Фьючерсы падают, нефть растет, поскольку пятница 13-го возвещает о новой войне на Ближнем Востоке

Futures are all lower but already about 100bps higher than overnight lows with all eyes on geopolitical tension in the Middle East after Israel effectively started war with Iran, sending the VIX up to a 20-handle and Gold re-testing ATHs. As of 8:00am, SPX futures are down -90 bps, and trading just under 6,000; Nasdaq 100 futs are down 110 bps with all Mag 7 stocks trading lower (TSLA -2.8%, NVDA -2.0%, GOOG/L -2.0% lagging) and small caps -140 bps Global indices lower, though not dramatically so, with Asia market down ~75 bps overnight and Europe down 100-150 bps at the moment. Dubai/Abu Dhabi markets were down 3/4%. Overnight, the major headlines were Israel’s wide-ranging attack on Iran’s nuclear program and military leadership. Oil up sharply to ~$75 but also well off session highs as so far the initial Israeli attack has avoided energy targets, but Israel could extend over several days, with Iran vowing to retaliate. Also it is unclear if Iran will be allowed to continue smuggling oil to China after this escalation. Crude is up 7.8% from yesterday’s close having surged as high as 13% earlier – its biggest jump in 3 years – and with all CTAs still 100% short this may just be the start of the squeeze. Gold added +0.9%. Yields are mostly unchanged; USD is higher. US economic data slate includes June preliminary University of Michigan sentiment at 10am; Fed officials are in external communications blackout period ahead of June 18 rate decision.

In premarket trading, magnificent Seven stocks are lower as as investors rotate out of equities and into haven assets (Tesla -1.6%, Amazon -1.9%, Meta Platforms -1.5%, Nvidia -1.5%, Alphabet -2%, Microsoft -0.8%, Apple -0.2%). Energy and defense stocks rise after Israel’s airstrikes against Iran (Exxon Mobil +3.3%, Chevron +2.6%, Occidental Petroleum +5.5%; RTX +5.5%, Lockheed Martin +4.8%). Airline and travel stocks slide following Israel’s predawn attacks. Here are some other notable premarket movers:

• Delta Air Lines -4.4%, United Airlines (UAL) -5%, American Airlines (AAL) -4%
• Royal Caribbean Cruises -3.7%, Carnival Corp -5.5% and Norwegian Cruise -4%
• Adobe slips 3% after the company gave a sales outlook for the current quarter that topped analysts’ estimates, but investors remain skeptical that the leader in creative software can outduel AI-focused upstarts.
• RH jumps 19% after the luxury furniture company reported adjusted earnings per share for the first quarter that beat the average analyst estimate. Analysts note that the unchanged full-year guidance is a positive sign for demand from upscale consumers.
• Visa falls 2.7% and Mastercard (MA) declines 2.4% as the Wall Street Journal reports that large merchants, including Walmart and Amazon, are exploring how to issue or use stablecoins to bypass traditional fees of the card-based systems.
• US Steel falls 4% after Nikkei reported that Nippon Steel’s planned takeover of the US company may not proceed if the Japanese company has insufficient freedom of management.

It’s shaping up as an extremely busy Friday for traders assessing market risks going into the weekend. Stock futures are down and oil jumped the most in three years after Israel’s strikes on Iran. Havens, and especially gold, are in demand.

The airstrikes against Iran’s nuclear program and ballistic-missile sites renewed a standoff between two adversaries that risks spiraling into a wider conflict. While the reaction was strongest in crude oil, other pockets of the market suggested that investors are watching how long the tensions will last and whether the situation escalates. Netanyahu said the attacks targeted Tehran’s nuclear program and military, and would last until the threat was removed. Iran vowed to retaliate against Israel and, possibly, US assets in the Middle East even as Trump urged Iran to make a deal “before it is too late.”

The strikes follow repeated warnings by Israeli Prime Minister Benjamin Netanyahu to cripple Iran’s nuclear program. Iran had previously said it would inaugurate a new uranium-enrichment facility in response to censure by the UN atomic watchdog over its nuclear program.

