WS #15183

Global markets are navigating a complex divergence between persistent geopolitical risk and a cooling of immediate supply shocks. Oil prices have retreated from the $100 mark to the high $90s as Gulf exports rebounded to pre-war levels and diplomatic channels with Iran showed activity, dampening the immediate 'war premium' that had driven the escalation narrative. However, the underlying risk remains embedded, supported by the deployment of new Russian infrastructure-targeting drones and ongoing tensions in the Strait of Hormuz, preventing a full risk-on rally. Simultaneously, the macro environment is tightening significantly. US and UK bond yields are hitting multi-decade highs, with the 10-year US yield reaching 2002-era levels, driven by stubborn inflation (Germany at 3.3%, UK wage pressures) and fiscal concerns. This yield spike is acting as a headwind for risk assets, particularly high-multiple tech, despite a bright spot in the AI hardware trade where Micron's earnings and Google's Gemini 4 launch are providing localized support. The combination of rising rates and geopolitical uncertainty is creating a 'higher for longer' volatility regime, pressuring consumer discretionary and financial sectors while benefiting energy and defense names.