Global stocks slide as U.S. strikes Iran, ECB set to hike rates

Asian and European Stocks Fall on Iran Tensions and ECB Rate Outlook

Global equities came under pressure on Thursday as investors grappled with the dual shock of hotter-than-expected U.S. inflation data and a fresh escalation in the Iran conflict, while Europe braced for a widely anticipated interest rate hike from the European Central Bank.

US Strikes and Inflation Fuel Risk-Off Mood

The United States launched fresh strikes against Iran overnight after peace talks stalled, sending oil prices higher and rattling risk sentiment across Asia. Brent crude traded near $94 per barrel, extending gains driven by the months-long conflict that has disrupted energy supplies through the Strait of Hormuz.bloomberg

The selloff compounded damage from Wednesday’s U.S. Consumer Price Index report, which showed annual inflation accelerating to 4.2% in May — its highest level since April 2023 — driven largely by a 23.5% surge in energy costs tied to the Iran war. The Bureau of Labor Statistics reported that the CPI-U rose 0.5% on a seasonally adjusted basis for the month.tradingeconomics

Japan’s Nikkei 225 fell nearly 2% on Thursday, while equity futures pointed to losses across the region as Bloomberg reported that Asian stocks were set to decline on the renewed military action. South Korea’s Kospi, which had plunged over 8% earlier in the week on Fed rate hike fears, showed signs of stabilization.tradingeconomics

ECB Poised to Raise Rates

In Europe, the ECB’s Governing Council met Thursday with markets pricing in a roughly 91% probability of a 25 basis-point rate hike that would lift the deposit facility rate to 2.25%. The near-certainty of a hike followed eurozone inflation climbing to 3.2% in May, well above the bank’s 2% target, with services prices accelerating sharply to 3.5%.riotimesonline

Reuters reported in May that the case for a June hike was “nearly sealed,” though policymakers intended to signal caution about further moves in July. The combination of rising energy costs and persistent inflation left the ECB with little room to hold steady, even as concerns mounted about the eurozone’s fragile growth outlook.cnbc

Broader Market Stress

The convergence of geopolitical risk, sticky inflation, and tightening monetary policy weighed broadly on sentiment. The Iran conflict, now past the three-month mark, has pushed oil prices roughly 40% above year-ago levels and has become the dominant driver of global inflation dynamics. With the Federal Reserve also facing pressure to hike rates after strong U.S. jobs data, investors found few places to hide in a week that saw steep losses across asset classes.reuters

“I love it, the numbers were great,” President Trump said of Wednesday’s inflation report, dismissing concerns about the rising cost of living.nytimes