Global markets are sharply lower on Tuesday, with major indices across Asia and Europe posting losses, even after the US lifted sanctions on Iran, sending oil prices below $77.

The selloff was likely deepened by a Bank of America note on Monday that revised its Fed forecast. BofA now expects the Federal Reserve to raise rates by a quarter point three times this year, in September, October, and December, lifting the benchmark rate to 4.25%–4.5% from the current 3.5%–3.75% range.

Also, a potential $165 billion in equity selling tied to quarter-end rebalancing is expected before June closes, as major institutional investors adjust their portfolios following a strong performance for equities, according to JPMorgan strategists, reports Investing.com,

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BofA had initially forecast steady rates in 2026. However, recent Federal Open Market Committee developments, where half of its members projected rate increases, and hawkish comments from new Fed Chairman Kevin Warsh, pushed analysts to revise their outlook.

BofA said the Fed might hold off on tightening only if job growth declines significantly, inflation eases, or a sharp stock market correction materialises. Warsh may adopt a “strategically hawkish” stance to build credibility while preparing for potential cuts later.

Wall Street is already pricing in a more aggressive Fed. The 10-year Treasury yield rose 4.6 basis points to 4.497%, even as Brent crude dropped 4% to $77.29 per barrel.

“The broader outlook on US equities remains tilted bearish. Stocks have been running hot for months, valuations are stretched, and Fed Chair Kevin Warsh’s harder-line policy stance is now colliding with a market that hasn’t fully priced in the consequences,” said Waleed Said, technical analyst at Givtrade.

Global Markets Today

On Tuesday, US stock futures extended the weakness, with the Nasdaq Composite down over 2%, S&P 500 1.5%, and the Dow opened nearly 300 points lower. Pressure is mounting, particularly on semiconductor stocks like INTEL, Micron, AMD, and Nvidia. SpaceX continued its drop, losing another 1.7% following a 16% decline on Monday.

Nigel Green, deVere Group, says, “Markets are getting a cold shower. For the last two years, investors have been willing to pay almost any price for the promise of AI-driven growth. Suddenly, they’re asking the questions they should have been asking all along. Where are the returns? How sustainable is the spending? And what happens if the global economy proves weaker than we expected?”

“The sell-off comes as investors increasingly question whether the enormous sums being committed to AI infrastructure will generate sufficient earnings growth to justify current valuations,” adds Green.

In Asia, South Korean shares saw a severe decline, with the KOSPI sliding 9.99% to 8,203.84 points and triggering a second circuit breaker halt on Tuesday. A report that South Korea would be excluded from MSCI’s developed markets index in the upcoming review added to the selling pressure.

The Hang Seng fell 1.5% to 23,350, while the Nikkei 225 plunged 3.55% despite easing geopolitical tensions. Taiwan’s TAIEX dropped 641 points, or 1.3%, to 47,101, snapping a six-day winning streak as traders booked profits after a record high the previous session. Australia’s ASX 200 slipped 29 points, or 0.3%, to 8,787 — its fourth straight session of losses — as caution ahead of domestic CPI and labour market data weighed on sentiment.

As investors continued to evaluate the political climate in the UK, miners and tech investment funds led the FTSE 100’s 0.6% decline on Tuesday, reversing yesterday’s slight increase.

Looking ahead, investors will watch Thursday’s release of the May Personal Consumption Expenditures (PCE) price index — the Fed’s preferred inflation gauge for fresh direction. PCE hit a near three-year high in April, keeping rate-hike expectations elevated.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Market data, forecasts, and analyst views cited are sourced from third parties and are subject to change. Past market performance is not indicative of future results. Readers are advised to consult a qualified financial advisor before making any investment decisions.