Global equity markets faced headwinds in Friday's session, interrupting a week of record-breaking gains, after direct military clashes between US and Iranian forces in the Strait of Hormuz reignited concerns over potential energy supply disruptions. This pushed Brent crude oil above the $100 per barrel mark. However, several analysts noted that investors largely view this geopolitical flare-up as a temporary disruption rather than a turning point that would reverse the ongoing bull market, which is primarily fueled by enthusiasm for artificial intelligence investments.

On Friday, the 8th, the MSCI World Index declined by 0.3%, while Asian markets retreated 1.1%, stepping back from record closing highs. European market futures also indicated a lower opening. Despite this, Asian stocks remained on track for a fifth consecutive weekly gain, marking the longest such streak since January. S&P 500 futures showed resilience, edging up 0.2%.

Reports cited by media outlets indicated that US forces struck civilian areas and oil tankers near the Iranian coast, prompting Iranian armed forces to retaliate with missile attacks against US military vessels. Unconfirmed reports suggested three US destroyers were targeted and retreated towards the Sea of Oman. Brent crude rose approximately 1% to around $101 per barrel as traders worried that a prolonged closure of the Strait of Hormuz could severely disrupt global oil and gas supplies. Nevertheless, oil prices were still down over 6% for the week, reflecting a baseline market assumption that the conflict would ultimately remain contained.

The US dollar hovered near pre-conflict levels. The yield on the 10-year US Treasury note held steady at 4.39%, having increased by two basis points over the week, with inflation concerns stemming from higher oil prices being a key pressure point. Gold prices saw a modest increase to approximately $4710 per ounce. Amid these intertwined uncertainties, global capital markets are engaged in a fresh round of risk repricing.

The MSCI World Index fell 0.3%, while Japan's Topix index dropped 1% during the day. South Korea's Kospi index managed to recover its losses. Euro Stoxx 50 futures declined by 0.7%, whereas S&P 500 futures saw a slight uptick of 0.2%. The US Dollar Spot Index showed little change. The 10-year US Treasury yield remained at 4.39%, up two basis points for the week. Brent crude oil advanced about 1% to around $101 per barrel. WTI crude oil rose 0.9% to $95.66 per barrel. Spot gold increased 0.6% to $4,714.64 per ounce. Bitcoin declined 0.3% to $79,639.76.

**Markets 'Look Through' Conflict as Oil Holds Risk Premium** Significant divergence is evident across global capital markets under ongoing geopolitical pressure. "Equities are 'looking through' the war, while oil prices retain their war premium," stated Hebe Chen, a senior market analyst at Vantage Global Prime in Sydney. "This divergence tells you that the market has quietly concluded that the worst-case scenario is receding and is already in the past, even if the ink isn't completely dry." The core driver behind the recent strength in global equities is the widespread investor expectation that massive spending in the artificial intelligence sector will boost corporate earnings, extending the so-called "AI trade." Supported by this outlook, markets are largely focusing on US efforts to de-escalate the situation, betting that a calming of tensions will help control energy prices and maintain overall risk appetite, even amidst geopolitical volatility.

Jacky Tang, Chief Investment Officer for Emerging Markets at Deutsche Bank Private Bank, indicated that the trajectory of crude oil prices will largely depend on the duration of the conflict with Iran, providing corresponding price forecasts for different scenarios.

**Diplomatic Pressure and Stalled Strait Negotiations** Diplomatic efforts remain complex and fraught. The recent military action was described as a "tap" by the former US administration, which simultaneously issued stern warnings to Tehran, cautioning that failure to reach a prompt agreement would lead to more severe actions. A previously announced "Project Freedom," aimed at facilitating safe passage through the Strait of Hormuz, was abruptly halted. Reports suggest Saudi Arabia and Kuwait have lifted restrictions on US military use of local bases, potentially creating conditions for the initiative's revival.

However, the prospects for negotiation remain uncertain. An Iranian official was reported as stating that Iran would not accept "unrealistic proposals" to reopen the Strait of Hormuz. Washington is currently awaiting Tehran's response to proposals regarding the strait, while tensions remain high in the Persian Gulf and Lebanon.

**Asian Markets Notch Fifth Weekly Gain, South Korea Leads** Despite Friday's pullback, Asian markets demonstrated considerable strength overall, poised for a fifth straight week of gains. South Korea's Kospi index has emerged as the world's best-performing major stock index this year, as markets bet that Korean companies, being core suppliers for AI infrastructure, will continue to benefit from the technology wave. Goldman Sachs raised its target for the Korean benchmark index to 9000 points for the second time in under three weeks, citing sustained profitability in semiconductor memory chips.

Yugo Tsuboi, Chief Strategist at Daiwa Securities, noted that gains in several markets have been "quite rapid and lack sufficient drivers," making them susceptible to profit-taking on negative news. "But I don't think the optimism for a deal that built up over the past week will completely dissipate after this," he added.

Jun Bei Liu, Co-founder of hedge fund Ten Cap Investment Management, said investors currently anticipate the conflict or the Strait of Hormuz issue will be resolved in some form within about a month. "There might be volatility and negative news like today in the near term, but unless there is a serious new escalation, markets overall will tend to buy on dips," she stated.

**Tariff Ruling and UK Election Add to Variables** Elsewhere, a federal trade court ruled that the previous administration's 10% global tariff measures were unlawful, presenting another legal setback to efforts to impose tariffs without congressional authorization.

In Europe, the British pound and UK government bonds are also in focus. The UK Prime Minister awaits the results of local elections viewed as among the most consequential in recent years, the outcome of which is expected to directly impact UK asset prices.