Market Report: strong earnings and Middle East optimism drive record highs
- Global markets lean into Middle East optimism
- Broad earnings strength drives US records
- AI opportunity still looks far from over
- Oil steadies as peace hopes build
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Global markets are still pricing the glass as half full, with yesterday delivering another strong rally despite little tangible progress towards a lasting resolution in the Middle East. The FTSE 100 jumped more than 2%, helped by miners, banks and real estate names, with the 10-year Gilt yield retreating to below 5% as a lower oil price eased some inflationary fears. Futures point to a more measured open today for UK stock markets, with investors turning their attention to local elections, where expectations of a bruising result for Labour look firmly baked in. A poor showing would pile more pressure on Starmer, leaving investors to weigh whether political pressure starts to translate into a different fiscal direction for the UK.
US futures point to a more muted open today, but the real story is in last night’s close, with the S&P 500 and Nasdaq both hitting fresh records as raw earnings power and hopes of Middle East de-escalation proved a powerful cocktail for equity markets. AMD was the standout, and another reminder that the AI infrastructure buildout still looks to be in its early chapters, with demand continuing to run ahead of even bullish expectations. But this earnings season is not just an AI story, with profit growth running above 20% at the S&P 500 level for the 80% of companies having already reported. Strength has been broad, from the obvious AI-linked areas like energy, materials and industrials, through to consumer names, utilities and healthcare, which gives this rally a firmer foundation than one built on a handful of obvious AI names alone.
For investors who feel they’ve missed the boat, the natural question is whether it’s too late to get involved in the AI theme. Based on what we’re seeing, from rapid model improvement and the early ramp in agents, to unwavering demand from the biggest builders and underlying strength driven by exploding earnings growth, that doesn’t look to be the case. This has the feel of an industrial revolution unfolding in real time, and even the CEOs closest to the action are having to recalibrate their expectations month by month. The easy gains may have been made in some pockets, but the scale of the buildout suggests the opportunity set is still broadening, not closing.
Oil has steadied after a sharp slide, and remains in the $95-100 a barrel range as investors weigh the chances of a Middle East peace deal and a gradual reopening of the Strait of Hormuz. Reports suggest the US has sent Iran a one-page memorandum through Pakistani intermediaries, but while Iran is reviewing the proposal, President Trump has warned it’s still a “big assumption” that a deal gets over the line. That leaves oil markets caught between relief that a diplomatic path is emerging and caution that the supply shock is not over, as record US exports show buyers are already scrambling for alternative barrels.”
