Iran War Sends Shockwaves Through Global Markets, Fueling AI Rally, Inflation and Emerging-Market Strain

The U.S.–Israel–Iran war that began on 28 February blocked the Strait of Hormuz, a conduit for about 20 % of oil. Brent crude rose to $105-$106 a barrel. European markets opened higher, with FTSE 100 +0.3 %, DAX +0.7 % and CAC 40 +0.5 %. Stoxx 600 is on track for a 2.25 % weekly gain. UK borrowing hit £24.3 bn in April, widening the deficit to £17.4 bn. AI-focused baskets (semiconductor and infrastructure) rose 20-22 % since April, driving two-thirds of equity gains. US jobless claims fell to 209 000; 10-year Treasury yield rose to 4.923 %.

CNBC

Rising energy costs have eroded real wages in the UK and US, slowed retail sales and cut single-family housing starts 9 % YoY. AI equities have outperformed, delivering over two-thirds of European gains.

CNN

IEA chief Fatih Birol said a full, unconditional reopening of the Strait of Hormuz is the important solution to the energy shock. Fed minutes recorded heightened inflation concerns and hinted at rate hikes. The UK Treasury reported higher borrowing and a widening deficit. TS Lombard noted its EU AI baskets have performed “on par with the Nasdaq, just a touch behind Taiwan” since April.

CNBC

Wells Fargo warned the AI rally may be a bubble, with downside if growth slows, core inflation accelerates, or the conflict escalates. Emerging-market analysts warned import costs could widen trade deficits, weaken currencies and force tight monetary policy.

Business Insider

Data show a resilient U.S. labor market but inflation outpacing wages; Europe reports a strong AI-driven rally. Asia notes currency pressure and $5-10 billion remittance losses for India. The oil-inventory impact of the strait closure remains unclear.

Iran war pressures emerging Asian markets, fuels bearish currency scenarios

• “We still can't rule out some spillover effects from the war and the spike in oil prices on to the labor market, which we have always expected would come with a lag,” — Matthew Martin, senior U.S. economist, Oxford Economics

Reuters

• “We expect limited downside until either growth slows, core inflation meaningfully accelerates, or if the war evolves into a hot war,” — Wells Fargo analyst

Business Insider

• “The performance of our EU AI baskets since April is on par with the Nasdaq, just a touch behind Taiwan,” — Davide Oneglia, TS Lombard

European AI stocks rally despite broader market pressure from Iran war

• “IEA Executive Director Fatih Birol said the single most important solution to the Iran war energy shock is a full and unconditional reopening of the strategically vital Strait of Hormuz.” — Fatih Birol, IEA executive director

CNBC

The IEA urges reopening of the Strait of Hormuz to avoid a “red-zone” oil market in July-August. The Fed is expected to keep rates steady while watching inflation. Wells Fargo warns AI rally speed may moderate. Emerging-market policymakers must defend currencies amid energy shocks, risking reserve drawdowns if conflict persists.

CNBC