WS #14965

Geopolitical tensions in the Middle East are escalating sharply following the US rejection of an Iranian ceasefire proposal and reports of Iranian missile strikes injuring US Marines in the Strait of Hormuz. This has triggered a significant spike in Brent crude past $107, driving a divergence in global markets: US stock futures are under pressure while European equities remain resilient, supported by domestic policy tailwinds like the UK's Help to Buy revival. The market is now pricing in a prolonged supply disruption risk, with the White House considering a diesel export ban to protect domestic fuel supplies, a move that Goldman Sachs expects to initially depress diesel prices but exacerbate global supply crunches. In the technology and crypto sectors, capital flows remain robust despite volatility. Bitcoin ETFs recorded their largest weekly inflows since October 2025 ($2.4B), signaling strong institutional demand even as Bitcoin consolidates near $87,100. Meanwhile, the Bitget exchange has resumed withdrawals following a $388 million exploit, with losses covered by a user protection fund, mitigating broader contagion fears in the crypto exchange space. In defense, a sector-wide repricing is emerging as defense stocks like General Dynamics and Lockheed Martin decline, potentially reflecting a market bet on de-escalation or profit-taking after the initial geopolitical shock, despite the ongoing escalation narrative. Corporate earnings previews and macro forecasts are highlighting sector-specific headwinds. Nike faces a challenging earnings report driven by extreme bearish sentiment, while HSBC forecasts RBI rate hikes in India due to oil-driven inflation pressures. The defense sector's recent underperformance contrasts with the broader geopolitical escalation, suggesting a complex interplay between immediate conflict risks and longer-term budgetary or political expectations.