Global markets add $4.1 trillion on AI boom despite Middle East war

AI rally offsets geopolitical risks

Nvidia's record quarterly earnings and expanding artificial intelligence partnerships have driven global market valuations to $161.1 trillion over the past 100 days, overshadowing volatility from the ongoing war between the US, Israel and Iran. The chipmaker reported revenue of $81.6 billion for the first quarter of its 2027 fiscal year, marking an 85% increase year over year. Nvidia founder and CEO Jensen Huang said the construction of AI factories has been the largest infrastructure expansion in history while announcing that the firm’s Blackwell and Rubin chips will generate at least $1 trillion in revenue by 2027.

Stock indexes saw mixed trends during the period, with South Korea’s Kospi Index surging 22.7%, the Nasdaq gaining 13.4%, and Japan’s Nikkei 225 climbing 8.5%, though Germany’s DAX 40 fell 2.1% and China’s Shanghai Composite Index declined 4.5%. The S&P 500 rose 7.3% and the Dow Jones Industrial Average added 3.9%, while Italy’s FTSE MIB increased 5.7%.

Energy markets and inflation concerns

Hostilities between the US, Israel and Iran erupted on February 28, threatening energy flows through the strategic Strait of Hormuz and causing Brent crude to spike sharply to $114 per barrel on March 9. The limited resumption of traffic through the strait and coordinated efforts to boost oil supply eventually brought Brent crude back down to the $90 per barrel level following a temporary ceasefire between Washington and Tehran on April 8, though energy prices remain elevated compared to pre-war levels. Major central banks were prompted to rethink their monetary policy amid these persistent inflation concerns, further exacerbated by macroeconomic indicators pointing to price rigidity, while the fear index VIX — reflecting volatility in the S&P 500 — surged 8.3% to 19.8 during these developments.

Central banks pivot as bond yields surge

Rising expectations that high energy prices could complicate the global fight against inflation led the Federal Reserve to postpone rate cuts, replacing earlier dovish expectations with hawkish moves instead. The US 10-Year Treasury yield rose to 4.69% on May 19, testing its highest intraday level since January 2025, while Germany’s 10-year bond reached 3.19% — its highest since May 2011 — and France’s 10-year bond hit 3.88%, its highest since June 2009. The UK’s 10-year bond surged to 5.19%, the highest level since August 2007, as markets continued pricing in three interest rate hikes by the European Central Bank by year-end, and Japan’s 10-year bond yield reached 2.76% — its highest since 1997 — while China’s 10-year bond fell to 1.72% as the People's Bank of China reportedly refrained from tightening policy amid deflationary risks.