Geopolitics, Oil, and Fear: Why Markets Are Shaken and Investors Flee to Safety
Market News 18 JUN
On Tuesday, global financial markets came under pressure amid escalating geopolitical tensions and weaker-than-expected economic data from the U.S. Major stock indices closed lower, while oil prices surged over 4% as concerns about a deepening conflict between Israel and Iran gripped investors.
Rising Geopolitical Tensions
Investor sentiment was rattled by former U.S. President Donald Trump’s hardline comments ruling out diplomatic talks with Iran and calling for “unconditional surrender.” The remarks followed the fifth consecutive day of military clashes between Israel and Iran, with Israeli forces continuing strikes on Iran’s nuclear facilities.
In the Strait of Hormuz—through which about 20% of the world’s oil flows—navigation disruptions were reported, affecting signals of over 900 vessels. A collision between two tankers was confirmed on Tuesday, although no direct attacks on critical infrastructure have yet been reported.
Flight to Safety and Oil Rally
The uncertainty triggered a move into safe-haven assets. U.S. Treasury yields fell to 3.95% (2-year) and 4.39% (10-year), while the U.S. dollar index rose 0.8%, reflecting risk-off sentiment.
Oil prices jumped more than 4% as WTI crude climbed above $73 a barrel, boosting energy stocks. Companies such as Valero Energy, Chevron, and Exxon Mobil saw gains between 1% and 2.5%.
Weak U.S. Economic Data Adds Pressure
Adding to the bearish sentiment, U.S. retail sales for May fell -0.9% month-over-month, worse than the -0.6% forecast. Excluding autos, sales dropped -0.3%, missing expectations of a 0.2% increase.
The NAHB housing market index also dropped to a 2.5-year low of 32, while industrial production contracted -0.2%, further raising concerns about stagnation risks in the U.S. economy.
Equities in Red—Except Energy and Defense
The S&P 500 closed lower, with all sectors down except energy. Key laggards included:
Healthcare: Pharma stocks dropped on speculation that the Trump administration might limit direct-to-consumer drug advertising.
Consumer Discretionary: Retail and housing-related stocks fell after disappointing sales and earnings data from Lennar.
Travel & Leisure: Airline and cruise line shares slid as investors priced in higher geopolitical risks.
Meanwhile, defense stocks rallied on the back of the Middle East conflict, with Lockheed Martin, RTX, and Huntington Ingalls gaining between 1% and 2%.
Corporate Movers and Strategic Deals
Eli Lilly acquired Verve Therapeutics for $1.3 billion, sending VERV stock up over 80%.
Jabil soared 8% after beating earnings expectations and raising its full-year revenue forecast to $29 billion.
SoftBank sold a large stake in T-Mobile US to fund its AI investments, dragging TMUS shares down over 4%.
Meta unveiled a new AI-powered ad feature, expanding its AI ambitions.
Airbus secured a $9.9 billion order from VietJet at the Paris Air Show.
OpenAI signed a $200 million deal with the U.S. Department of Defense for national security AI capabilities.
Market Volatility and Fed Outlook
The CBOE Volatility Index (VIX) jumped 12.7% to 21.54, reflecting elevated market anxiety. Investors are awaiting the outcome of the Federal Reserve’s two-day meeting, which concludes Wednesday. The Fed is expected to hold rates steady at 4.25%–4.50%, but market participants will scrutinize Fed Chair Powell’s comments and the dot plot for signals on future easing.