• Global equity markets largely shrugged off the weekend’s U.S. airstrikes on Iranian nuclear sites:
U.S. stocks gained on Monday: Dow +0.17%, S&P 500 +0.48%, Nasdaq +0.61%
The European and Asia-Pacific markets showed mixed to slight declines; investors are cautious but not panicking.
• Risk sentiment remains “risk on”, a muted response to escalating Middle East conflict suggests markets believe the situation is contained for now
Oil & Energy Sector
• Oil prices initially surged to near five-month highs - Brent around $78–81, WTI near $78, on supply‐disruption fears, but fell ~1% to mid $70s as tensions eased
• Ongoing threats to the Strait of Hormuz remain key, about 20% of global LNG and 25% of oil flows through this chokepoint
• Energy equities underperformed on Wall Street, reflecting profit taking post‐rally.
Currencies, Bonds & Gold
• USD: Strengthened against safe‐haven currencies like the yen, euro, and franc following geopolitical pressure
• Bonds: Treasury yields climbed slightly, with no drastic safe haven flows yet
• Gold: Prices remain elevated, seen as a hedge amid global uncertainties.
Monetary Policy & Fed Outlook
• Federal Reserve Vice Chair Michelle Bowman hinted a rate cut could come soon, possibly in July, due to evolving labor and inflation dynamics
• Markets are leaning toward a September cut, wrecking July expectations
• Outlook remains nuanced: markets await further signals from Fed Chair Powell and upcoming economic data.
Outlook & Key Risks Ahead
• Geopolitical: Any Iranian retaliation or threats to the Strait of Hormuz could ignite volatility in energy and equity markets
• Economic: Upcoming U.S. data (jobless claims, PCE, GDP) and Fed testimony will heavily influence near-term direction.
• Energy: Sustained oil above $80–100 may weigh on global growth and inflation, while prices below that range offer some relief.
Overall Take
Markets are remarkably composed, balancing geopolitical jitters with central bank cues and economic fundamentals. While short-term oil and safe-haven swings persist, equities are holding steady until tangible escalation or sharper Fed guidance shifts the tide.
