Stocks fall as Middle East tensions persist and Trump targets fed chair

Global stock markets declined on Thursday, pressured by lingering geopolitical concerns and renewed uncertainty over U.S. monetary policy. Oil prices edged higher for a second consecutive session, while the U.S. dollar weakened following fresh comments from President Donald Trump about replacing Federal Reserve Chair Jerome Powell—a signal that investors interpreted as a possible shift toward more aggressive interest rate cuts.

The ongoing ceasefire between Iran and Israel remained in focus as markets weighed the risk of renewed conflict. Despite recent escalations, President Trump said he would hold nuclear talks with Tehran next week, though he reiterated claims that U.S. strikes had set back Iran’s atomic program by “decades.” Iranian President Masoud Pezeshkian, for his part, indicated earlier in the week that Tehran was open to returning to negotiations but insisted the country would continue defending its right to peaceful nuclear energy. While the situation has de-escalated, analysts cautioned that the truce remains fragile and that geopolitical risks could quickly return.

Meanwhile, uncertainty over global trade policy added further pressure on investor sentiment. A July 9 deadline looms for countries to reach agreements with Washington and avoid a new round of steep tariffs. The lack of progress in these talks has heightened market anxiety, especially as the broader economic impact of the trade war remains unclear.

Oil markets saw a modest rebound after sharp declines earlier in the week. Prices, which tumbled following the ceasefire announcement, rose again Thursday as traders assessed the possibility of increased output from OPEC and other major producers. Analysts at Morningstar noted that while a return to conflict in the Middle East could lead to short-term price spikes, oil supply disruptions are unlikely, and any gains are expected to be temporary given that prices have returned to pre-conflict levels.

Equity markets were mixed across Asia and beyond. Hong Kong, Shanghai, Sydney, Singapore, Seoul, Jakarta and Wellington all posted losses, while Tokyo and Taipei managed small gains. On Wall Street, the Nasdaq led the way overnight, buoyed by a 4 percent surge in chipmaker Nvidia, which hit a record valuation of \$3.76 trillion—surpassing Microsoft and Apple to become the world’s most valuable company.

The U.S. dollar came under renewed pressure following Trump’s latest attack on Fed Chair Jerome Powell. Speaking after a NATO summit, the president said he had already narrowed down his choices for Powell’s replacement, whose term expires in May 2026. Calling Powell “terrible” and “average mentally,” Trump claimed the Fed chair had a “low IQ” and confirmed he would likely announce a successor by September or October. According to *The Wall Street Journal*, potential candidates include Treasury Secretary Scott Bessent, economic adviser Kevin Hassett, and former Fed governor Kevin Warsh.

Trump’s comments followed remarks from Powell earlier in the week, where the Fed chair told lawmakers the central bank needed to assess the impact of U.S. tariffs before making any move on interest rates. 

Analysts say Trump’s vocal dissatisfaction with Powell could undermine the Fed’s independence and accelerate expectations of rate cuts, further weighing on the dollar. Rodrigo Catril of National Australia Bank warned that markets may now face a “shadow Fed chair” dynamic even before Powell’s official departure, amplifying policy uncertainty.

With geopolitical tensions unresolved and domestic economic policy in flux, investors are likely to remain cautious in the near term. All eyes will now turn to developments in the Middle East and Washington as markets brace for what could be a volatile few weeks ahead.

Key figures at around 0230 GMT

Tokyo - Nikkei 225: UP 1.1% at 39,349.85 (break)
Hong Kong - Hang Seng Index: DOWN 0.6% at 24,334.44
Shanghai - Composite: DOWN 0.1% at 3,451.62
Euro/dollar: UP at $1.1685 from $1.1656 on Wednesday
Pound/dollar: UP at $1.3692 from $1.3664
Dollar/yen: DOWN at 144.74 yen from 145.32 yen
Euro/pound: UP at 85.34 from 85.26 pence
West Texas Intermediate: UP 0.5% at $65.23 per barrel
Brent North Sea Crude: UP 0.4% at $67.92 per barrel
New York - Dow: DOWN 0.3% at 42,982.43 (close)
London - FTSE 100: DOWN 0.5% at 8,718.75 (close)