The dual impact of the Middle East conflict and warnings from the Federal Reserve has led to a decline in global stock markets, a correction in gold, and a 0.5% increase in crude oil during the day

On Thursday, the Stoxx Europe 600 index fell 0.6%, heading towards a third consecutive day of decline. The benchmark index for Asian stock markets dropped more than 1%, U.S. stock futures also faced downward pressure, and the dollar strengthened against major currencies. Due to the June holiday, U.S. stock and bond markets were closed. Spot gold fell more than 0.5% during the day, while both WTI and Brent crude oil rose by 0.5%.

The trigger for the sharp decline in market sentiment was the ongoing stalemate in the conflict with Iran. According to a report by CCTV News on Thursday, three informed sources stated that U.S. President Trump approved an attack plan against Iran on June 17 but has not yet issued a final order, hoping to use threats to force Iran to abandon its nuclear program.

This news added to the already tense market, which was reacting to the Federal Reserve's downgrade of this year's growth forecast and an increase in inflation predictions. The uncertainty driven by tariffs is complicating the central bank's easing policies.

• European stocks opened lower collectively, with the German DAX index down 0.73%, the UK FTSE 100 index down 0.32%, and the Stoxx Europe 600 index down 0.66%. The French CAC40 index fell by 1% during the day.
• S&P 500 futures fell 0.4%, Nasdaq 100 futures fell 0.5%, and Dow Jones Industrial Average futures fell 0.3%.
• The Nikkei 225 index closed down 1%, at 38,488.34 points. The Tokyo Stock Exchange index closed down 0.6%, at 2,792.08 points. The Seoul Composite Index closed up 0.2%, at 2,977.74 points.
• The yield on the 10-year U.S. Treasury bond changed little, at 4.39%.
• The yield on Japan's 5-year government bonds fell by 5 basis points to 0.955%.
• The U.S. dollar spot index rose by 0.1%.
• The euro fell 0.1% against the dollar to 1.1467. The yen fell 0.1% against the dollar to 145.33.
• The euro turned lower against the Swiss franc, currently down 0.1% to 0.9387. The Swiss National Bank lowered its policy rate by 25 basis points to 0%, in line with market expectations.
• Spot gold briefly fell below $3,350 per ounce, down more than 0.5% during the day.
• WTI and Brent crude oil both rose by 0.5% during the day.

Geopolitical Clouds Hang Over Global Stock Markets

CCTV cited U.S. officials and other sources stating that the U.S. aircraft carrier "Ford" strike group is expected to be deployed to the European theater next week, likely heading into the eastern Mediterranean near Israel. Iran is experiencing widespread internet outages.

"We are currently cautious, focusing on asset classes that are less correlated with interest rates and less related to U.S. presidential actions," said Gareth Nicholson, head of self-investment portfolio management at Nomura Securities:

"However, such assets are rare. In this environment, it is wise to remain more cautious." Manish Bhargava, CEO of Singapore Strait Investment, stated:

"The direct involvement of the United States in an attack on Iran would almost certainly trigger a sharp rise in oil prices. This surge would exacerbate global inflation, making it more difficult for central banks to control inflation and potentially delaying interest rate cuts."

Both WTI and Brent crude oil rose by 0.5% during the day.

Federal Reserve Policy Shift, Market Faces New Challenges

The Federal Reserve voted unanimously on Wednesday to keep the benchmark interest rate unchanged. Powell clearly pointed out that tariff increases could push prices higher, and the impact on inflation could be more lasting. Although the median expectation for two rate cuts in 2025 remained unchanged, several officials lowered their forecasts.

Haris Khurshid, Chief Investment Officer of Chicago Karobaar Capital, stated:

"Powell has chosen the safe route. They currently stick to two rate cuts, but are clearly unsettled by the tariff issue. There is no urgency to act. It’s a tough situation: slowing growth, persistent inflation, and rising geopolitical risks."

Changes in the swap market more intuitively reflect this uncertainty. Traders are readjusting expectations, with the rate cut magnitude priced in at nearly 50 basis points by the end of the year.

On Thursday, Europe will face key decisions from several central banks. The Bank of England is expected to maintain the interest rate at 4.25% and suggest sticking to a strategy of "cutting rates every other meeting," trying to find a balance between high inflation, rising oil prices, and economic slowdown. The Swiss National Bank may lower rates to zero and maintain that level for a period. The German DAX index fell by 0.73%, the UK FTSE 100 index fell by 0.32%, and the European Stoxx 600 index fell by 0.66%. The French CAC40 index saw a decline of up to 1% during the day.

News from the Japanese market indicates that strong auction results have driven Japanese bond yields down across the board, while reports suggest that the Ministry of Finance is considering reducing the issuance of ultra-long-term bonds starting in July