US equities finished the week higher, while Australian equities lagged, as markets navigated renewed geopolitical tensions between the US and Iran alongside a more hawkish tone from the Federal Reserve.
The S&P 500 rose 1.26%, led by a rebound in large-cap technology and semiconductor stocks. Early signs of continued market broadening, which had seen gains spread beyond the technology sector, faded after geopolitical tensions escalated in the Middle East. President Trump announced an end to the ceasefire with Iran, with the US reportedly carrying out additional strikes and tightening sanctions on Iranian oil exports.1 The developments drove crude oil prices sharply higher, reigniting inflation concerns and pushing US Treasury yields higher. Rather than triggering a traditional growth-related market selloff, semiconductor and mega-cap technology stocks resumed their leadership as investors pursued perceived earnings certainty. Additionally, the Federal Reserve's June meeting minutes reinforced a hawkish tone. Policymakers noted that inflation was likely to remain elevated in the near term due to tariffs and supply-side disruptions, while economic activity and labour market conditions continued to remain resilient despite ongoing uncertainty.2 The minutes suggested the Fed remains cautious on easing policy, supporting the view that interest rates may stay elevated for longer.
The ASX 200 fell 0.43% for the week, with eight of the eleven sectors closing lower following renewed US military strikes on Iran. While US investors rotated back into semiconductor and mega-cap technology stocks, Australian investors favoured the Materials sector, which acted as a local proxy for the global AI and infrastructure buildout theme. The sector emerged as the market's strongest performer following the strikes after being the weakest in the days leading up to the escalation, highlighting a sharp reversal in sentiment.
In the world of commodities:
- Gold: Gold (GOLD) declined to a mid-week low of ~USD 4,000, as escalating geopolitical tensions and persistent inflation concerns drove expectations for higher interest rates.
- Oil: Oil prices increased over the week, supported by renewed US strikes and tighter sanctions on Iranian oil exports. Despite the geopolitical backdrop, gains were relatively contained, with prices remaining below the levels seen during previous periods of heightened Middle East tensions indicating investors are becoming less sensitive to geopolitical headlines.
- Uranium: Indian Prime Minister Narendra Modi visited Australia, resulting in an agreement to expand Australian uranium (ATOM) exports to support India's nuclear energy ambitions. India has committed to growing its nuclear generation capacity to 100 gigawatts by 2047, creating a significant long-term demand source for Australian Uranium producers.3
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