Global stock markets showed signs of strain early Wednesday as geopolitical tension and doubts about the artificial intelligence boom unsettled investors ahead of a crucial U.S. Federal Reserve decision.
Asian markets opened uneven. A key regional index tracking shares outside Japan slipped 0.2%, pulling back for a second straight day after hitting record highs earlier in the week. Losses in Taiwanese chipmakers drove much of the decline, while Japanese markets remained closed for a holiday.
Futures tied to the S&P 500 edged slightly higher, but sentiment stayed fragile. Oil prices climbed, with Brent crude rising to $111.71 per barrel as efforts to resolve the Iran conflict stalled.
Analysts pointed to a breakdown in negotiations. “Markets remained cautious overnight as peace talks continued to stall, with Iran seeking the lifting of the U.S. naval blockade of the Strait of Hormuz and mediators expecting a revised Iranian proposal in coming days,” analysts from Westpac wrote.
The standoff has drawn a firm response from Donald Trump, who is pushing for nuclear issues to be addressed immediately. According to U.S. officials cited by The Wall Street Journal, preparations are underway for a prolonged blockade of Iran.
Wall Street reflected that uncertainty on Tuesday. The S&P 500 dropped 0.5%, while the Nasdaq fell nearly 1% as investors weighed the geopolitical risk.
Technology stocks added to the pressure. A report that OpenAI missed internal targets for user growth and revenue raised fresh concerns about the sustainability of heavy AI investment. The news dragged down related firms, including Oracle and CoreWeave.
The spotlight now turns to earnings from major tech companies. Results from Microsoft, Alphabet, Amazon, and Meta Platforms are expected later Wednesday. These reports will test whether the AI-driven market rally still has momentum.
Despite the tension, corporate earnings have held up. More than a third of S&P 500 companies have reported results so far, with 81% beating expectations.
Attention is also fixed on the Federal Reserve. The central bank is widely expected to leave interest rates unchanged at its April meeting, which will mark the final session chaired by Jerome Powell.
Market pricing suggests no rate changes until late 2027. Still, analysts warn that inflation tied to ongoing conflict could shift the Fed’s tone.
“Given the challenging war-impacted inflation environment, it won’t cost much for the Fed to adopt a hawkish tilt; while remaining in a wait-and-see mode,” analysts at ING said. “There will also be questions on the incoming Kevin Warsh and Powell’s intention to stay or go.”
Bond yields ticked slightly higher, with the 10-year U.S. Treasury reaching 4.346%. The dollar strengthened modestly, extending gains for a second day.
Energy markets absorbed another surprise. The United Arab Emirates announced its exit from OPEC, though traders expect the broader alliance to hold.
Chris Weston of Pepperstone noted the muted reaction: “On any other given day, this news may have seen the Brent price move down $5 to $6 off the bat, given the UAE accounts for around 10% of OPEC output.”
He added that production limits likely softened the impact, allowing oil prices to recover quickly.
Gold slipped slightly, while cryptocurrencies showed little movement. Bitcoin held steady near $76,471, and ether edged lower.
