The S&P 500 pulled back from recent record highs in a tech-led decline overnight, before recovering late in the session after US President Donald Trump announced he had called off planned military strikes on Iran, according to Deutsche Bank’s Jim Reid.
The reversal in risk sentiment mid-session highlights how geopolitical headlines continue to drive short-term volatility in US equities โ a pattern that has become familiar for traders navigating 2025’s macro landscape.
What Happened
US technology stocks led the early retreat, pulling the broader S&P 500 lower after the index had been trading near all-time highs. The session stabilised once news broke that the planned Iran strikes had been stood down, easing immediate fears of a Middle East escalation that could disrupt global energy supply.
Australian Angle
For Australian traders, the overnight session carries several implications. A softer Wall Street open typically weighs on ASX 200 sentiment at the open, particularly for tech-exposed names and global growth proxies. The Iran headline also matters for oil prices โ any de-escalation in the Middle East tends to ease upward pressure on crude, which flows through to energy sector stocks including ASX-listed names.
The AUD/USD pair is sensitive to risk appetite swings of this kind. A stabilising S&P 500 into the close is broadly supportive of the Australian dollar, though traders should watch whether the tech sector’s weakness persists into the next session.
What to Watch Next
The key question is whether the tech-led pullback represents a healthy consolidation after record highs or the start of a broader risk-off rotation. Watch the Nasdaq closely โ if technology names continue to underperform while the broader market holds, it could signal sector rotation rather than an outright sell-off.
Geopolitical developments around Iran remain a live risk. Any re-escalation would likely lift oil prices and safe-haven assets such as gold (XAU/USD), while pressuring equities and the AUD.
Directional bias: Wait-and-see. The late session recovery is encouraging, but the tech-led nature of the pullback from record highs warrants caution until follow-through buying confirms the dip has been absorbed.
Source: FX Street