook following strong early demand for its new oral Wegovy weight-loss treatment, helping offset slowing growth in Ozempic sales. Novo Nordisk shares rose as much as 9.2% in Copenhagen on Wednesday after the update.
- As at Thursday’s close the S&P 500 was 1.5% up for the week.
Local News
- Economists have warned that this week’s sharp fuel-price increases are likely to feed inflationary pressures across the South African economy, as higher transport and production costs filter into food and consumer prices. Petrol rose by R3.27 a litre on Wednesday and diesel by R5.27 after the government corrected a calculation error in the original diesel adjustment. The increases follow a surge in global oil prices linked to the Iran conflict.
- Moody’s said South Africa’s fiscal discipline and reform programme should help preserve macroeconomic stability despite risks from the Middle East conflict and higher oil prices. The ratings agency said on Thursday that stronger revenue collection, spending restraint and improving funding costs support its expectation that government debt will stabilise this year before gradually declining. Moody’s also said ongoing reforms in electricity, logistics and rail could support stronger economic growth over the next few years.
- South African Reserve Bank Governor Lesetja Kganyago said on Monday the rand’s resilience during the Iran conflict may reflect weakening confidence in the US dollar and growing investor diversification away from dollar-denominated assets. The rand has recovered to its January levels despite higher oil prices, while emerging-market currencies have also strengthened in recent weeks. Kganyago said investors were not abandoning the dollar entirely but were becoming less willing to remain heavily concentrated in US assets.
- The JSE rose sharply on Wednesday as easing tensions over the Iran conflict boosted global investor sentiment, triggering gains across emerging markets. The JSE All Share Index climbed close to 4%, while the rand gained 1.45% against the dollar, and bonds also gained after Trump signalled progress in talks with Iran. Lower oil prices helped ease immediate inflation concerns, with mining and financial stocks leading gains on the local market.
- China implemented a zero-tariff policy for selected South African exports from the first of May, offering local producers expanded access to one of the world’s largest consumer markets as global trade conditions remain under pressure from elevated US tariffs. Trade, Industry and Competition Minister Parks Tau said on Sunday that the agreement could support exports of products including fruit, vegetables and wine, while economists cautioned that infrastructure and manufacturing constraints may limit South Africa’s ability to fully capitalise on the opportunity.
- Government is considering plans to give municipalities a share of more than R400 billion in annual VAT revenue as part of broader proposals to overhaul local government funding. A draft white paper gazetted on Thursday proposes replacing declining fuel-levy income with a VAT-sharing model tied to economic activity, while stronger municipalities would retain greater revenue-raising powers. The paper also relaxes municipal borrowing rules to allow councils to access private-sector infrastructure funding more easily.
- Eskom has secured agreements with nine municipalities as part of efforts to recover about R111.6 billion in unpaid municipal electricity debt. The municipalities will allow Eskom to help manage parts of their electricity distribution systems, including billing, infrastructure maintenance and debt collection. Eskom said the municipalities had either failed to pay bulk electricity accounts for at least 18 months or breached National Treasury debt-relief conditions, while three municipalities still face possible supply interruptions from Friday after failing to provide viable repayment solutions.
- Finance Minister Enoch Godongwana said Johannesburg’s worsening financial position poses a risk to South Africa’s broader economy, citing rising debt, weak revenue collection and deteriorating infrastructure in the country’s economic hub. In a letter to Johannesburg Mayor Dada Morero towards the end of April, Godongwana said the city was in severe financial distress and instructed it to halt a R10.3 billion municipal wage agreement, warning that National Treasury could withhold funding if corrective measures were not taken. The city reportedly owes creditors R25.2 billion while holding just R3.9 billion in cash reserves.
- Dis-Chem launched a new “Health Hub” store format that combines pharmacies, clinics, healthcare funding and digital healthcare services into a single customer platform on Thursday as the retailer expands beyond traditional pharmacy operations. The model includes virtual doctor consultations, digital prescription systems and diagnostic testing facilities, while also integrating products such as medical insurance and life cover. Dis-Chem said the new format could help expand access to private healthcare services for millions of South Africans.
- Aspen Pharmacare shares rose to a 52-week high on Thursday after the company announced it had received regulatory approval to begin commercial sales of locally manufactured human insulin produced at its Gqeberha facility. The approval marks the commercial launch of Aspen’s insulin manufacturing partnership with Novo Nordisk and is seen as a significant step toward improving access to diabetes treatment across South Africa and other African markets.
- Bolt has invested about R3 billion in South Africa over the past decade as competition intensifies in the country’s ride-hailing and delivery market. The Estonia-based company, which launched locally as Taxify in 2016, said on Tuesday it now has about 40,000 drivers and 1.4 million users in South Africa. Bolt said the investment reflects the country’s importance as one of the world’s largest and fastest-growing shared mobility markets, with further expansion and safety spending planned.
- As at the time of writing, the rand was 1.3% stronger against the dollar, and the ALSI was 2.5% up for the week.
Sources: Dynasty, Reuters, Bloomberg, CNN, ITWeb, Business Day, Moneyweb, Daily Maverick, etc.
