Markets React to Geopolitical Tensions and Rate Cut Signals

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Date: 20 June 2025
By Tim Montague Jones

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Wall Street Edges Lower

US markets dipped on Friday, with the S&P 500 falling 0.3% as chip stocks like Nvidia and Broadcom declined. Concerns are growing over potential new US export restrictions to China, which weighed heavily on the tech sector.

The Nasdaq dropped 0.5%, while the Dow Jones rose slightly by 0.1%. Investors remain cautious ahead of the next Federal Reserve meeting, despite comments from Fed Governor Chris Waller suggesting rate cuts could begin as early as July.

Fed Rate Cut Hopes Build

Waller cited slowing inflation as a reason for the Fed to consider easing. However, Chair Jerome Powell remains cautious, emphasising a data-driven approach. With mixed economic data still coming through, markets are keeping a close eye on upcoming inflation and employment figures.

Oil Surges on Iran Strikes

Oil prices spiked after the US launched airstrikes on Iran’s nuclear sites. Brent crude jumped 5.7% to over US$81 a barrel as traders priced in potential supply disruptions.

Two major oil tankers made sudden U-turns in the Strait of Hormuz following the strikes. The risk of further military escalation could increase volatility in energy markets.

ASX 200 Closes Lower

The ASX 200 fell 0.21% on Friday. Losses in Materials and Financials were partially offset by gains in Technology, Healthcare and Utilities.

Commodities were mixed. Aluminium, copper and zinc rose, while nickel declined. Investors are watching closely for signals from China and commodity demand in the second half of the year.

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Qantas Rally Faces Headwinds

Qantas (ASX: QAN) has surged 65% over the past year, but Morningstar remains cautious. Analyst Angus Hewitt is the only one with a sell rating, warning that the airline’s $20 billion fleet renewal could pressure future profits.

CEO Vanessa Hudson has led a strong turnaround post-COVID, with the company now paying its largest dividend in nearly two decades. However, long-term capital spending could weigh on margins.

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Outlook for Investors

Markets are facing a complex mix of geopolitical risk, economic uncertainty and company-specific headwinds. Oil prices, central bank policy, and global trade tensions will be key themes for the months ahead.

Investors may need to stay nimble and diversified as these global factors play out.

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