The Escalation Of The Conflict In The Middle East Put Pressure On US And European Stock Indices

The US stock indices retreated from their historical highs amid a new wave of escalation in the Middle Eastern crisis. By the end of the day, the Dow Jones (US30) Index fell by 1.21%. The S&P 500 (US500) Index declined by 0.74%. The Technology‑heavy Nasdaq (US100) closed down by 0.29%.

The direct exchange of military strikes between the US and Iran affected third countries in the Persian Gulf, disrupting the fragile ceasefire and prolonging the naval blockade of key energy routes. A simultaneous surge in oil and fuel prices triggered a sharp jump in US Treasury yields across the curve, while strong macroeconomic data, including the May ADP report (122,000 new jobs versus the prognosis of 110,000) and the ISM services PMI with its price component at a four‑year high, finally convinced investors that the Federal Reserve will be forced to keep interest rates at a tight, restrictive level for an extended period. This macroeconomic backdrop triggered a large‑scale flight from risk assets, hitting the technology and financial sectors the hardest. Shares of major software companies entered a deep correction: Oracle and Palantir plunged more than 5%, while Microsoft’s market capitalization fell by 3%.

Bitcoin continued to decline, dropping to the $61,000 mark, its lowest level since the escalation of the conflict with Iran in late February, before trimming losses to around $64,000. Since Strategy Inc. sold part of its large bitcoin holdings worth about $2.5 million, the digital assets has fallen by roughly 16%. The company is one of the largest corporate bitcoin holders and is widely viewed as a representative of the digital assets management model. Bitcoin is now down more than 50% from its peak above $126,000 reached in October of last year. US-listed bitcoin exchange‑traded funds (ETFs) also recorded nearly $4 billion in outflows over 12 consecutive sessions – a record streak.
The Organization for Economic Co‑operation and Development (OECD) published an updated macroeconomic report in which it sharply downgraded its global growth expectation for the current year from the previous 3.4% to 2.8%, while keeping its 2027 estimate unchanged at 3.1%. The revision is directly linked to the prolonged Middle Eastern crisis. The key factors weighing on global activity in the coming years will be entrenched increases in energy prices, supply shortages, tight financial conditions due to high central bank rates, and a general decline in business confidence.

European indices were under pressure yesterday. By the end of the day, Germany’s DAX (DE40) fell by 1.31%, France’s CAC 40 (FR40) closed down by 0.71%, Spain’s IBEX 35 (ES35) declined by 0.53%, and the UK’s FTSE 100 (UK100) finished the session down by 0.40%.

European stock indices closed with notable losses as persistent inflation concerns were compounded by a new wave of global protectionism from Washington. The Donald Trump administration threatened to impose additional import tariffs of up to 12.5% on several trading partners due to ineffective oversight of goods produced using forced labor. This tariff threat instantly revived trade barriers between the US and the EU, coinciding with another escalation in the Middle East, where new armed clashes between Iran and the Gulf monarchies effectively derailed the fragile ceasefire. Against this backdrop, the banking sector – highly sensitive to rising systemic risks – came under the strongest pressure: shares of Italy’s UniCredit, Spain’s BBVA, and Germany’s Deutsche Bank plunged between 2% and 3.7% lower.

Prices for US WTI crude oil extended their rally, rising more than 2% to $95.7 per barrel amid a combination of severe domestic supply shortages in the US and a critical escalation in the Middle East. The main local trigger for the bulls was the latest weekly report from the Energy Information Administration (EIA), which recorded a sixth consecutive decline in US commercial crude inventories – this time by 7.97 million barrels. This drop not only doubled analysts’ consensus expectations of a 4‑million‑barrel decrease but also became the largest weekly outflow from US storage facilities since February of this year, revealing a significant physical supply shortfall in the market. At the same time, commodity traders priced a geopolitical risk premium into the barrel, completely ignoring another wave of verbal optimism from Washington. US President Donald Trump publicly stated that Iran had allegedly agreed to abandon its pursuit of nuclear weapons. However, the real situation in the region only worsened: overnight, direct clashes between US and Iranian forces were the fiercest since the ceasefire was announced, with Kuwaiti and Bahraini territories caught in the crossfire.

In Asia on Wednesday, Japan’s Nikkei 225 (JP225) rose by 2.50%, China’s FTSE China A50 closed up by 0.46%, Hong Kong’s Hang Seng (HK50) fell by 1.56%, and Australia’s ASX 200 (AU200) gained 0.70%.

The Australian dollar remained below the 0.715 USD mark. The national currency received local support from strong domestic data: Australia’s April trade balance returned to a surplus of 1.79 billion AUD after a March deficit of 1.02 billion, driven by a sharp surge in iron ore and coal exports while imports remained stable. At the same time, earlier this week, weak Q1 GDP data confirmed that the three rounds of monetary tightening by the Reserve Bank of Australia this year have already begun effectively cooling domestic consumer demand and restraining underlying price pressures.

• S&P 500 (US500) 7,553.68 −56.10 (−0.74%)

• Dow Jones (US30) 50,687.07 −620.72 (−1.21%)

• DAX (DE40) 24,795.94 −328.23 (−1.31%)

• FTSE 100 (UK100) 10,332.30 −41.21 (−0.40%)

• USD Index 99.53 +0.31 (+0.31%)

News feed for: 2026.06.04

• Australia Trade Balance (m/m) at 04:30 (GMT+3) – AUD (MED)

• Australia RBA Gov Bullock Speaks at 08:00 (GMT+3) – AUD (LOW)

• Sweden Inflation Rate (m/m) at 09:00 (GMT+3) – SEK (MED)

• Switzerland Consumer Price Index (m/m) at 09:30 (GMT+3) – CHF (HIGH)

• Switzerland Unemployment Rate (m/m) at 10:00 (GMT+3) – CHF (MED)

• Eurozone Retail Sales (m/m) at 12:00 (GMT+3) – EUR (LOW)

• US Initial Jobless Claims (w/w) at 15:30 (GMT+3) – USD (MED)

• US Natural Gas Storage (w/w) at 17:30 (GMT+3) – XNG (HIGH)

• UK BOE Gov Bailey Speaks at 18:40 (GMT+3) – GBP (LOW)