Market Commentary

The US dollar strengthened on Monday as renewed setbacks in US-Iran negotiations added to geopolitical uncertainty and pushed oil prices higher. Reports that Tehran had suspended communications with Washington and was moving to fully close the Strait of Hormuz reinforced expectations that higher energy prices could keep US interest rates elevated for longer. At the same time, the ISM Manufacturing PMI rose to 54 in May, marking the strongest expansion in factory activity in four years.

Against this backdrop, US Treasury yields moved higher, with the 10-year yield climbing to 4.51%, while US equities retreated from record highs. The Dow Jones Industrial Average fell 150 points, while the S&P 500 and Nasdaq 100 edged lower. Traditional sectors came under pressure, although continued enthusiasm around artificial intelligence supported technology shares. Nvidia gained more than 2% after unveiling its RTX Spark Superchip, while Microsoft and Oracle each advanced 4%.

European markets faced similar pressure as the euro weakened towards $1.16 and investors increased expectations for further European Central Bank rate hikes. In the UK, the pound slipped towards $1.34, while 10-year gilt yields rose above 4.90% as higher oil prices fuelled inflation concerns. UK house prices declined by 0.60% in May, marking the largest monthly fall since June 2025.

Asian markets delivered a mixed performance. Japan’s Nikkei 225 reached a fresh record high, rising 0.91% as technology shares extended gains, led by a 14% surge in SoftBank. In contrast, Chinese equities weakened, with the Shanghai Composite falling 0.27% as investors weighed mixed PMI data and profit-taking in technology counters.

Locally, the Absa Purchasing Managers’ Index eased to 50.8 in May from 52.6 previously, reflecting slower growth in activity, weaker new orders and rising input costs. The FTSE/JSE All Share Index declined 2.27%, while the rand weakened to R16.32 against the US dollar.

Commodity markets remained focused on developments in the Middle East. Brent crude rose more than 5% to around $96 a barrel, while WTI climbed above $94. Gold fell towards $4 470 per ounce as higher oil prices reinforced expectations that global interest rates could remain higher for longer. Silver reversed early gains to trade below $75 an ounce, while platinum hovered near four-week lows below $1 950 per ounce.