Markets rebound, but oil jitters and war risks keep nerves taut

Global equities rebounded yesterday as investors recalibrated after a bruising start of the week triggered by the escalation of strikes between Iran and Israel. The MSCI Emerging Markets Index rose nearly 1% on Monday, led by gains in GCC equities, while European and US stocks also posted gains. While the rebound reflects cautious optimism, tail risks remain firmly in place.

In Europe: The pan-European Stoxx 600 edged up 0.4%, led by a rally in energy and banking names, CNBC reports. The UK’s FTSE also rose to a near record high, closing up 0.3%.

US stocks also rebounded due to speculation over a possible truce between Israel and Iran, with the S&P 500 up 1% and the Nasdaq gaining 1.5%.

Middle East equities also joined the global rally, paring back some of the losses they made earlier this week and last Friday. The DFM gained 0.8%, ADX rose 0.2%, TASI was up 1.3%, and Egypt’s EGX30 inched up 0.1%.

The geopolitical premium was on full display in energy markets: Brent erased earlier gains to trade just below USD 75, paring back losses after last week’s 7% surge. Oil options volumes soared on Monday, with traders snapping up bullish Brent calls at USD 80 and USD 100, Bloomberg reported separately. Brent’s futures curve steepened into backwardation, suggesting fears of near-term supply shocks, especially if tensions escalate toward the Strait of Hormuz, through which 17 mn barrels per day of oil pass.

Despite calmer price action, the “margin for safety is getting ever narrower,” strategist Robin Mills wrote for the National.

Despite the rebound, forecasts point to a weaker year for US equities. RBC Capital Markets warned that the S&P 500 could drop up to 20% to 4.8k if higher oil prices drive inflation past 4%, earnings stall, and the Fed only cuts rates twice, Bloomberg reports. Even in a more benign scenario, the bank sees 13% downside from current levels. Other analysts, like Morgan Stanley’s Michael Wilson, remain cautiously optimistic on corporate earnings.

The bottomline? The rebound signals some relief, but the market’s risk appetite is still constrained by oil price volatility, geopolitical uncertainty, and policy recalibration. For now, investors are hedging hard and staying nimble.

MARKETS THIS MORNING-

Asian markets are also on the rise as investors’ attention splits between hopes for a potential truce in the Middle East and the Bank of Japan’s interest rate prospective move. Japan’s Nikkei is up 0.5%, while South Korea’s Kospi gained 1.1%, and Hong Kong’s Hang Seng was up 0.1%. Mainland China’s CSI 300 is flat in early trading. Over on Wall Street, futures fell following yesterday’s rebound.

THE CLOSING BELL-

The ADX rose 0.2% yesterday on turnover of AED 1.4 bn. The index is up 1.8% YTD.

In the green: Abu Dhabi National Co. for Building Materials (+11.6%), Sudatel Telecommunications Group Company (+10.0%) and Presight AI Holding (+5.8%).

In the red: Umm Al Qaiwain General Investment Co. (-9.5%), Hayah Ins. (-5.2%) and Gulf Medical Projects (-4.5%).

Over on the DFM, the index rose 0.8% on turnover of AED 726.6 mn. Meanwhile, Nasdaq Dubai was up 0.3%.

CORPORATE ACTIONS-

Emirates Telecommunications Group (e&) now owns roughly 16% of Vodafone as a result of the UK telco firm’s ongoing buyback program, which dilutes its stake according to a statement (pdf). The increase is a higher proportional holding, not a new purchase, and e&’s total shares in Vodafone remain at 3.9 bn shares.

ICYMI- e& acquired a. 10% stake in the firm in 2022, and its stake has gradually increased since the start of Vodafone’sUSD 500mn buyback program last year.