Extra, pre market — June 25, 2025Global financial markets mounted a broad-based relief rally as geopolitical tensions in the Middle East eased significantly following a ceasefire between Israel and Iran. The U.S.-brokered truce, while fragile, has triggered a visible return to risk appetite across equity, fixed income, and currency markets. U.S. President Donald Trump, despite playing a central role in halting the conflict, publicly rebuked both Israel and Iran for violations, urging Israel via Truth Social to “BRING YOUR PILOTS HOME, NOW!” This unusual stance appears to have stabilized sentiment across asset classes, at least for now.
U.S. equity markets responded favorably to the geopolitical de-escalation. The Dow Jones Industrial Average surged by +507.24 points (+1.2%) to close at 43,089.02, while the Nasdaq 100 added +334.19 points (+1.5%) to end at 22,190.52. The S&P 500 rose +67.01 points (+1.1%), settling at 6,092.18 (Screenshot_1.png). The Russell 2000 also climbed +1.1%, driven by renewed confidence in domestic cyclicals. Volatility sharply dropped, with the CBOE VIX Index falling -11.9% to 17.48, indicating a lower perceived risk premium.
Sector rotation was pronounced. Technology (XLK) led with a +1.8% gain to $247.24, closely followed by Financials (XLF) at +1.5%, and Communications (XLC) at +1.3%. In contrast, Energy (XLE) sank -1.3% to $84.91, weighed down by falling oil prices, and Consumer Staples (XLP) edged down slightly by -0.1% (Screenshot_1.png). Investors appeared to rotate out of defensive sectors into higher-beta growth plays, signaling a risk-on tone.
The sector divergence was matched by style factor dispersion. On a relative basis, Private Equity (PSP/SPY) outperformed all other factors with a +1.2% daily move, followed by IPOs (IPO/SPY) at +0.9% and Hedge Funds (GURU/SPY) at +0.6% (Screenshot_6.png). Among equity styles, Small-Cap Growth (IJT/SPY) posted a +0.6% relative return, while Value (IVE/SPY) and Low Volatility (USMV/SPY) underperformed at -0.3% and -0.6% respectively. This points to growing investor confidence in higher-risk, higher-reward assets, likely fueled by reduced macro stress.
The relief was also evident in global bond markets. U.S. Treasury yields declined modestly as demand for duration returned. The 10-year yield (US10Y) closed at 4.298%, down from earlier June highs, while the 2-year (US2Y) yield dropped to 3.797% (Screenshot_5.png). European yields followed suit: Germany’s 10Y Bund yield dropped to 2.144%, and the UK Gilt yield hovered at 4.475%. Notably, Japanese 10Y yields have increased to 1.404%, up 22.88% YTD, signaling shifting monetary dynamics in Asia.
Credit markets remained resilient. On a year-to-date basis, Local Emerging Market Bonds (EMLC) are outperforming with an 11.3% return, followed by USD Emerging Market Debt (EMB +6.9%), and Convertibles (CWB +5.2%). U.S. Corporate bonds continued to benefit from carry and spread compression, with High Yield (HYG) and Investment Grade (LQD) both showing solid inflows and positive performance (Screenshot_4.png). Fixed income appears to be balancing carry with renewed duration appeal amid easing geopolitical risk and softer Fed expectations.
Commodities, particularly energy, experienced sharp reversals. WTI Crude Oil (CL1) and Brent Crude (CO1) fell 6.0% and 6.1% respectively, closing at $64.37 and $67.14 (Screenshot_7.png). This move reflects the de-escalation in the Strait of Hormuz risk and was compounded by Trump's call to "DRILL, BABY, DRILL!!!"—signaling a political push for increased U.S. production. Gold, meanwhile, retreated slightly to $3,328.22 (-0.1%), though remains up 28.4% YTD, having benefited from haven flows during the height of the conflict. Silver saw a similar retreat to $35.74 (-0.5%), though retains a +23.6% YTD gain.
In foreign exchange, the U.S. dollar weakened across major pairs as safe-haven demand declined. The EUR/USD rose to 1.1606 (+8.5% YTD), while the GBP/USD reached 1.3612 (+7.6% YTD). In contrast, the USD/JPY fell to 145.75, marking a -8.7% YTD decline (Screenshot_10.png). The reversal in dollar strength aligns with broader global reflation trades and a moderation in Fed hawkishness, supported by Chair Powell’s comments that the U.S. economy remains “solid” and that tariff impacts may be more muted than feared.
On a global equity level, YTD returns tell a diverse story. Latin America continues to dominate, with Argentina (ARGT +54.2%), Brazil (EWZ +22.6%), and Mexico (EWW +22.0%) leading gains (Screenshot_9.png). Among developed markets, Canada (EWC +27.5%) and Germany (EWG +18.7%) outshine, whereas Turkey (TUR -25.2%) and India (PIN -0.75%) lag meaningfully. In Asia, South Korea (EWY +14.8%) and Taiwan (EWT +13.6%) saw notable performance, bolstered by strength in tech exports and domestic policy easing.
Looking ahead, the sustainability of this rally depends on several unresolved variables. First, the Middle East ceasefire, while currently holding, is inherently fragile. Any renewed hostilities could spike volatility and reverse energy price trends rapidly. Second, the Fed remains in a delicate position. Markets are currently pricing in a prolonged pause, but Trump’s pressure on the central bank and shifting economic data could alter expectations quickly. Finally, watch for China’s re-entry into Iranian oil markets following Trump’s announcement that Beijing “can now continue to purchase oil from Iran.” This move could reignite trade friction or trigger secondary sanctions, especially if EU or U.S. energy security concerns are heightened.
In conclusion, the combination of geopolitical relief, Fed ambiguity, and a rotation into riskier assets has created a fertile environment for short-term bullish momentum. However, macro fragility persists. Investors should remain tactically optimistic but structurally cautious, especially in sectors sensitive to energy prices and interest rates. Keeping a diversified allocation across risk assets, commodities, and high-quality fixed income remains advisable in this unpredictable macro regime.
