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Markets Are Holding Steady Amid Israel-Iran Escalation
Good morning. Hallam Bullock here, writing to you from London. A former animation president at Warner Bros. and Comcast’s DreamWorks is betting he can create the next Hollywood franchises with the help of AI — and just raised $11.6 million to do it.
In today’s big story, US President Donald Trump announced a cease-fire between Iran and Israel. Israel says Iran has violated it. We’re looking at how the markets are reacting — and what they’re expecting next.
What’s on deck
Markets: Real-estate investors are no longer counting out San Francisco.
Tech: Leaked files and the startup’s own contractors are calling Scale AI’s security into question.
Business: Why we should all know less about each other at work.
But first, the markets are hopeful.
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The big story
Markets hold firm
Israeli forces have pounded Iran with airstrikes over the past week and a half.
AP Photo/Leo Correa, File
“Please do not violate it!” US President Donald Trump said in a Truth Social post earlier this morning. He was referring to a cease-fire between Iran and Israel, which Trump said was “now in effect.”
It was the news the markets had been waiting for. European and US stock-index futures both jumped, while the dollar fell against all its major peers and gold, a safe haven asset, dropped 1.3%. Oil prices, meanwhile, continued their plunge.
Hours later, Israel’s defense minister said Iran had violated the cease-fire — and vowed to respond with “powerful strikes against regime targets in the heart of Tehran.”
Iran has denied the accusation. BI is covering this developing story. Follow our coverage.
Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2023 in New York City.
Michael M. Santiago/Getty Images
In many cases, the traditional risk-off response would’ve hampered the early-morning market rally, yet US stock futures are still firmly up.
While the latest developments appear to signal a renewed escalation, markets are reacting as if this is a temporary disruption in an otherwise steady move toward de-escalation.
We saw a similar thing yesterday, when Iran said it fired missiles at a US military base in Qatar. Fears of supply disruption would normally send oil prices up, but the attack was largely believed to be symbolic — Trump thanked Iran for giving the US “early notice, which made it possible for no lives to be lost.” Oil prices continued to fall.
Investors had also been pricing in geopolitical risks for months. “There wasn’t much in the way of escalation so markets breathed a sigh of relief,” Paul Hickey, cofounder of Bespoke Investment Group, told BI.
We might be witnessing a similar scenario play out. A cease-fire hangs in the balance, but amid a cloud of uncertainty, it seems the markets are holding their nerve.
3 things in markets
Tesla launched its robotaxi on Sunday.
AP Photo/Eric Gay
1. Don’t get too excited about Tesla’s stock jump, UBS says. The EV-maker’s stock leapt 11% Monday morning after its robotaxi launch, but UBS said the opportunity is “already priced into the stock” in a note. Tesla’s stock has been on a wild ride this year and is still down 13.6% YTD.
2. San Francisco could be in for a real estate rebound. The city is buzzing again thanks to RTO mandates. While the average rent price is still below pre-pandemic levels, they’re predicted to tick up. Large investors are aiming to capitalize on a rebound by buying up multi-family homes.
3. The housing market is slowly turning in favor of buyers. A Redfin report showed US home prices rose 0.7% in May, the smallest increase since 2023. They expect this trend to continue and potentially start showing year-on-year declines by the end of 2025.
3 things in tech
Scale AI cofounder and CEO Alexandr Wang.
Scale AI
1. Scale AI’s data security problem. The startup, which uses public Google Docs to track internal work for its high-profile clients, has left multiple AI training docs labeled “confidential” accessible to anyone with a link, BI has found. While there’s no indication that Scale AI’s practices have caused a breach, one expert called it “dangerous.”
2. Leave a tip? JK! Tesla’s robotaxi service trolls users who try to tip their non-human drivers, some commuters discovered shortly after the robotaxi launch in Austin. See what happens when you try.
3. Chatbots are competing for users on WhatsApp. The messaging app, owned by Meta, is “the largest surface that people use Meta AI on,” according to Mark Zuckerberg. It’s also becoming an AI free-for-all as rival chatbots compete for audiences, which could hurt Meta’s quest to become the default AI provider, BI’s Pranav Dixit writes.
3 things in business
Getty Images, Ava Horton/BI
1. Make coworkers mysterious again. It’s good that workplaces have become more inviting, but there’s a cost to sharing too much. Besides annoying coworkers and managers, oversharing can hurt an employee’s reputation and their organization’s, writes BI’s Emily Stewart.
2. Compass is lawyering up to fight Zillow. The real estate brokerage accused Zillow of violating antitrust laws by forcing listings onto its platform in a lawsuit filed Monday. Zillow has been beefing with big brokerages since they started gatekeeping certain listings, arguing that they’re creating an uneven playing field for homebuyers.
3. DTC bedding brand Parachute folds 19 stores. Parachute shrank its retail footprint from 26 to seven storefronts over the past year, becoming the latest direct-to-consumer brand that’s struggled to scale or turn a profit. It said it plans to focus on e-commerce and partnerships with retailers like Target instead.
In other news
What’s happening today
- FedEx reports earnings.
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New York City primary mayoral election.
Dan DeFrancesco, deputy editor and anchor, in New York (on parental leave). Hallam Bullock, senior editor, in London. Meghan Morris, bureau chief, in Singapore. Grace Lett, editor, in Chicago. Amanda Yen, associate editor, in New York. Lisa Ryan, executive editor, in New York. Akin Oyedele, deputy editor, in New York. Ella Hopkins, associate editor, in London.
