US stock indices drop on Iran comments

European markets also closed lower yesterday, with Volkswagen notably down 1.2%, slipping below the €90 level. Stock indices were mixed in early trade on Wednesday. The UK’s FTSE 100 was a touch firmer soon after the open, but the German DAX and Euro Stoxx 50 turned lower, despite an uptick across US stock index futures.

Source: TN Trader

Meanwhile, the UK’s May inflation data were broadly in line with forecasts. The inflation reading helped steady bond markets but did little to lift broader equity sentiment. 

Inflation has been well above the Bank of England’s 2% target for close to four years now, and today’s update simply reinforces the view that the Bank will leave rates unchanged after tomorrow’s meeting.

Asian Pacific stock indices were mixed, following weakness across Wall Street on Tuesday. Hong Kong’s Hang Seng dropped 1.1%, weighed down by renewed concerns over potential US involvement in the Iran–Israel conflict. The Shanghai Composite ended unchanged.

Meanwhile, Japanese equities saw moderate gains, with the Nikkei 225 closing 0.9% higher as a slightly weaker yen provided support. On Tuesday, the Bank of Japan kept interest rates unchanged, as expected. 

Yesterday, the British pound had a rough session, falling broadly and breaking below the 1.3500 level against the dollar. The weakness was partly reversed early Wednesday after the UK’s Core CPI data for May came in at 3.5%, which was aligned with expectations, but significantly below last month’s 3.8%.

The report helped ease immediate concerns around inflation, providing a modest lift for sterling.

Source: TN Trader

Elsewhere, the euro slipped back from recent highs, retreating to around 1.1500 against the US dollar, having traded above 1.1600 last week and again on Monday.

Source: TN Trader

Silver continued to shine, surging above $37 per ounce. This followed a week-long period of consolidation after it broke above $36 earlier this month. 

Source: TN Trader

In contrast, gold has been subdued. Despite the elevated geopolitical risk, investors showed little interest. Instead, it too shows signs of consolidating and has so far failed to break decisively back above $3,400.

Source: TN Trader

Oil has given back some recent gains, with prices significantly below last Thursday’s highs, which were hit in the immediate aftermath of Israel’s attack on Iran. The latest move suggests some profit-taking and cautious positioning by traders.

Source: TN Trader

Despite strong underlying support, sentiment appears to be cooling slightly as markets reassess near-term demand prospects and await further clarity from the Middle East. The pullback may prove temporary if tensions escalate further. Trader focus is on President Trump as he weighs US involvement in the Israel-Iran war.

At the G7 Summit in Canada, the UK and the US signed a bilateral trade deal, offering key industry protections and relief. President Trump praised the agreement, stating, “Britain will have protection against future tariffs because I like them.”

Under the terms, US tariffs on UK car exports will fall to 10% from 27.5%, and tariffs on aerospace exports will be eliminated entirely. However, the UK’s steel industry was left out of the exemption list and still faces a 25% duty.

That said, this remains more favourable than the global steel tariff rate of 50%. Unions have since called for a complete exemption on UK steel exports, underscoring the uneven impact across sectors.

The Volatility Index (VIX) July contract rose to 21.20, marking a renewed uptick in volatility. With tensions in the Middle East intensifying and global trade discussions still evolving, investor caution is rising.

The mood in global markets has clearly shifted toward caution. Tuesday’s losses across US and European indices highlight growing anxiety over geopolitical developments. President Trump’s call for Iran’s unconditional surrender rattled markets, triggering broad-based selling despite relatively neutral economic data and in-line UK inflation figures.

In the UK, the newly signed trade deal with the US offers pockets of relief for key industries like autos and aerospace. Still, the continued imposition of steel tariffs limits broader optimism. Sterling’s rebound post-CPI was modest and likely short-lived without a more meaningful shift in economic or trade dynamics.

Across asset classes, silver’s breakout contrasts with gold’s muted tone, and oil’s recent rally shows signs of fatigue. Stock indices were mixed in early trade, and with volatility climbing, traders are preparing for more headline-driven swings. In short, markets remain vulnerable, and sentiment is tightly tethered to unfolding political risks and tariff outcomes.