„We are seeing behavior fully consistent with risk-off,” said Geoff Yu, FX and macro strategist at Bank of New York Mellon Corp. “This is probably the starting point for markets, but as we know correlations have been variable in recent weeks and much will depend on the reaction of Iran, the US and others.”

„Short term it will be used as an excuse or a catalyst by investors for some profit taking, after a very strong comeback of risk assets,” said Vincent Mortier, chief investment officer at Amundi SA. “Price reaction of historical safe havens has been minimal. We believe the events of last night will remain localized and will not degenerate into something more global.”

The attacks are coming at a time when equity markets had recovered from a slump in April that was caused by US President Donald Trump’s tariff war. An index of global stocks touched a record Thursday, gaining more than 20% from a low hit in April. Any persistent gain in oil prices could fuel inflation, adding to the challenges confronting the Fed and other central banks as policymakers also contend with the repercussions of Trump’s trade war. For now, changes in the prices of crude futures point to fears of a drawn-out conflict.

“This goes against what central banks were expecting for oil prices and could potentially change their scenario by heating up inflation and slowing growth,” said Alexandre Hezez, chief investment officer at Group Richelieu.

Meanwhile, US stock funds just suffered the biggest outflows in almost three months, according to data published by BofA’s Michael Hartnett, citing EPFR Global data, another sign the rally may be stalling. About $9.8 billion was redeemed from US stocks in the week through Wednesday, the most in 11 weeks. Mideast conflict also risks upending the S&P’s quick-fire comeback from April’s tariff fallout. Bloomberg Intelligence wrote earlier that a return by the benchmark to its former peaks within the next few weeks would mark the fastest recovery from a decline of more than 15% since at least 1980.

European equities fall, with Israel’s military strikes against Iran’s nuclear program spurring big moves across energy and airline stocks, which are most sensitive to oil’s price jump. The Stoxx 600 falls 0.8%, with travel, auto and consumer products leading declines. Among single stocks, Novo Nordisk overtakes SAP to reclaim its position as Europe’s most valuable public company. Novo shares are lifted by its plans to advance an experimental weight management treatment amycretin into late-stage development. Here are the most notable movers:

• Energy stocks are pushing higher following a surge in oil prices after Israel mounted waves of air strikes against Iran.
• BAE Systems and other defense suppliers move higher as the tensions spur predictions of elevated military sending.
• Novo Nordisk shares climb as much as 2.3%. The firm plans to advance its experimental weight management treatment amycretin into late-stage development following feedback from regulatory authorities.
• Intrum shares gain as much as 2.4% after the credit management services firm was upgraded to neutral from underweight at JPMorgan. Analysts note better profitability in Servicing.
• Airline stocks are the worst performers following a surge in oil prices after Israel mounted waves of air strikes against Iran, spurring concern around jet fuel costs.
• Burberry, Hugo Boss and other luxury stocks slip due to concerns around reduced demand from travelers.
• Soitec shares slide as much as 5.7%. The chip wafer maker is cut to hold at Jefferies as analysts don’t expect a near-term cyclical upturn.
• Mitie shares fall as much as 3%. The building maintenance services firm is downgraded to hold at Jefferies as analysts see insufficient upside to maintain a buy rating, noting that shares are up about 30% year-to-date.
• Clas Ohlson shares drop as much as 7.2%, retreating from an all-time high on Thursday. Kepler Cheuvreux downgraded the retailer, saying its valuation looks full and that there is a risk of tougher conditions going forward.
• PGE shares drop as much as 6.3%, most in nearly two months, as its new strategy envisages $64 billion in capex by 2035 without clarifying when Poland’s biggest utility will return to paying dividends.

