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Markets mixed amid Middle East escalation

The Iran-Israel conflict entered its fifth day on Tuesday, with escalating airstrikes and rising casualties. US President Donald Trump called for the evacuation of Tehran, citing Iran's refusal to curb its nuclear ambitions, while proposing a ceasefire and broader discussions through intermediaries. Meanwhile, oil prices rose as tensions deepened. Brent crude oil gained 0.8% to trade at USD 73.82 per barrel, while West Texas Intermediate (WTI) rose 0.8% to reach USD 70.84 per barrel. Gold edged higher, trading around USD 3390 per ounce, as safe-haven demand persisted. US and European stocks closed higher to start the week, but Asian equity markets were trading mostly lower on Tuesday.

  • Date
  • Author Shane Strowmatt, LGT
  • Reading time 5 minutes

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In Asia, the Bank of Japan (BOJ) maintained its short-term interest rate at 0.5% during its policy meeting on Tuesday. While keeping its bond tapering schedule unchanged through March 2026, the BOJ announced a slower pace of balance sheet reduction for fiscal 2026, citing global uncertainties such as escalating Middle East tensions and US tariffs. Japan's core inflation, which reached 3.5% in April, continues to exceed the BOJ's 2% target, driven by rising food prices and a weak yen. Japan’s Nikkei 225 was up 0.5%, buoyed by gains in technology stocks. Elsewhere in the region, stocks were mostly a bit lower. Korea’s Kospi was down 0.1% and Australia’s S&P/ASX 200 also slid 0.1%. Hong Kong’s Hang Seng Index dropped 0.2%, while Mainland China’s CSI 300 was trading flat.

US and European equity markets rebound despite Middle East tensions

US stock markets recovered on Monday following sharp losses last week, as investors balanced concerns over escalating conflict between Israel and Iran with cautious optimism. The Dow Jones rose by 0.8% to 42,515.09 points, while the S&P 500 gained 0.9% to close above 6000 points at 6033.11. The Nasdaq 100 outperformed, climbing 1.4% to 21,937.57, driven by strong gains in chipmakers such as AMD, which surged 8.8% after positive forecasts for its graphics processors. European markets also saw gains on Monday with the Euro Stoxx 50 jumping 1%, while Germany’s DAX and France’s CAC 40 each climbed 0.8%.

Swiss producer and import prices decline

The Swiss Producer and Import Price Index fell by 0.5% in May 2025 compared to April, reaching 106.4 points (December 2020 = 100), according to data released on Monday. Declines were driven by lower prices for petroleum products, electricity for large-scale consumers, and basic metals, while pharmaceutical products saw price increases. Year-on-year, the index dropped by 0.7%, with the Import Price Index showing a sharper decline of 2.9% compared to May 2024. The downward trend supports calls for the Swiss National Bank (SNB) to lower rates when it announces it monetary policy decision on Thursday.

Swiss economic growth forecast revised downward

Adding to reasons for the SNB to act was the revised economic outlook published by the State Secretariat for Economic Affairs, Seco on Monday. Swiss GDP growth for 2025 is now projected at 1.3%, down from the earlier forecast of 1.4%. Growth is expected to slow further to 1.2% in 2026, reflecting weaker exports and equipment investments amid ongoing international trade tensions. Despite these challenges, domestic demand, bolstered by low inflation (0.1% in 2025), is anticipated to provide some stability.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German ZEW Indicator of Economic Sentiment (11:00), euro-area ZEW Indicator of Economic Sentiment (11:00), US retail sales (14:30), US industrial production (15:15).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.