Yesterday, equity indices continued to fall. The S&P 500 dropped by 0.79%, and the Nasdaq 100 fell by 1.55%. The Dow Jones Industrial Average lost 0.26%.

Today, the MSCI Asia Pacific index rose by 0.5% after intraday swings between gains and losses. South Korea's KOSPI experienced true roller-coaster action, plunging by more than 5% at one point before rebounding to finish up roughly 2.5%.

Oil has climbed for a second day and is the principal driver of market jitters. Brent rose by 2.8% to $85.64/bbl after US President Donald Trump resumed a US blockade of Iranian vessels transiting the Strait of Hormuz.

The bond market reacted in proportion to the news flow. Treasuries held onto losses after the US session as investors awaited inflation data due on Tuesday. On Monday, Treasuries fell after traders pushed the odds of a Fed hike in July to roughly 50% following comments from Fed Governor Christopher Waller that officials may need to raise borrowing costs to contain price pressures.

Vantage Global Prime summed up today's market reaction well: "Surging oil prices and yields are already speaking clearly to a worsening inflation outlook. That uncertainty helps explain today's wavering sentiment rather than a full-scale flight from risk, with investors increasingly alert to the deteriorating backdrop, but not yet pricing in the worst-case scenario." That captures the market mood: anxiety is rising, but panic has not set in.

Alongside geopolitics, markets are playing out their own drama around artificial intelligence. The Middle East escalation coincides with a growing number of investors asking whether the vast sums poured into AI will generate commensurate profits. Monday's sell-off in South Korea, driven by a re-rating of AI stories, spilled over into US markets and highlighted concerns that the AI boom may be overstretched.

Technically, the daily chart suggests that the immediate task for buyers is to overcome the resistance level of $7,544. Doing so would confirm upside and open the path to $7,574. Taking control of $7,600 would further strengthen buyers' positions. On the downside, buyers must defend the $7,518 area. A break below that level would likely push the index back to $7,494 and open the way to $7,474.