Global equities retreated on Thursday as investor sentiment soured amid growing fears of a US-Iran confrontation and renewed warnings on inflation from the Federal Reserve.
The MSCI Asia Pacific Index dropped by nearly 1%, with Hong Kong stocks tumbling more than 2%. Meanwhile, US equity futures edged lower after the S&P 500 Index closed flat in the prior session. The US dollar strengthened against major currencies, while Treasury markets were closed due to a US holiday.
Market jitters escalated following a Bloomberg report that senior US officials are preparing for a potential military strike on Iran in the coming days, heightening geopolitical uncertainty in an already fragile global outlook.
Compounding the unease, Federal Reserve Chair Jerome Powell warned of “meaningful inflation” ahead. The central bank recently downgraded its 2025 growth projections and raised inflation estimates, reflecting concerns over persistent tariff-related headwinds and the growing complexity of policy easing.
“We’re cautious at the moment, focusing on asset classes that are less correlated to rates and geopolitical shifts,” said Gareth Nicholson, Head of Discretionary Portfolio Management at Nomura, in an interview with Bloomberg TV.
“But there’s not many that are uncorrelated right now.”
With risk appetite weakening, investors are closely watching developments in the Middle East and upcoming data releases that could influence central bank trajectories and broader market direction.
