Global equity markets generally rose during May, boosted by continuing demand for AI-related stocks. The price of oil dropped sharply at the end of the month, finishing May at US$92.05 per barrel on hopes that the US and Iran were nearing an agreement that would reopen the Strait of Hormuz.
- AI optimism drove US and Japanese indices to new highs
- US consumer confidence continued to weaken
- Germany’s economy is expected to stagnate over Q2
Hopes of a deal: global equity markets generally rose during May, boosted by continuing demand for AI-related stocks. The price of oil dropped sharply at the end of the month, finishing May at US$92.05 per barrel on hopes that the US and Iran were nearing an agreement that would reopen the Strait of Hormuz. Optimism was tempered, however, by wider uncertainties about the outlook for inflation and monetary policy alongside some concerns over tech-related valuations.
“Investor sentiment was lifted by hopes of a resolution to the conflict in the Middle East”
Fresh highs for US stocks: as May ended, US indices reached new highs amid investors’ fresh enthusiasm for tech and AI-related stocks. Over May as a whole, the Dow Jones Industrial Average Index rose by 2.8% while the Nasdaq Index climbed by 8.4%. Investor sentiment was lifted by hopes of a resolution to the conflict in the Middle East. Nevertheless, US consumer confidence continued to deteriorate in May, according to the University of Michigan’s Consumer Sentiment Index .
US inflationary pressures: high and increasing energy prices stoked the annualised rate of inflation , which rose from 3.3% to 3.8% in April. In particular, airline fares rose by 20.7% in April. Meanwhile, producer prices rose by 1.4% month on month. 10-year Treasury yields rose as high as 4.67% during the month.
A challenging outlook for Europe: the European Central Bank warned that “acute geoeconomic stress” was being exacerbated by ongoing uncertainties around global trade and international cooperation, particularly with regard to US policy. The European Commission’s Spring Economic Forecast revised down growth expectations for the eurozone to 0.9% this year and 1.2% next year, citing the impact of the Middle East conflict on energy prices. Inflation in the euro area is predicted to average 3.0% in 2026 – compared with a previous forecast of 2.1% – easing to 2.3% in 2027. Elsewhere, according to the Bundesbank , the Middle East conflict is likely to dampen Germany’s economic growth, which is expected to “stagnate” in the second quarter. Nevertheless, the Dax Index rose by 3.3% over May, boosted by tech-related stocks.
Tech boost for Japan: Japanese equities hit new highs in May, buoyed by interest in the technology sector. Against a backdrop of AI-related optimism, Japan’s Softbank Group surged during the month, helping to propel the Nikkei 225 Index to a fresh all-time high. Over May as a whole, the Nikkei 225 Index soared by 11.9%.
