US capital markets had a wild but hugely rewarding second quarter. This era was characterized by new levels of instability in oil prices combined with a rapid depreciation of the US dollar. On June 13, US oil climbed to above $72 and Brent crude jumped above $76. This was their largest one-day increase since the onset of war in Ukraine, reflecting simmering tensions in the Middle East. In the second quarter, the US dollar index nose-dived by a staggering 6.6% quarter-on-quarter. This near 10% drop contributed to a total year decline of 10%.
Sure enough, as Wall Street opened on Monday, stocks began climbing high. This movement capped off a remarkable month and an exceptional, record-setting second quarter with a powerful finish. The broad S&P 500 index climbed 0.34%, while the tech-heavy Nasdaq Composite increased 0.46%, with both indexes registering record intraday highs. The S&P 500 has jumped 10% thus far in the second quarter. This incredible comeback comes after a 4.59% fall during the first quarter and an enormous recovery since its bottom on April 8th.
Oil Prices Spike Amid Global Tensions
On June 13, Brent crude futures—the global oil benchmark—jumped to $78.85 per barrel. In the meantime, West Texas Intermediate (WTI) crude prices hit $73.85 a barrel. This turnabout came after publicly stoked fears about an outbreak of war between Israel and Iran, leading to waves of volatility in oil markets.
Traders are rushing to respond to the very latest big news. Their actions resulted in massive increases in oil prices as speculators scrambled to understand how geopolitical unrest would affect global commodity supply chains. The painful and alarming impacts of skyrocketing oil prices directly and through inflationary spillovers into the whole economy. That will likely undermine consumer spending and dampen economic growth.
These jumps in crude oil prices are happening against an even more troubling backdrop of economic instability. Analysts have been sounding the alarm for months on the likelihood of a recession. Sam Stovall, chief investment strategist at CFRA Research, goes in deep by singling out the cumulative heavy-handed tariffs slapped on every other major trading partner as a keystone factor.
The Decline of the US Dollar
Compared to the strengthening oil market, the US dollar has been under considerable pressure this year. The dollar index was down 0.2% on Monday, trading near its lowest point since 2022. Since then, the euro has strengthened almost 13% compared to the dollar and the British pound almost 9%.
This drop is very concerning to investors, especially as it relates to their purchasing power declining and changing the dynamics of international trade. The depreciation of the dollar may complicate matters for businesses reliant on imports or foreign transactions, ultimately influencing broader economic trends.
Mohit Kumar, chief economist and strategist for Europe at Jefferies, commented on the current market dynamics: “In the background, investors have been cash rich and supportive of the move higher in the risky assets.” It’s an indication that investors remain hungry to jump into riskier assets. They are ready to leap into the deep, despite concerns about the danger of currency devaluation and tsunamis of economic crisis.
A Promising Quarter for US Stocks
Even as currency and commodities markets faced unprecedented volatility, US stocks have displayed remarkable strength throughout Q2. Indeed, the S&P 500 index has jumped an astonishing 24% since it hit bottom on April 8. It’s doing so right in the face of expectations for a bear market resurgence! Investors have been pretty easily impressed by this momentum, which has largely been led by the tech sector.
Clark Bellin, president and CIO at Bellwether Wealth, pointed out the market tech’s surprising run since the April lows. As he put it, “tech has been ripping the markets since the April lows.” He wants to see tech’s leadership stick around for the second half of 2025. It all points to an increasing optimism about AI-related innovations and other emerging technologies.
CBOE Volatility Index, Wall Street’s fear gauge, reflected the extreme volatility throughout this period as well. It really did show a roller coaster trend. After surging by 28% in the first quarter, it fell by 26% in the second quarter, suggesting a calming of investor anxiety as markets stabilized.