Stocks in Asia dropped amid rising risk-off sentiment following Israel’s attacks on Iran’s military facilities, which can potentially spark a wider war in the Middle East. The MSCI Asia Pacific Index extended its loss to 1.2% in the afternoon session, the most in nearly two months. Most major markets were in the red, with Japan and Hong Kong leading the declines. TSMC, Alibaba and Samsung Electronics were among the stocks that weighed the most on the regional gauge. “This morning’s alarming escalation is a blow to risk sentiment and comes at a crucial time after macro and systematic funds have rebuilt long positions and investor sentiment has rebounded to bullish levels,” said Tony Sycamore, market analyst at IG Australia. “We are likely to see a further deterioration in risk sentiment as traders cut risk seeking positions ahead of the weekend.

In FX, the dollar rebounded 0.5% from Thursday’s three-year low as the Bloomberg Dollar Spot Index rises 0.4% as the greenback strengthens against all its G-10 peers. The haven yen and Swiss franc initially rise on news of the attack, only to reverse those gains in London trade; USD/JPY and USD/CHF both rise 0.3. Higher-risk currencies suffer the most, with the Australian and New Zealand dollars both falling roughly 1% versus the greenback. Knee-jerk reaction to risk-off news points to haven dynamics for the dollar, yet positioning and profit-taking on shorts ahead of the weekend need to be taken into account, as well as the boost to the greenback from higher oil prices

In rates, treasury futures turn lower into early US session, unwinding an overnight flight-to-quality bid after Israel launched airstrikes on Iran’s nuclear and ballistic missile programs, sending oil futures higher. Treasury yields higher by a couple of basis points across maturities with curve spreads little changed. 10-year is around 4.38% with UK counterpart cheaper by an additional 3.5bp, leading losses among European peers. Gilts underperform, along with most European bonds, after German and French CPI data. WTI crude futures remain more than 8% higher on the day.

In commodities, brent crude gained 7.6%, having earlier surged as much as 13% in the biggest intraday jump since March 2022. Gold rose 1% to the highest in more than a month.

Looking to the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for June, and in the Euro Area we’ll get industrial production for April. Central bank speakers include the ECB’s Escriva

Market Snapshot

• S&P 500 mini -1.2%
• Nasdaq 100 mini -1.5%
• Russell 2000 mini -1.7%
• Stoxx Europe 600 -0.9%
• DAX -1.4%, CAC 40 -1.1%
• 10-year Treasury yield -2 basis points at 4.34%
• VIX +3.1 points at 21.12
• Bloomberg Dollar Index +0.4% at 1204.54
• euro -0.5% at $1.1528
• WTI crude +7.6% at $73.22/barrel

Top Overnight News

• Israel launched waves of airstrikes against Iran’s nuclear program and ballistic-missile sites, killing the head of the Islamic Revolutionary Guard Corps and the military’s chief of staff. Oil surged as much as 13% as PM Benjamin Netanyahu pledged more attacks to come. Iran vowed to retaliate, sending drones that were intercepted. BBG
• Donald Trump can continue to use troops to deal with LA protests, an appeals court ruled, hours after a judge said the federal government must cease these efforts and return National Guard control to California state leaders. The court set a hearing Tuesday to discuss further action. BBG
• The case for a Fed rate cut is growing stronger as inflation stays muted despite tariffs while signs of deterioration emerge in the labor market (the Fed won’t cut next week, but the forward guidance language could evolve in a dovish direction). WSJ
• Japan’s top trade negotiator expects a trade deal with the US to spare Tokyo from higher auto tariffs, even if Trump increases them against other nations. BBG
• Nearly all the iPhones exported by Foxconn from India went to the United States between March and May, customs data showed, far above the 2024 average of 50% and a clear sign of Apple’s efforts to bypass high U.S. tariffs imposed on China. Apple is also reportedly targeting spring of 2026 for delayed upgrade of Siri. RTRS
• China is saddled with the most loss-making industrial companies since 2001, leaving the government grappling with conflicting goals: closing enterprises while also trying to avoid mass unemployment. BBG
• Bank of Japan officials see prices rising a little stronger than they expected earlier in the year, a factor that may open the door to discussions over whether to raise interest rates if global trade tensions ease. BBG
• UK employers scaled back hiring further in May in the wake of the sharp tax increases and the global trade war, a REC and KPMG survey showed. BBG
• Meta finalized an investment in Scale AI that was said to be $14.3 billion. BBG

