Oil prices surged and global stocks largely fell on Tuesday after US President Donald Trump abruptly left the G7 summit, fuelling speculation of possible American intervention in the escalating Iran-Israel conflict.
Investor optimism from Monday quickly faded as fears of broader Middle East escalation returned on the conflict’s fifth consecutive day.
“Tensions in the Middle East show no signs of easing, leaving investors on edge,” said Russ Mould, Investment Director at AJ Bell.
Speaking after leaving the G7 summit in Canada early, Trump insisted he wanted a “real end” to the fighting, not a temporary ceasefire. Later on Tuesday, US Vice President JD Vance hinted that further action against Iran might be on the table, heightening concerns of direct US involvement.
Wall Street’s major indices slipped in late morning trading. The mood soured further after US retail sales for May dropped 0.9 percent — a steeper decline than expected — adding to worries over economic momentum.
Patrick O’Hare, analyst at Briefing.com, noted that uncertainty over Iran and concern about the impact of tariffs on consumer spending had left investors hesitant.
European markets closed in the red, while Asia recorded a mixed day — Hong Kong declined, Shanghai ended flat, and Tokyo posted modest gains.
Brent crude jumped 2.9 percent to $75.35 per barrel, while West Texas Intermediate also climbed 2.9 percent to $72.30 per barrel, amid volatility since Friday’s surge triggered by Israel’s initial strikes on Iranian targets.
However, the International Energy Agency (IEA) tempered the rally, stating in its 2025 report that global oil demand is expected to decline slightly by 2030 — the first drop since the pandemic.
“We don’t foresee high oil prices persisting long-term,” said IEA Executive Director Fatih Birol. He confirmed the agency was monitoring developments closely and stood ready to act in case of supply disruptions.
“There’s intense focus on oil markets, not just for geopolitical reasons, but because of their broader economic implications,” said Matt Britzman, Senior Equity Analyst at Hargreaves Lansdown.
“Energy prices are crucial to the inflation equation, and falling oil had been central to the US administration’s strategy to pressure the Federal Reserve towards rate cuts,” he added.
Attention now shifts to the US Federal Reserve’s decision expected Wednesday, with most analysts forecasting a pause on interest rate changes.
Markets also tracked developments from the G7 summit, where leaders from Britain, Canada, France, Germany, Italy, and Japan rebuked Trump over his ongoing trade disputes, warning that aggressive tariffs posed a risk to global economic stability.
“Trump’s early exit from the summit suggests little chance of further agreements in the coming days,” said Fawad Razaqzada of City Index and FOREX.com.
However, Trump did manage to sign a bilateral trade agreement with UK Prime Minister Keir Starmer before leaving.
On currency markets, the yen briefly strengthened against the dollar after the Bank of Japan held interest rates and slowed the tapering of bond purchases, but later relinquished those gains.
Key Market Figures at 15:30 GMT:
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Brent Crude: UP 2.9% at $75.35 per barrel
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WTI Crude: UP 2.9% at $72.30 per barrel
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Dow Jones: DOWN 0.2% at 42,432.02
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S&P 500: DOWN 0.4% at 6,011.44
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Nasdaq: DOWN 0.4% at 19,621.22
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FTSE 100 (London): DOWN 0.5% at 8,834.03
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CAC 40 (Paris): DOWN 0.8% at 7,683.73
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DAX (Frankfurt): DOWN 1.1% at 23,434.65
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Nikkei 225 (Tokyo): UP 0.6% at 38,536.74
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Hang Seng (Hong Kong): DOWN 0.3% at 23,980.30
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Shanghai Composite: FLAT at 3,387.40
Currency Rates:
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Euro/Dollar: DOWN at $1.1521
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Pound/Dollar: DOWN at $1.3500
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Dollar/Yen: UP at ¥145.00
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Euro/Pound: UP at 85.35p