Oil edged higher and stocks slipped on Friday after the US and Iran exchanged fire in the Middle East, though many equity markets — particularly in Asia — remained on track for strong weekly gains on booming AI demand.
Benchmark Brent crude futures rose about 0.5 per cent to $100.50 a barrel, while European stocks fell 0.6 per cent and US stock futures gained 0.5 per cent.
Traders were also watching losses for Britain's ruling Labour Party in local elections, which could pressure Prime Minister Keir Starmer, though sterling inched up and UK assets broadly tracked European peers as results trickled in.
The US and Iran exchanged fire in the Gulf and the UAE came under renewed attack, testing a month-long ceasefire. Both sides played down the situation, leaving investors uncertain.
"The market seems to be taking every chance to price in a quick end to the war", said Jan von Gerich, chief analyst at Nordea.
"But it seems unlikely there's going to be an agreement. I still think there are going to be disruptions in the Strait (of Hormuz) for a longer time and it won't be resolved any time soon".
European stocks were lower. The pan-continental STOXX 600 was down 0.6 per cent, while major bourses in Frankfurt and Paris were off about 0.9 per cent.
Asian equities slipped from recent highs but remained on track for a robust week, supported by strong revenue and spending plans from US AI hyperscalers, which have boosted regional chipmakers.
MSCI's broadest index of Asian shares outside Japan fell 0.9 per cent, although South Korea's KOSPI inched up 0.1 per cent, bringing its weekly gain to more than 13.5 per cent — its largest since 2008 — helped by rallies in Samsung and SK Hynix.
Taiwan's benchmark was up 7 per cent this week and Japan's Nikkei rose 5.4 per cent. Europe's STOXX 600 was heading for a 0.2 per cent weekly rise, while the S&P 500 and Nasdaq were up 1.5 per cent and 3 per cent, respectively.
The dollar edged lower and was set for a second straight weekly decline, while the yen remained in focus after Japan intervened in currency markets in early May to stem its slide, a source familiar with the matter said.
The dollar was last down 0.1 per cent to 156.77 yen and was headed for a second weekly fall against Japan's currency. Gains beyond 155 have proved difficult to sustain following suspected intervention totalling nearly $70 billion since last Thursday.
The euro last bought $1.1767, while China's yuan, Asia's best-performing currency since the war broke out, hovered near 6.8 per dollar, close to its strongest since 2023.
Investors are awaiting Friday's US nonfarm payrolls report, with economists expecting 62,000 jobs to have been added in April after a 178,000 increase in March, a Reuters survey shows.
"The labour market is still holding up reasonably well", Nordea's von Gerich said.
"Since the focus is on the Middle East and the impact comes via inflation more than growth, especially in the US, maybe the payrolls report is not quite as crucial as it has been sometimes in the past".
Local election results across Britain showed heavy early losses for Labour, although Starmer said he would not resign.
"Gilts are already under scrutiny due to inflation risks and adding political uncertainty to the mix could further push (global) investors to look elsewhere", said ING analysts.
Britain's 10-year gilt yield was down 3.5 basis points at 4.91 per cent, although remained close to a three-decade high.
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