Tariffs/Trade

• US Commerce Secretary Lutnick said the China tariff pause likely won’t be extended and its best chips were never on the table and won’t be regarding the China deal.
• US Commerce Department made steel derivatives products subject to additional tariffs, according to the Federal Register.
• US eyes a plan to use the Defense Production Act for rare earths, although a timeline for the Trump rare earth initiative is unclear, according to Bloomberg citing sources.
• China reportedly delayed approval of the USD 35bln merger between Synopsys (SNPS) and Ansys (ANSS) amid Trump’s trade war, according to FT.
• Japanese PM Ishiba will hold talks with US President Trump on Friday, via NHK.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded lower and US equity futures were pressured amid the worsening geopolitical situation in the Middle East after Israel conducted pre-emptive strikes on Iranian nuclear and military targets, with the Israeli military said to have struck dozens of sites across Iran, while Israeli PM Netanyahu said the operation will last for as many days as it takes and Iran has warned that Israel and the US will pay a heavy price for the Israeli attack. ASX 200 was dragged lower by losses in cyclicals but with the downside stemmed as energy and gold miners benefitted from the geopolitical-fuelled upside in the respective underlying commodity prices. Nikkei 225 slipped beneath the 38,000 level after recent currency strength and heightened geopolitical tensions. Hang Seng and Shanghai Comp conformed to the negative mood as Israel’s numerous strikes and Iran’s retaliation threats dominated the headlines.

Top Asian news

• BoJ officials see prices rising a little stronger than they expected earlier in the year and expect the interest rate to be maintained at 0.5% next week, according to Bloomberg.

European bourses are in the red, Euro Stoxx 50 -1.4%, given the dour risk sentiment, which has been triggered by events in the Middle East. Energy (+1.0%) is the only sector in the green, given the surge in benchmark prices. Defence names also faring well, the two together causing the FTSE 100 -0.3% to be the relative outperformer. Conversely, energy strength is weighing on Travel & Leisure (-2.5%) while Auto (-2.2%) names have been hit by Trump’s comments on tariffs potentially going up.

Top European news

• IFS’ Johnson has warned that UK Chancellor Reeves is a „gnat’s whisker” away from having to raise taxes in the autumn budget despite the chancellor insisting her plans are „fully funded”, according to Sky News.
• Bank of England/Ipsos Inflation Attitudes Survey, May 2025: Median expectations of the rate of inflation over the coming year were 3.2%, down from 3.4% in February 2025.

FX

• DXY on the front foot with USD benefiting from its status as a safe-haven currency. Ventured as high as 98.39 but has stopped shy of yesterday’s best @ 98.51.
• GBP pressured against the USD but flat vs the EUR. Action dictated by the USD, hence why EUR/GBP is near-enough unchanged, while Cable itself has pulled back from the overnight multi-year high at 1.3632, as low as 1.3522.
• EUR under similar pressure against the USD. The single currency down to a 1.1513 base, though someway clear of Thursday’s 1.1487 base. As above, price action dictated by geopols and the USD, remains to be seen if the energy moves move the inflation outlook and provide some ammo for the ECB’s hawkish contingent.
• JPY is, somewhat surprisingly, softer against the USD despite the risk-aversion seen across global markets. Overnight, USD/JPY trickled lower and briefly dipped beneath the 143.00 level owing to the haven flows into yen but later rebounded above 144.00 to a current 144.16 high.
• Antipodeans trade in-line with the risk tone and have been hit hard, residing at the trough of the G10 leaderboard. AUD/USD at a 0.6457 base and NZD/USD down to a test of 0.60.

