China stocks slide as global investors show mixed readings on Iran-Israel military conflict

Chinese stock markets reflected the confusion of global investors trying to decide if a delay in US direct involvement in the Iran-Israel war is a good sign or just a futile hope in bringing the weeklong military conflict to an end.

Geopolitical risks are the greatest challenge facing the capital markets, Mike Wardle, chief executive of Z/Yen Group, a UK-based commercial think tank, said at the Lujiazui Forum in Shanghai this week. The latest market performances can serve as proof of that.

The Shanghai Composite Index posted a 0.51 percent decline for the week, while the Shenzhen Component Index lost 1.6 percent. Both moved sharply lower in the last two trading days as the Iran-Israel conflict escalated despite President Donald Trump's decision to withhold joining Israeli attacks on Iran for two weeks to allow for possible negotiation.

Hong Kong's Hang Seng Index dropped 1.1 percent in the week but posted a surprise rise of 1.26 percent on Friday, buoyed by a surge in shares of electric vehicle makers and other tech-related companies shares. The Hong Kong market has been on a roll in recent weeks on a wave of successful initial public offerings by mainland technology companies and more corporate applications to sell shares.

Japan's Nikkei retreated 0.22 percent on Friday but rose 0.91 percent for the week even amid continuing weak economic data. In Europe, Germany's DAX retreated 1 percent in the week, with Britain's FTSE index also down.

Oil prices ended the week lower despite some gains on Friday fed by hopes that Trump's two-week "window for diplomacy" might lead to peaceful settlement of the Iran-Israel conflict. Benchmark Brent crude was up 3 percent for the week after slipping 2 percent on Friday to settle at US$77 a barrel. Gold prices lost nearly 2 percent for the week.

"The main factor of this volatility is based on the fast-changing developments in the Iran-Israel military conflict, while the war in Ukraine also has no near end in sight," said Gu Fengda, chief analyst with Guosen Futures. "Investors can still bet on precious metals, especially gold, although it has scaled back quite a bit in recent days."

Confidence in the US is also ebbing around the world. Many countries have unloaded part of their holdings in US Treasuries, including China, which reduced its stockpile to a 16-year low in April.

Participants at the Lujiazui Forum, the most high-profile event in China's financial industry, voiced strong support for political stability but many stopped short of outright optimism.

Giovanni Tria, former Italian minister for economy and finance, said at the forum that hopes for stronger global monetary cooperation are simply showing "wishful thinking."