US futures
Dow futures -0.22%, S&P futures 0.01% & Nasdaq futures 0.19%
In Europe
FTSE 0.82% & DAX -0.38%
- U.S stocks steady at record highs
- Iran stops negotiating, oil prices and treasury yields rise
- AI optimism limits the downside
- Oil prices spike 5%
Middle East worries rise as Iran stops negotiating
U.S. stocks have paused at record levels on the open as Middle East concerns offset AI optimism.
Iran has suspended negotiations with the U.S. and vowed to completely block the Strait of Hormuz as tensions in the Middle East ramp up once again.
The latest developments come as peace talks between the two sides stalled over disagreements surrounding Iran's nuclear programme and the reopening of the strait.
As a result, oil prices have jumped sharply, reigniting inflation concerns and weighing on risk sentiment.
These latest developments have overshadowed the AI optimism that has helped U.S. equities rally to record highs despite lingering concerns over the situation in the Middle East.
Optimism surrounding the AI trade helped the S&P 500 reach 11 record highs during May, meaning roughly half of the month's trading sessions closed at record levels. The index is up 11% year-to-date, while the Nasdaq has gained 16% since January.
However, concerns are growing over the breadth of the rally, given that just a handful of companies are exerting an outsized influence on the index. The 10 largest companies in the S&P 500 now account for 43.2% of the index's total market value, reflecting the growing concentration of AI enthusiasm in financial markets.
That said, these companies are highly profitable businesses with strong balance sheets and substantial free cash flow generation. Concentration alone is not enough evidence of a bubble, but it is something investors should watch closely. If AI enthusiasm starts to fade, the pullback could be swift.
Corporate movers
NVIDIA is rising 2% after unveiling a new chip designed to bring AI capabilities directly into personal computers. Speaking at Computex in Taiwan, CEO Jensen Huang said the RTX Spark chip will be central to Nvidia's efforts with Microsoft to reinvent the PC for the AI era.
Shares in PC makers moved higher in pre-market trade, with Dell Technologies, Microsoft and Lenovo all gaining. Arm Holdings, whose technology was used to develop the new chip, surged 14.5%.
On the flip side, chipmakers such as Qualcomm, Intel and Advanced Micro Devices posted losses of between 4% and 7%.
IBM is jumping 13% after Berkshire Securities initiated coverage with an overweight rating, arguing that quantum computing could become the next major computing paradigm and that IBM is well positioned to benefit.
S&P 500 – technical analysis
The S&P 500 has recovered from the 6,310 low seen earlier in 2026, rising to a fresh record high above 7,600. The RSI has moved back into overbought territory, suggesting some consolidation could be on the cards.
Buyers will look to extend gains towards 7,700 and then 7,800 as the next logical upside targets.
Immediate support can be seen at 7,340, the May 19 swing low, followed by 7,200 and the 50 SMA at 7,100. It would take a break below 7,000 to negate the longer-term uptrend.
FX markets – USD rises, EUR/USD falls
The U.S. dollar is rising after losses last week but remains within a familiar trading range. Limited progress in peace talks and a renewed flare-up in hostilities between the U.S. and Iran over the weekend have boosted safe-haven demand.
EUR/USD is falling as rising U.S.-Iran tensions lift oil prices and undermine risk appetite. Meanwhile, eurozone data confirmed a slowdown in manufacturing activity in May, with the manufacturing PMI easing to 51.6 from 52.2 in April.
GBP/USD is little changed even after comments from Andrew Bailey suggested there is no rush to raise interest rates. Bailey said rate hikes would only be necessary if second-round inflation effects begin to emerge.
Oil spikes on renewed Middle East volatility
Oil prices are rising on Monday, jumping 5% after Iran and the U.S. exchanged strikes and as Israel pushed troops further into Lebanon.
The move higher comes after Brent and WTI fell 19% and 17%, respectively, last month, marking the largest monthly decline in oil prices since March 2020.
However, the renewed escalation in Middle East tensions has dampened hopes that the U.S. and Iran could soon agree to extend their ceasefire and begin the gradual reopening of the Strait of Hormuz.
Geopolitical concerns have overshadowed economic data from China, which showed factory activity stalling in the world's largest importer of oil, pointing to a softer demand outlook.
