Markets amid tariffs, Hormuz, and profits: political risk isn't stopping Wall Street yet.

The weekend when politics started moving prices again

The weekend of May 2-3 brought a difficult combination of trade war, energy risks, and military diplomacy back to the forefront of markets. Donald Trump confirmed his intention to raise tariffs on European cars and trucks to 25% , compared to the previous agreement, which had set an overall threshold of around 15% . This is a politically charged step for Brussels: the Commission rejected the American accusation of non-compliance with the agreement, and Bernd Lange, chairman of the European Parliament's Trade Committee, called Trump's behavior "unacceptable." The European auto sector reacted immediately: the European Car and Parts Index lost around 2.3% , while Porsche, BMW, Mercedes-Benz, and Volkswagen fell between 2% and 3% .

Hormuz: The market no longer looks only at oil, but also at freedom of movement.

The second front was the Strait of Hormuz. Washington launched "Project Freedom" to help stranded ships transit the strait, but Tehran continued to assert direct control over navigation. According to Reuters, the United States claimed to have destroyed six small Iranian military vessels, while Iran denied this. Meanwhile, several merchant ships reported explosions or fires, while an oil field in the United Arab Emirates was hit by drones attributed to Iran. In Fujairah, firefighters intervened at an energy facility, and three Indian citizens suffered moderate injuries.

In this context, the most sensitive yet controversial news also emerged: Iranian media claimed that Iranian missiles had hit or forced the retreat of an American warship. The United States emphatically denied this: CENTCOM declared that "no US Navy vessel was hit" and added that two US-flagged merchant ships had managed to transit the strait with the support of US destroyers. The difference between the Iranian story and the American version is significant: for the markets, it's not just what actually happens that matters, but also the risk that an unverified incident could be used as a pretext for a new escalation.

Oil: OPEC rises, but the market looks at blocked routes

On the energy front, OPEC+ agreed in principle to increase production by around 188,000 barrels per day for June. Normally, this would be bearish news for oil. This time, however, the effect was limited: according to Reuters, the increase remains largely theoretical as long as Hormuz remains unstable, as many Gulf producers are unable to export normally anyway. Not surprisingly, on Monday, Brent crude rose to close at $114.44 a barrel, up 5.8% , while WTI reached $106.42 , up 4.4% . On Tuesday, with the ceasefire still formally in place, Brent crude then fell back by around 4.0% to $109.82 .

Stock Markets: Fears on Monday, Return to Profits on Tuesday

The stock market reaction was very instructive. On Monday, Wall Street corrected: the S&P 500 lost 0.41% , the Nasdaq 0.19% , and the Dow Jones 1.13% , with investors worried that the Gulf crisis could reopen a phase of open warfare. On Tuesday, however, the market changed its narrative: it did not ignore geopolitical risk, but chose to price it in alongside strong earnings. The S&P 500 rose 0.89% to 7,264.87 points , the Nasdaq 1.10% to 25,342.82 , a new high, and the Dow 0.62% to 49,243.90 . The Philadelphia Semiconductor Index jumped 4.7% , Intel 14% , and AMD 4.4% .

The explanation lies in the fundamentals: according to LSEG, aggregate first-quarter earnings for S&P 500 companies are now expected to grow 28% year-on-year, double the 14% estimated in early April. It's the classic market saying: "There's risk, but as long as earnings accelerate, I'll buy it." Europe has also recovered: Euro Stoxx 50 up 1.84% , DAX up 1.71% , CAC 40 up 1.08% , while London remained weak with the FTSE 100 down 1.40% . In Asia, Nikkei up 0.38% , Shanghai up 0.11% , Hang Seng down 0.76% .

Rates, currencies and gold: the market remains cautious beneath the surface

Beneath the surface of stocks, however, caution remains evident. The yield on the 10-year U.S. Treasury was at 4.414% , the German Bund at 3.062% , the British Gilt at 5.048% , and the 10-year Japanese yen at 2.509% . The dollar moved little: the dollar index fell 0.03% to 98.437 , while the euro rose towards $ 1.1700 . The yen remains fragile, with the dollar/yen exchange rate hovering around 157.85 , despite suspected Japanese intervention in recent days.

Gold confirmed that the market isn't completely calm: the metal rose 0.8% to $4,557.56 an ounce, after hitting its lowest level in over a month the previous session. Copper, a more cyclical commodity, rose 0.87% , signaling that part of the market continues to bet on industrial demand and macroeconomic resilience.

The macro data that cools enthusiasm

The only real macroeconomic warning came from US services. The ISM non-manufacturing index fell to 53.6 from 54.0 , remaining above 50 but showing a slowdown. Above all, new orders fell to 53.5 from 60.6 , the steepest decline in three years , while the price paid index remained at 70.7 , its highest level since the end of 2022. This is the key point of the week: the economy is not stalling, but it is becoming more expensive. For the markets, this means a Fed with less freedom to cut and a more fragile balance between growth, inflation, and geopolitical risk.

The bottom line is this: between the weekend and Tuesday, the market once again chose resilience. But it's not a calm resilience. It's a resilience bought above oil at $110 , gold above $4,500 , tariffs at 25% , and a Strait of Hormuz that remains the true barometer of global risk.