US stocks did manage to get off to a positive start on Monday welcoming news that President Trump was postponing strikes against Iranian power plants following “productive conversations”. However, the positive momentum did not last long, made worse by Trump giving Iran a 10-day extension to reopen the Strait of Hormuz. This raised questions over how soon the conflict could be resolved.
On Thursday the Nasdaq Composite dropped into correction territory, down over 10% from its October high. The following session the Dow Jones Industrial Average was the next index to slip into correction. For the week the Nasdaq dropped 3.2% and the Dow was down 0.9%. Meanwhile the S&P 500 lost 2.1%, with all indices suffering their fifth consecutive weekly loss in the worst run in nearly four years. The Russell 2000 index was the first to fall into correction territory the prior week, however it managed to eke out a slight positive performance of 0.5% for the week. Value stocks outperformed growth peers once again. Treasury yields saw some volatility on the geopolitical headlines although ultimately ended the week higher.
European markets were also influenced by the mixed messages around the Middle East war. For the week the STOXX 600 added 0.4%, snapping three weeks of losses. This was despite a 0.9% loss on Friday which was fuelled by a jump in oil prices. Many regional indices logged gains, although Germany’s DAX retreated 0.3%. Economic data was generally weaker, with the German business climate index falling to its lowest level since February 2025 in March, and the composite purchasing managers’ index dropping to 50.5 from 51.9. Meanwhile, the OECD cut its eurozone growth forecast for 2026 to 0.8% owing to the energy price surge.
In Japan the Nikkei 225 ended flat whereas the broader Topix managed to eke out a 1.1% gain. The yen was hovering around the 160 per US dollar level, with the finance minister verbally intervening although no actual intervention in the market occurred. Chinese markets were weaker, with the Shanghai Composite dropping 1.1% whilst Hong Kong’s Hang Seng lost 1.3%. South Korea’s Kospi had managed to avoid the sell-off triggered by the Middle East conflict the previous week, however it wiped out those gains falling 5.9% over the week. The country announced an emergency bond buyback as well as expanding fuel tax cuts to try and ease the energy shock. One surprising move of the week was that Mexico’s central bank delivered a 25 basis point rate cut despite inflation ticking up.