Fixed Income

• Broadly, fixed benchmarks were propelled to WTD peaks overnight/this morning as Israel struck Iranian facilities. Since, the move has pared and we reside in Thursday’s parameters as the intensity of geopolitical news slows slightly and we await updates from Iran.
• USTs peaked at 111-13 overnight, a new WTD high and just a tick+ shy of last week’s 111-14+ best. Since, the benchmark has pared and is near-enough unchanged, holding just below Thursday’s 111-06 peak.
• Bunds bid given the above. Hit a 131.95 peak, marking a new WTD high. A move that occurred given the risk-off action sparked by Israel striking Iran’s facilities and the associated FTQ that ensued. In-line with USTs, EGBs have pulled back markedly from the above peak and currently reside just in the red and 20 to 30 ticks below Thursday’s best; for Bunds, this has the benchmark holding around 131.20.
• The German 10yr yield fell by around 5bps to a 2.42% low when Bunds hit their WTD peak. Since, the 10yr has retraced the move and is now higher by just over a bps on the session, probing 2.50% to the upside.
• Gilts hit a 93.68 peak when trade resumed this morning, gapping higher by 37 ticks and then extending another 10 to that high and eclipsing Thursday’s 93.55 best in the process. However, this proved short-lived as fixed benchmarks generally were already paring back much of their overnight gains and this pressure began to make itself known in Gilts within minutes of the open. Now, holding a few ticks above a 92.94 trough and by extension above Thursday’s 92.80 low.

Commodities

• Session dominated by geopolitics; see the Geopolitics section below and/or headline feed for full details. Brent hit a USD 78.50/bbl high overnight, WTI got to USD 77.62/bbl.
• In brief, Israel’s operation, dubbed “Rising Lion”, targeted a number of nuclear and military targets. The head of IRCG, Hossein Salami, and nuclear scientist Abbasi, have been killed. Iran’s Natanz enrichment site has been impacted. In response, Iran vowed to retaliate, noting also the US would pay a heavy price „now that Israel has crossed all red lines, Iran sees no limits to respond to this crime.”, a state of emergency has been declared in Israel. US said they were not involved in the action.
• Throughout the European morning, while still markedly firmer, benchmarks pulled back from highs as participants faded the initial move and awaited fresh updates. A move that took WTI and Brent as low as USD 71.00/bbl and USD 72.10/bbl.
• Thereafter, a bout of fresh upside occurred (within overnight ranges) as Tass cited remarks from the Israeli PM’s office that they are prepared for the possibility of full-fledged war with Iran. This lifted the benchmarks towards current levels above USD 73.15/bbl and USD 74.50/bbl for WTI and Brent respectively.
• More recently, Trump has commented „Iran must make a deal, before there is nothing left…”; no significant move to this.
• Ahead, further potential catalysts for crude include Iranian retaliation, Strait of Hormuz activity, indications of US involvement (US Security Council meeting at 16:00 BST), and the length of the Israeli operation.
• European gas prices bolstered given the above, Dutch TTF firmer by over EUR 1.50/MWh at best; most recently, Israel’s Energy Minister says they may order temporary shutdown to Natgas reservoirs; due to security situation.
• Spot gold firmer given its haven status and the FTQ. However, upside is being capped by the markedly firmer USD. Leaving XAU at a USD 3444/oz peak, with the ATH at USD 3500/oz the next point of focus.
• Base metals in the red, given the risk off tone and strong USD. 3M LME Copper lower by near-enough 1%, hit a trough at USD 9.57k/T before.

