Global markets rallied strongly in the week ending 8th May 2026, with major equity indices hitting record highs as U.S.-Iran peace framework signals advanced, oil fell 6.4% WoW, and April payrolls printed nearly double consensus expectations. AI and semiconductor earnings remained the primary market driver, with NASDAQ gaining 5.5% and Nikkei surging 5.4% WoW.
Key Themes
- Geopolitical De-escalation Driving Risk Re-rating, With Caveats: Progress toward a U.S.-Iran peace framework, including a reported 14-point memorandum of understanding covering Hormuz reopening, nuclear enrichment limits, and sanctions reduction, drove oil lower and repriced risk premiums across equities, credit, and currencies. Neither the U.S. naval blockade nor Iran’s counter-restrictions have been formally lifted, and vessel tracking confirms incomplete commercial normalisation.
- AI Earnings Cycle Intact; Semiconductors Lead: With ~89% of S&P 500 companies reporting, Q1 blended earnings growth is tracking ~28% YoY, the strongest since 2021. Tech and AI-linked names are the primary engine, with the Philadelphia Semiconductor Index posting ~10%+ WoW gains. AMD’s blowout quarter during Japan’s Golden Week triggered the Nikkei’s largest single-day point gain in history (+3,320 points on 7 May).
- Labour Market Resilience Complicates the Rate Narrative: April nonfarm payrolls exceeded expectations at 115,000 versus a consensus estimate of 62,000, marking the first consecutive monthly improvement in nearly a year, while unemployment remained stable at 4.3%.
- Oil: Narrative Ahead of Physical Reality: The week’s (6.4%) WoW decline is a risk premium release, not a fundamental resolution. Goldman Sachs noted that global crude inventories are not critically low but refined product buffers, naphtha, LPG, and jet fuel, are being depleted rapidly. Even a fully open Hormuz strait does not immediately restore refined product market balance, as that supply chain is harder to reroute than crude.
- Trump-Xi Beijing Summit (14-15 May): Trump’s first visit to China in eight years is the dominant near-term risk event. A failed summit removes the diplomatic cover delaying further U.S. tariff action on China. With the IEEPA tariff mechanism struck down by the Supreme Court in February, the administration’s remaining tools are Section 301 and 232 investigations already underway targeting Chinese overcapacity and forced labour violations. Deployment of these in H2 2026 would likely trigger Chinese retaliation through rare earth export restrictions, directly impacting semiconductor supply chains in Taiwan and Korea and weighing on trade-dependent EM currencies.
