By Daniela Hathorn,
Senior Market Analyst at Capital.com
Global markets have welcomed signs of a potential diplomatic breakthrough in the Middle East,
with reports of possible negotiations between the US and Iran raising hopes of a de-escalation
in regional tensions. Oil prices have come under pressure as investors reassess the geopolitical
risk premium built into crude. However, while lower energy prices would normally boost risk
appetite, the improvement in sentiment has struggled to translate into a sustained recovery in
US equities. The reaction highlights how investors are increasingly focused on domestic
economic and corporate risks rather than on geopolitical developments alone.
As a result, US equities are on course for a fourth consecutive session of declines, with the
Nasdaq now around 11% below its early-October peak. Concerns about the sustainability of AI
investment remain the dominant negative driver, particularly following underwhelming market
reactions to earnings from major technology companies. Investors are increasingly questioning
whether the enormous sums being spent on data centres and AI infrastructure can generate
sufficient returns, with attention shifting towards profitability, free cash flow and monetisation.
Elevated Treasury yields are adding to the pressure by reducing the present value of future
earnings. The combination of stretched valuations, persistently high borrowing costs and
uncertainty around AI returns is proving difficult for technology stocks to overcome.
Precious metals are also struggling to regain sustained momentum after October's sharp selloff.
Silver has slipped below $50, having lost around 20% over the past month, as elevated real
yields, dollar strength and broader market deleveraging weighed on prices. Although gold and
silver rebounded on Monday as oil prices and Treasury yields eased, the recovery remains

fragile. The challenge for precious metals is that geopolitical uncertainty is not automatically
translating into safe-haven demand when investors are also concerned about restrictive
monetary policy. They also face the risk of liquidation during sharp equity selloffs, as investors
sell profitable or liquid positions to raise cash.
Looking ahead, today's US midterm elections introduce another source of uncertainty,
particularly for the dollar, Treasury yields and sectors sensitive to fiscal and regulatory policy.
Investors will be watching whether the results change expectations for government spending,
borrowing and the administration's ability to advance its economic agenda. However, the
immediate challenge for equities remains the combination of elevated yields and growing
doubts about AI monetisation. A diplomatic breakthrough in the Middle East could provide
further relief through lower energy prices and inflation expectations, but it is unlikely to be
enough to restore confidence in technology stocks unless earnings expectations and valuations
begin to stabilise.