Risk appetite is waning in global markets due to concerns that the Middle East tensions could reignite into a violent conflict, while investors are closely monitoring the upcoming monetary policy decisions from the European Central Bank (ECB) and Türkiye's Central Bank (TCMB), both scheduled for Thursday.
Fears that US and Iranian forces in the Middle East could return to conflict and adopt a harder stance in a potential new phase of the war influence asset pricing.
The US Central Command (CENTCOM) said it launched additional strikes against various targets in Iran in "self-defense" on Wednesday at the direction of US President Donald Trump.
Meanwhile, Iranian state television reported the Muwaffak Salti Air Base in Jordan, where US forces are stationed, was targeted by missiles.
Iran's military headquarters also announced the complete closure of the Strait of Hormuz to all vessels amid escalating tensions and hostilities.
The macroeconomic impact of the conflict is also on investors' radar as tensions in the region continue to escalate.
The US' annual inflation reached its highest since April 2023 at 4.2% and monthly inflation came in within estimates at 0.5%, according to data released on Wednesday.
Expectations that the fight against rising geopolitical risks and inflation could take longer than expected have taken precedence, according to analysts.
The Fed is expected to hike rates by the end of the year more than before, according to money market estimates.
Meanwhile, selling pressure on tech stocks continued amid concerns of a tightening stance in the US and the questions over the impact of artificial intelligence (AI) firms' high spending plans on company valuations.
Broadcom shares declined 5.1%, AMD 4.9%, Micron Technology 4.7%, Nvidia 3.7%, Alphabet and Amazon 2.5% each, Microsoft 1.5%, and Intel 1%.
At the same time, the US 10-Year Treasury yield stands at 4.54% and the US Dollar Index is trading at 99.9, slightly down.
Gold fell to $4,071 per ounce, its lowest since Nov. 24, 2025. Gold is trading at $4,084 per ounce on Thursday, up 0.3%.
Brent crude oil rose 2.9% to $93.7 per barrel on Wednesday following Iran's closure of the Strait of Hormuz, while trading at $93.1 on Thursday, down 0.7%.
The S&P 500 fell 1.62%, the Nasdaq 1.98%, and the Dow Jones 1.87% on Wednesday, while American indexes started Thursday positively.
European markets also traded negatively on Wednesday, except for the UK. All eyes turned to the monetary policy decisions by the ECB and the verbal guidance by ECB President Christine Lagarde on Thursday.
Expectations for the ECB to cut rates have been pushed back from March 2027 to mid-2027, as a rate hike is widely expected at the bank's meeting on Thursday.
The FTSE 100 climbed 0.27%, while the DAX 40 fell 0.97%, the CAC 40 0.51%, and the FTSE MIB 30 0.46% on Wednesday. European indexes opened Thursday on a mixed trend.
The developments in the American and European markets impacted Asia as a mixed trend prevailed in the region, while the recovery in tech-focused stocks supported risk appetite.
South Korean chipmaker SK Hynix said it plans to boost production volume, increasing the buying activity in the region's semiconductor sector.
Bank of Japan Governor Kazuo Ueda was reportedly hospitalized ahead of the bank's rate decision next week amid inflation risks in the region. He may not be able to attend the June 15-16 meeting.
The Nikkei 225 and the Kospi Index both climbed 0.1%, while the Shanghai Composite Index fell 0.5% and the Hang Seng Index declined 1.3% near the close.
