By Daniela Hathorn, senior market analyst at Capital.com
The past 24 hours have been a clear illustration of the growing divergence in global markets. On the one hand, developments in the Middle East have intensified, with the ongoing disruption to the Strait of Hormuz pushing oil prices sharply higher and reinforcing concerns about a prolonged energy shock. At the same time, the Federal Reserve has struck a more cautious tone, contributing to a rise in yields as markets reassess the path for inflation and interest rates.
Yet despite these signals, equity markets — particularly in the US — have shown notable resilience. Rather than reacting to the deterioration in the geopolitical backdrop, investors appear to be focusing on the strength of corporate earnings and the broader growth outlook. This suggests that markets are increasingly willing to look through near-term shocks, provided they do not materially alter the trajectory for profits.
In that sense, the current environment is less about a single dominant driver and more about competing narratives. Oil and rates markets are signalling rising risk and tighter financial conditions, while equities are pricing a scenario where those pressures remain contained. The key question from here is whether that balance can hold, particularly as earnings season progresses and the impact of higher energy costs begins to filter through into corporate guidance.
Brent crude daily chart:
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