Overview:

Global financial markets experienced significant volatility on Thursday as escalating geopolitical tensions in the Middle East collided with persistent inflation concerns. Oil prices surged above $95 per barrel following reports of increased U.S.-Iran military activity, while precious metals and equities showed mixed performance. Central banks remain focused on interest rate management as inflation persists at elevated levels across major economies.

Details:

Crude oil rallied sharply, with Brent futures climbing $2.30 per barrel (2.47%) to reach $95.40 following heightened tensions between the United States and Iran, including reports of additional airstrikes and threats to close the Strait of Hormuz. This geopolitical premium offset concerns about global economic slowdown that typically weigh on energy demand.

Gold prices exhibited volatile trading patterns, declining more than 3% as investors reassessed interest rate outlooks and inflation trajectories. The precious metal fell to its lowest level in six months at $4,063.87 per ounce before recovering somewhat through short-covering operations. Base metals, particularly copper, retreated amid broadening concerns about global economic deceleration.

Asian equities declined during Thursday's session, with Japan's Nikkei index falling 1.3% as semiconductor stocks came under selling pressure from Wall Street weakness. The U.S. dollar fluctuated as markets weighed competing signals from monetary policy expectations and geopolitical risk aversion. U.S. inflation reached its highest level in three years during May, driven significantly by fuel price increases, reinforcing expectations for continued elevated interest rates. The Saudi stock index closed down 102.73 points at 11,012.64, with trading valued at 5.7 billion riyals.

Outlook:

The European Central Bank's expected interest rate decision later this week will provide critical signals regarding monetary policy normalization in the eurozone. Investors are monitoring whether geopolitical premiums in oil markets will persist and whether they might trigger broader inflationary pressures that could delay anticipated rate cuts globally.