Western markets were down on Thursday, reeling under the impact of turmoil in the Middle East and rising oil prices, with technology stocks suffering the most.
European indices closed in the red: Frankfurt was down 1.50%, followed by London (-1.33%), Paris (-0.98%), and Milan (-0.71%).
On Wall Street, the Dow Jones fell by 1.01%, the broader S&P 500 slid 1.74%, and the tech-heavy Nasdaq suffered the largest hit, dropping 2.38%.
Investor unease
The situation is driven by a combination of factors, according to Kim Forrest, Chief Investment Officer at Bokeh Capital Partners. The ongoing conflict in the Middle East is making investors uneasy, she explained.
Confusion remains over US-Iran negotiations aimed at resolving the region’s tensions.
US Special Envoy Steve Witkoff reported “strong signals” of a possible agreement, noting that a 15-point peace plan had been submitted to Tehran.
However, Iranian officials criticised the proposal as unbalanced, according to reports from local media.
Fears of prolonged conflict drive oil prices up
Lack of concrete progress and fears of prolonged conflict, approaching its one-month mark, pushed oil prices higher, further dampening sentiment on Wall Street.
The price of the US benchmark West Texas Intermediate (WTI) crude rose by 4.61% to close at $94.48 per barrel.
The Brent crude, the global benchmark, surged 5.66% to reach $108.01 per barrel, nearing $110 for the first time since Monday’s dip.
Too early to forecast recession, analyst says
Each trading session with oil prices staying above $100 leads to worsening sentiment in equity markets, Andreas Lipkow of CMC Markets, warned. The risk of stagflation is continually growing, which could ultimately trigger a recession, especially in Europe, he added.
['Stagflation' in financial jargon means an economic situation characterised by slow growth, high unemployemnt and inflation - Editor's note.]
However, Amélie Derambure, portfolio manager at Amundi, Europe's leading asset manager, offered a cautious outlook. “The market remains prudent but far from panic or capitulation," she said. "No recession scenario is currently foreseen.”
Derambure added that most investors are still anticipating the conflict to end by late April.
Meta loses 7.96% as tech stocks tumble
Tech stocks faced additional pressure, with California-based Meta tumbling 7.96% on Thursday following two major legal rulings in consecutive days over its social media platforms’ impact on young users.
The decisions could set a precedent in hundreds of pending lawsuits against Meta, escalating both financial and reputational pressures on the company.
Other social media platforms were also hit; Reddit dropped 8.85%, and Snap plunged 10.69%.
Chipmakers experience sharp declines
Google’s parent company, Alphabet, saw a 3.06% decline following a Los Angeles court ruling against YouTube’s operational practices, although Alphabet’s diversified business model limited further damage.
Chipmakers experienced sharp declines after the unveiling on Tuesday of a new algorithm that could reduce the memory demands for AI models by over 80%.
Key players such as Micron (-6.97%), Sandisk (-11.02%), and Western Digital (-7.70%) stayed in the red throughout the session.
Gold prices fell below $4,500 per ounce, down around $1,000 from their highs in late January. As of 21:30 GMT, gold stood at $4,376.11 per ounce, marking a 2.88% drop.
Bonds move higher
“Retail investors had bought heavily into gold, seeking short-term profits. However, they have been exiting these positions en masse since the conflict began, pushing gold prices down,” Derambure explained.
In another sign of rising concerns, 10-year bond yields moved higher on Thursday.
Germany’s benchmark Bund yield rose to 3.07% from 2.95%, while French bonds climbed to 3.80%, up from 3.65%.
US 10-year Treasury yields jumped to 4.41%, compared to 4.30% the previous day.
