Global stocks diverge, oil rises as fresh US-Iran clashes hit peace hopes

US fighter jets disabled two Iranian-flagged tankers in the Strait of Hormuz on Friday, triggering immediate Iranian retaliation and shattering any remaining hope for a quick end to the Middle East conflict. Markets barely flinched. The S&P 500 and Nasdaq set fresh records while the Dow finished flat, proving once again that this bull run ignores bad news from abroad.

The Labor Department reported the economy added 115,000 jobs in April—more than double forecasts—giving equities another reason to climb. CFRA Research’s Sam Stovall captured the mood: "No negative news sticks to this bull market, and it just keeps working its way higher." Yet the same day, a University of Michigan survey showed US consumer confidence at an all-time low, dragged down by persistent high prices and the fallout from the US-Israel war on Iran.

Oil prices rose on the renewed Hormuz violence, a reminder that energy costs could soon feed back into inflation. Bret Kenwell of eToro warned that if the labor market holds steady while rising energy prices fan price pressures, the Federal Reserve will have even less reason to cut rates quickly. In his words, good news may be good news again, "just not for investors hoping the Fed rides in with quick rate cuts."

European stocks retreated amid the geopolitical jitters. The British pound held steady only because Prime Minister Keir Starmer insisted he would remain in office despite Labour’s heavy losses to the hard right in local elections, a scandal involving Peter Mandelson’s ties to Jeffrey Epstein, and his failure to deliver on promised economic growth. Britons continue to grapple with a cost-of-living crisis made worse by elevated energy prices.

In Japan, the yen strengthened after authorities reportedly spent $64 billion since late April to support the currency, which had slumped near 160 per dollar. The interventions began on April 30 and have produced repeated spikes, feeding speculation of more to come.

The contradiction is glaring: a labor market that still adds jobs, consumers who have never been more pessimistic, tankers disabled in a vital chokepoint, and a stock market that treats it all as background noise. How long that detachment can last is the only question that matters now.

Original reporting: CNA.