Geopolitics

• Israel’s military struck nuclear and military targets in Iran as well as dozens of sites and said the Iranian nuclear programme is an existential threat to Israel, while it said the Iranian regime is advancing a secret program to build a nuclear weapon and Iran has enough fusion material to make 15 nuclear bombs within days.
• Israeli PM Netanyahu said their pilots were striking many targets in Iran and that the operation would continue for as many days as it takes which will hurt Iran’s nuclear infrastructure, ballistic missile factories and military capabilities. Netanyahu also said they struck at the heart of Iran’s nuclear enrichment programme and nuclear weaponisation programme, as well as Iran’s main enrichment facility in Natanz. Furthermore, he said they targeted Iran’s leading nuclear scientists working on the Iranian bomb and he later declared that they delivered a successful opening strike.
• Israeli Defence Minister Katz declared a special state of emergency on the home front throughout the entire state of Israel and said following Israel’s pre-emptive strike against Iran, that a missile and drone attack against Israel is expected in the immediate future. It was separately reported that two Israeli officials said Israel is bracing for an Iranian response in the coming hours and the Iranian response could include the launch of hundreds of ballistic missiles.
• Iran’s Supreme Leader Khamenei said Israel will receive a harsh punishment and that Israel „unleashed its wicked and bloody” hand in a crime against Iran, while he added that several commanders and several scientists were „martyred” and with this attack, Israel has prepared a bitter fate for itself, which it will surely receive.
• Iran Revolutionary Guards said Israel will pay a heavy price for the killing of IRGC Chief Commander Salami and that the attack was carried out with full knowledge and support of 'wicked rulers in the White House and terrorist US regime’, while it was also reported that supreme leader advisor and IRGC commander Shamkhani was critically injured and that the head of Iran’s armed force Bagheri was killed in the Israeli attack.
• Iran’s Foreign Ministry said responding to Israel is its right under international law, and the US as Israel’s main supporter will be responsible for the consequences of Israel’s adventurism, while Iran’s armed forces spokesman earlier warned that Israel and the US will pay a heavy price for the Israeli attack.
• US Secretary of State Rubio said Israel took unilateral action against Iran and the US is not involved in strikes against Iran, while he added the top priority is protecting American forces in the region and that Iran should not target US interests or personnel.
• US officials said they still intend to have talks on Sunday between US and Iran envoys.
• US reportedly told Israel it won’t be directly involved in any strike on Iran, according to Axios.
• UN General Assembly demanded an immediate, unconditional and permanent ceasefire in Gaza, while it adopted the Gaza resolution with 149 votes in favour.
• National Iranian Oil Refining and Distribution Company says refining facilities and oil storage did not sustain damage in the Israeli attack.
• Israel’s Ambassador to France says the operation against Iran can continue for a few days, not months. Have already destroyed parts of the Iranian nuclear programme.
• Israeli officials report „The assumption is that additional senior officials in Iran have been eliminated, whose deaths have not yet been publicly disclosed.”, via journalist Stein.
• Israel’s air force has begun to intercept drones over the „skies of Saudi Arabia”, via Channel 12.
• Mossad and the Israeli military led a series of covert operations against the Iranian strategic missile array, according to Reuters citing an Israeli security source; Israel deployed precision guided weapons in open areas near Iranian surface-to-air missile systems sites. Thereafter, Israeli Military says it completed a large-scale strike against the aerial defense array of Iran, according to Reuters.
• Israel is prepared for the possibility of a full-fledged war with Iran, according to PM Netanyahu’s office via Tass.
• Israel Defence Minister Katz says the assessment is that most leadership of the Iranian IRGC Air Force were eliminated in a strike.
• Israeli Military says it is prepared for this (i.e. action against Iran) to keep going on for days; depends partly on Iranian response. Already achieved a lot, assessments continue. Still trying to determine how things went. Iran has sent over 100 drones to Israel, many already intercepted.
• Iran’s Abadan oil refinery Co. says they are producing and providing services at full capacity, no disruption.
• Iran’s Armed Forces reportedly says „now that Israel has crossed all red lines, Iran sees no limits to respond to this crime.”, via journalist Aslani.
• Iran’s Atomic Energy Organisation says damage occurred at the Natanz enrichment facility; no chemical or radioactive contamination shown.
• IAEA Statement: „the competent Iranian authorities have confirmed that the Natanz enrichment site has been impacted and that there are no elevated radiation levels.”.
• IAEA says, as it stands, the Fordow fuel enrichment plant has not been impacted; Isfahan nuclear site has not been impacted.
• Iranian Supreme Leader Khamenei appoints Mohammad Pakpour as the new IRGC Commander, after Salami was killed by an Israeli strike; Pakpour directed to „enhance the IRGC’s capabilities, readiness, and internal cohesion.”.
• Iran’s Fars News reports renewed strike by Israel on north-western city of Tabriz.
• Iranian President will deliver a speech soon, according to an X post. [posted around 10:15BST/05:15ET]
• Iran has requested a special session of the (IAEA) „board of governors” on Monday, via Jerusalem Post citing sources.

