Markets amid US record highs, oil, and truce: Wall Street rises to record highs, Europe remains exposed to energy

Oil remains the barometer of risk

The second half of the week had a very clear center of gravity: the Strait of Hormuz. Every market movement, from European stocks to bond yields, was interpreted through a single question: will energy flows from the Persian Gulf really return to normal?

The strongest signal came from Fujairah, the United Arab Emirates' key energy hub: petroleum product inventories fell to around 5.5 million barrels , a new low, after weeks of progressive erosion. By early May, inventories had already fallen 6.9% to 6.501 million barrels , marking their fifth consecutive record low; this data confirms how the Hormuz crisis has transformed a geopolitical tension into a physical strain on inventories.

Oil, however, responded more to diplomacy than scarcity. On Wednesday, Brent crude fell 5.31% to $94.29 a barrel, while WTI lost 5.55% to $88.68 , following rumors of a possible US-Iran deal to reopen Hormuz. Washington, however, rejected the Iranian TV version of an agreement already reached, emphasizing that unresolved issues remained.

War sends mixed signals

The week has been uneven. On the one hand, markets have priced in the possibility of a broader truce; on the other, military events have reminded us of how volatile the situation remains. Reuters reported that Iran had struck a US base in Kuwait, while Washington had retaliated against an Iranian drone complex near the Strait of Hormuz. Meanwhile, another truce agreement has reportedly been put on the table, but is still awaiting approval from Donald Trump.

Adding to the tension, news from Gaza has also arrived: Hamas has confirmed the killing of Mohammed Odeh, identified as the leader of the group's military wing, in an Israeli raid in Gaza City. According to Al Jazeera, Odeh's wife and two children were also killed in the attack.

The market, therefore, experienced a two-speed week: immediate fear at moments of escalation, relief as soon as a trading trail appeared. This is a typical dynamic in phases in which asset prices depend not only on macroeconomic data, but on the probability attributed to a binary event: reopening or closing of Hormuz.

Wall Street hits all-time highs, Europe catches up

In the United States, the positive reading prevailed with almost symbolic force: Wall Street didn't just rise, it closed at new all-time highs. On Friday, the Dow Jones rose 0.72% to 51,032 points , surpassing the 51,000-point threshold for the first time at the close; the S&P 500 gained 0.22% to 7,580 points , while the Nasdaq rose 0.21% to 26,973 points . All three major American indices ended the session at record highs, supported by technology, enthusiasm for artificial intelligence, and hopes for a negotiated solution to the US-Iran crisis.

The most interesting data, however, is not just the new high: it's the continuity of the movement. The S&P 500 posted its ninth consecutive positive week , its best streak since December 2023, with a weekly gain of 1.4% . The Nasdaq did even better, rising 2.4% for the week, confirming that the market continues to favor technology and AI-related stocks in particular. In other words, Wall Street is buying two stories at once: the possibility of geopolitical de-escalation and the structural narrative of AI-related earnings.

In Europe, the movement was more cautious. The STOXX 600 closed Friday up 0.1% at 626 points , still posting a monthly gain of 2.5% . The reason is simple: Europe benefits from the decline in oil prices, but remains more exposed to the energy shock. If Brent crude falls, airlines, industry, and consumer spending take a breather; if it rises, inflation risk immediately returns to the ECB's reaction function.

Piazza Affari clearly demonstrated this sectoral fragility. On Wednesday, the FTSE MIB lost 0.64% to 49,578 points , penalized by energy stocks: Saipem fell 4.21% , Tenaris 3.5% , and Eni 2.81% , while Brent was still around $96 . On Friday, however, Milan recovered, closing at 50,037 points , up 0.42% , with a weekly gain of 1.06% . This is precisely the difference with the United States: Wall Street is updating its records thanks to technology and AI; Europe is rising, but remains more dependent on energy prices and the risk that Hormuz will once again become the bottleneck of the global economy.

Rates, currencies, and gold: the market seeks protection without panic

The decline in oil prices also helped the bond market. The yield on the 10-year U.S. Treasury fell to 4.441% , while the 30-year remained close to 4.982% . These are small but significant movements: they indicate that investors are reducing their inflation risk premium, without betting on an immediate return to accommodative monetary policy.

On the currency front, the dollar lost some ground: the Dollar Index fell to 98.90 , while the euro rose to $1.1663 . Gold, on the other hand, confirmed its dual nature: a safe haven in times of tension, but sensitive to real interest rates. Spot gold rose 1.18% on Friday to $4,545 an ounce, but remains on track for a monthly decline of more than 1% .

European inflation: lower than expected, but still above target

The most significant macroeconomic data came from France and Germany. In France, preliminary inflation rose to 2.8% annually in May, from 2.5% in April, but below the 2.9% expected by analysts. The increase was driven primarily by energy, which rose nearly 17% year-over-year, while manufacturing goods and services showed less worrying signs.

In Germany, meanwhile, inflation fell to 2.6% from 2.9% in April, below consensus; the harmonized index rose from 2.9% to 2.7% . This is good news for the markets, but still not enough to put the problem behind us: inflation remains above the ECB's target of 2% , and the energy shock continues to be the main channel for transmitting geopolitics to the real economy.

The final reading

The week ends with resilient stock markets, oil falling, gold recovering, and slightly lower rates. But the markets' message isn't one of full normalization: it's one of conditional relief. If the truce is approved and Hormuz actually reopens, the energy risk premium could shrink further. If, however, the negotiations collapse, the 5.5 million barrels of inventories in Fujairah will become a symbol of an oil market still too thin to absorb further shocks.