Ongoing military tensions in the Middle East caused global markets to start the week with inflation concerns. The U.S. Central Command (CENTCOM) announced that military coastal surveillance and air defense facilities, naval forces, and missile and drone storage areas in Iran were struck.
The Iranian side, however, claimed that the U.S. targeted the under-construction Darhovin Nuclear Power Plant, describing the attack as a 'dangerous attempt'. The fact that the critical oil shipping route of the Strait of Hormuz is under threat of war and the possibility of interference with trade routes caused energy prices to surge sharply.
Oil Price Rise and Market Impacts
Reports of oil tankers being hit in the strait fueled global energy supply concerns and supported prices. The barrel price of Brent crude rose to $88.9, reaching its highest level since June 12. A decrease in the number of tankers transiting the Strait of Hormuz was notable.
The possibility of the clashes intensifying and turning into a ground operation is seen as one of the main risk factors in the markets. Claims that U.S. President Donald Trump sent a message to mediating countries urging preparedness for escalation if no ceasefire with Iran is reached this week heightened geopolitical risk perception.
Fed Policies and Inflation Concerns
Inflation fears triggered by the rise in oil prices are shaping the monetary policy expectations of the U.S. Federal Reserve (Fed). In money markets, predictions that the Fed will raise its policy rate by 25 basis points in September are priced at a 70% probability. It is forecast that the bank may make two rate hikes in the next 12 months.
Cleveland Fed President Beth Hammack stressed that persistently high inflation is a greater concern. Hammack said, 'There is no conflict among our monetary policy goals. Inflation is too high. The labor market, for me, is at a point quite close to maximum employment.' While the U.S. 10-year Treasury yield stood at 4.55%, the dollar index fell 0.1% to trade at 100.7. The ounce price of gold, meanwhile, declined 0.2% to $4,010.
European and Asian Market Trends
In Europe, index futures contracts started the week with a mixed course. In the UK, while Prime Minister Andy Burnham is expected to make his first speech today, signals regarding economic policies will be sought. The European Central Bank (ECB) is expected to keep interest rates unchanged at its meeting this week and to raise rates at its September meeting.
In Asian markets, Chinese and Hong Kong stock exchanges traded higher, while the Kospi index in South Korea showed a negative trend. Losses in technology stocks stood out; SK Hynix fell 2.3%, Samsung Electronics 4%, LG Electronics 4.9% and Hanmi Semicon 8.7%. The emergence of AI language models developed in China that can deliver high performance at low cost kept concerns over high valuations in the sector alive. In Japan, trading volume was low as markets were closed for Marine Day. In China, loan interest rates were kept unchanged; the one-year rate was held at 3% and the five-year rate at 3.5%. Near the close, South Korea's Kospi was down 2.8%, while the Shanghai composite index rose 1.2% and the Hang Seng index gained 2.2%.
Domestic Markets and Data Calendar
In Borsa Istanbul, the BIST 100 index ended Friday with a loss of 1.90% at 13,981.05 points. The USD/TRY exchange rate is trading at 47.1750. Fitch Ratings affirmed Turkey's credit rating at 'BB-' while maintaining its 'stable' outlook.
Analysts noted that today, domestically, the CBRT market participants survey, international investment position, and foreign PPI data will be followed, while abroad, Germany's PPI and the U.S. leading index will be monitored. For the BIST 100 index, 13,900 and 13,800 points are seen as support, while 14,100 and 14,200 points are resistance levels.