Geopolitics: Other

• The sixth round of (Nuclear) negotiations will not be held due to Israeli attacks, according to the Tehran Times.
• Frontline is „far more hesitant” about offering its craft to move cargo from the Persian Gulf after the Israeli strikes on Iran, via Bloomberg.
• Iraq’s gas supply from Iran not affected by the Israeli attack, according to Iraqi state news.
• Lebanon’s Hezbollah says the group will not initiate an attack on Israel in response to strikes on Iran.
• US President Trump posts on Truth „I gave Iran chance after chance to make a deal” and „Iran must make a deal, before there is nothing left, and save what was once known as the Iranian Empire”.

US Event Calendar

• 10:00 am: Jun P U. of Mich. Sentiment, est. 53.6, prior 52.2

DB’s Jim Reid concludes the overnight wrap

As we go to press, there’ve been huge developments in the Middle East overnight, as Israel has carried out air strikes against Iran’s nuclear and military facilities. We still await further details, but press reports have said that explosions were heard in Tehran and Natanz, which is where one of Iran’s nuclear plants is. Iranian state TV has reported that Hossein Salami, the head of the Revolutionary Guards, was killed, along with armed forces chief of staff Mohammad Bagheri. Israeli PM Netanyahu has said the operation “will continue for as many days as it takes to remove this threat”, although US Secretary of State Marco Rubio has said the US weren’t involved in the strikes.

The news has led to significant fears about an escalation and a wider regional conflict. For instance, Iran’s armed forces spokesperson said that Israel and the US will receive a “harsh blow” in response, and Iran’s Supreme Leader said Israel “should expect a severe punishment”. In turn, oil prices have surged on the news, with Brent crude up +9.00% this morning to $75.60/bbl. If sustained, that would be the biggest daily jump in oil prices since May 2020, as the global economy was recovering from the Covid lockdowns. And that’s slightly down from the overnight peak, when prices reached $78.50/bbl.

The effects of the attack have cascaded across global markets, with a strong risk-off move for several asset classes. Equities have slumped, with S&P 500 futures down -1.65% this morning, whilst those on the German DAX are down -1.65% as well. Meanwhile, gold prices have surged, moving up +1.26% to $3,428/oz. US Treasuries have also seen a fresh rally this morning, with the 10yr yield down another -1.4bps to 4.35%, its lowest in the last month. And the dollar index (+0.36%) has stabilised after closing at a 3-year low yesterday.

Looking forward, the focus is now shifting to what form Iran’s retaliation might take. It’s also unclear whether talks between the US and Iran over their nuclear programme will continue, although AFP reported that the US still wanted to hold talks this Sunday. We haven’t yet heard from President Trump directly, although his public schedule says he’ll be attending a National Security Council meeting in the Situation Room at 11am ET.

The reaction has been clear in Asian markets overnight as well, where all of the major indices have lost ground in response. That includes the Nikkei (-1.25%), the KOSPI (-1.29%), the Hang Seng (-0.70%), the CSI 300 (-0.76%) and the Shanghai Comp (-0.72%). Similarly, sovereign bonds have rallied, with Japan’s 10yr yield down -3.5bps, and Australia’s down -6.3bps.

Before the strikes, markets had put in a steady performance yesterday. Admittedly, there had been speculation about a strike, with Trump himself saying “Look, there’s a chance of massive conflict”, whilst ABC News reported that Israel was considering military action against Iran. However, there had been hopes that this could be a pressure tactic before planned US-Iran talks over the weekend, and US bonds and equities both advanced.

