Global equities rose further last week on news of extended US–Iran talks, pushing major US indices to fresh highs and lifting Asian and European markets. However, optimism quickly faded after Iran reinstated the closure of the Strait of Hormuz and reportedly attacked at least two vessels.
Despite ongoing uncertainty, the US earnings season has started strong and TSMC’s results again confirmed solid AI demand, suggesting that the negative impact of Middle East tensions on financial markets will gradually become more muted. This week’s WEFC explores these developments.
Ceasefire Fragile as Hormuz Tensions Reignite
US–Iran tensions remain unstable as the 14-day ceasefire approaches expiry with no confirmed negotiations. Markets initially rallied on de-escalation hopes, but sentiment reversed after the US intercepted an Iranian-flagged vessel in the Gulf of Oman, triggering renewed escalation risks. Iran responded by re-closing the Strait of Hormuz and warning vessels against entry, framing US actions as a ceasefire violation. Key disagreements—particularly over nuclear terms and sanctions—remain unresolved, with both sides accusing each other of bad faith. With no confirmed talks before the deadline, the probability of near-term de-escalation is falling, and the ceasefire increasingly appears temporary.
China Q1 GDP Beats, but Growth Still Leans on Exports
China’s Q1 GDP grew 5.0% YoY, beating expectations and reaching the upper bound of policy targets, with exports as the primary driver. High-tech exports accelerated sharply, supporting industrial production and offsetting domestic weakness. Nominal GDP recovered more strongly than real GDP, as PPI turned positive for the first time in 41 months, signaling easing deflation pressures. However, consumption remains the key drag: retail sales slowed and both income and spending growth decelerated. The recovery remains unbalanced, relying on exports and investment. Sustaining 5% growth will depend on continued export strength and whether policy support can stabilize domestic demand.
Earnings Season Opens Strong, Led by Tech and Financials
Q1 earnings season has started strongly, with 87.5% of companies beating earnings estimates and 79.2% exceeding revenue expectations. Growth is concentrated in technology and financials, which are driving overall index expansion. Technology posted robust earnings and revenue growth on AI demand, while financials delivered solid results supported by trading revenues and stable credit conditions. In contrast, healthcare and energy lagged, dragging on aggregate performance.
TSMC Delivers Clean Beat as AI Demand Drives Upgrade
TSMC delivered strong Q1 results, with revenue up 35.1% YoY and margins exceeding guidance across all levels. Growth was driven by sustained HPC demand and pricing power in advanced nodes, with HPC reaching a record 61% revenue share. Advanced nodes remained above 70% of revenue, reinforcing structural demand strength. The company raised full-year growth guidance to above 30%, supported by expanding AI adoption, particularly agentic AI. Despite cost pressures from overseas fabs and new nodes, margins remain supported by mix and pricing. Capacity expansion and elevated capex signal confidence in continued AI-driven semiconductor demand.
About Weekly Economic and Financial Commentary (WEFC)
The MacroMicro WEFC is published weekly, delivering rigorous analysis and in-depth insights on the most critical market-moving events. Coverage spans equities, foreign exchange, bonds, commodities, global central banks, geopolitics, and the international political economy.
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