The bond rally was driven by a dovish batch of US data, including a softer-than-expected PPI reading. So that added to investors’ confidence that the Fed would still cut rates this year, which pushed Treasury yields lower, and meant the dollar index (-0.72%) hit a three-year low. Geopolitical concerns added to the bond rally, but risk assets put in a decent session too, aided by the prospect of rate cuts and the fact that lower yields helped to ease fears around the fiscal situation. So the S&P 500 (+0.38%) still reached a three-month high, closing just -1.61% beneath its all-time peak from mid-February.

The US PPI reading for May was the main driver of yesterday’s rally, as it added to the view that the tariff passthrough was smaller than expected, and wasn’t creating a big spike in inflation. Now, we should add the caveat that we wouldn’t expect the full tariff impact to be evident in the May data, and plenty of tariffs have since risen further (like on steel and aluminium). But the fact that inflation has been pretty soft so far is adding to investor confidence that the inflationary impact won’t be as big as feared. For example, monthly headline PPI was up just +0.1% in May (vs. +0.2% expected), whilst core PPI only rose +0.1% as well (vs. +0.3% expected).

That soft inflation print led to mounting anticipation that the Fed would cut rates in the months ahead, not least given the lower-than-expected CPI number the previous day. Moreover, the weekly jobless claims were also higher-than-expected yesterday, so that created a bit of nervousness about the state of the labour market, and helped to support the rate cut narrative. In fact, the continuing jobless claims moved up to their highest level since late-2021, at 1.956m in the week ending May 31 (vs. 1.910m expected). The initial claims have also been moving higher in recent weeks, and the 4-week average now stands at 240.25k for the week ending June 7, the highest since August 2023.

Given all that, futures priced in more rate cuts from the Fed yesterday, with 52bps of cuts now expected by the December meeting, up +2.9bps on the day. The overnight news has seen that move further, with 55bps priced in this morning. So that led to a significant rally for Treasuries as well yesterday, with the 10yr yield (-6.1bps) falling to 4.36%, whilst the 30yr yield (-7.6bps) hit a one-month low of 4.84%. Matters were helped by a solid 30yr auction, which went smoothly despite recent concern about demand for long-end bonds. And in turn, the decline in yields meant the dollar index hit a three-year low yesterday, whilst the Euro moved above $1.16 intraday for the first time since 2021.

Other notable news yesterday included Trump repeating his criticism of Fed Chair Powell, adding that he may “have to force something” if the Fed does not lower rates. In comments at the White House, Trump also said he might want to raise auto tariffs further from their 25% level “in the not too distant future”. Auto stocks struggled following the comment, with Ford (-1.22%), GM (-1.22%) and Stellantis (-1.84%) all falling back. And in other trade news, Bessent commented that the EU had been “very intractable” in talks.

Despite the geopolitical fears and the softer data, US equities had managed to put in a decent performance yesterday as the decline in yields proved supportive. For instance, the S&P 500 (+0.38%) posted a moderate advance, as did the NASDAQ (+0.24%). The Mag-7 (-0.005%) saw mixed moves, with Tesla (-2.24%) falling back but Nvidia outperforming (+1.52%) and Microsoft (+1.32%) reaching a new record high. The mood for AI-linked stocks was helped by Oracle (+13.31%) projecting very strong growth in its cloud infrastructure business. However, it wasn’t all good news, with the small-cap Russell 2000 (-0.38%) falling back.

Earlier in Europe, markets put in a much weaker performance, with the STOXX 600 (-0.33%) posting a 4th consecutive decline. Matters weren’t helped by some weak growth data in the UK, with monthly GDP contracting by -0.3% in April (vs. -0.1% expected). There was also a clear tariff impact, as the export of goods to the US fell by £2.0bn in April. The weak growth figures meant investors priced in more rate cuts from the Bank of England, and gilts outperformed their counterparts elsewhere, with the 10yr yield down -7.6bps on the day. But bonds still rallied across the continent, with yields on 10yr bunds (-6.1bps), OATs (-4.5ps) and BTPs (-4.1bps) all moving lower.

To the day ahead now, and data releases from the US include the University of Michigan’s preliminary consumer sentiment index for June, and in the Euro Area we’ll get industrial production for April. Central bank speakers include the ECB’s Escriva