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Market drivers and catalysts
Equities: Israel-Iran tensions, tech/airlines down, energy/defense up, Fed and earnings ahead
Volatility: VIX spikes to 20.8, futures elevated, geopolitical risks drive choppiness
Digital assets: Bitcoin above $106K, ETH steady, IBIT/ETHA dip, FOMC in focus
Fixed Income: Yields rose on Friday on oil price spike from Iran-Isreal conflict
Currencies: US dollar sell-off stumbled Friday, yen weak on higher yields, crude prices
Commodities: Crude volatility remains elevated on binary price outcome of MidEast war
Macro events: US June Empire Manufacturing, Bank of Japan meeting (Tue)
Macro data and headlines
Iran and Israel exchanged further strikes overnight, with Israel focusing its attacks on Iran’s missile launching sites and killing another military official, while Iran launched further drones and missiles. Israel has avoided targeting oil fields and crude oil export facilities, but Iran reported an explosion at a natural gas processing plant associated with Iran’s giant South Pars gas field on Saturday. Crude oil prices rose again overnight by more than four dollars per barrel, but had settled back closer to Friday’s close, up less than a dollar for August Brent.
A senior US official said that US President Trump vetoed a plan by Israel to kill Iran’s Supreme Leader, Ayatollah Khamenei.
The University of Michigan's consumer sentiment index for the US increased to 60.5 from 52.2 in May and April, surpassing expectations of 53.5. This marks the first rise in six months, with gains in current conditions and future expectations. Despite this, sentiment remains 20% below its December 2024 level, when confidence temporarily surged post-election.
China’s retail sales grew 6.4% in May, the fastest pace since December 2023, exceeding all expectations, offering a confidence boost to Beijing. However, the strong consumption was boosted by an annual shopping festival and government subsidies highlighting the risk it may may not represent a turnaround in sentiment.
Macro calendar highlights (times in GMT)
1000 – OPEC's Monthly Oil Market Report
1215 – Canada May Housing Starts
1230 – US Jun. Empire Manufacturing
1700 – US Treasury to auction 20-year notes
0230-0330 – Bank of Japan Rate Announcement
0430 – Bank of Japan Governor Ueda press conference
Earnings events
Today: Lennar
Thursday: Accenture, Kroger, Darden Restaurants
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
US: US equities fell sharply Friday as Israel-Iran tensions escalated. The S&P 500 lost 1.13%, Nasdaq -1.3%, and Dow -1.79%, led by declines in tech, financials, and travel stocks (Nvidia -2.1%, Apple -1.4%, Visa, Mastercard -4%). Defense and energy outperformed with Lockheed Martin, RTX, Northrop Grumman, and Exxon gaining as oil surged nearly 7%. Despite Friday’s selloff, the S&P 500 remains up for June and 2025. This week, focus shifts to the Fed meeting, retail sales, and earnings from Accenture and Kroger.
Europe: European markets ended the week at one-month lows. STOXX 50 fell 1.4%, DAX -1.07%, CAC 40 -1.04%, as investors fled to safety amid Middle East conflict. Autos and airlines led declines, while oil, gas, and defense stocks gained (Shell, Eni, Rheinmetall). The escalation in Israel-Iran tensions sent volatility higher and triggered a selloff in risk assets. Energy supply risks and upcoming central bank meetings keep sentiment cautious.
UK: The FTSE 100 lost 0.4% Friday, pulling back from record highs, but remains up 0.1% on the week. Airlines, consumer, and tech stocks fell, while oil, gas, and defense outperformed (BAE Systems +3.3%, BP +2%). The market remains sensitive to geopolitical news and energy price swings. All eyes are on the Bank of England’s rate decision Thursday.
Asia: Asian stocks were subdued, with Japan’s Nikkei +1.2% before the BoJ decision. Hong Kong’s Hang Seng edged up 0.16%, while China’s CSI 300 was flat after mixed economic data. Middle East tensions and looming global central bank meetings weighed on sentiment. South Korea’s KOSPI outperformed (+1.34%), while Australia’s ASX was steady.
Volatility
Volatility spiked Friday as the VIX surged 15.5% to 20.82—its highest in a month—amid the Israel-Iran conflict and a jump in oil prices. VIX1D hit 21.67 before falling back, reflecting short-lived panic. VIX futures remain elevated near 21-22, signaling expectations for choppy trading. For long-term investors, this suggests caution rather than panic, with volatility likely to react to further geopolitical developments and Fed commentary this week.
Digital Assets
Bitcoin stabilized above $106,000 after a volatile weekend, recovering from a 4% dip triggered by Middle East tensions. Ether hovered near $2,600, supported by optimism around spot ETF reviews. Both IBIT and ETHA saw mild outflows Friday, but three weeks of positive inflows suggest institutional investors are buying the dip. Crypto stocks like MARA and RIOT declined, while major tokens traded in narrow ranges as markets awaited the FOMC decision.
Fixed Income
Global bond yields rose Friday and overnight on the spike in crude oil prices from the ongoing Iran-Israel conflict, with the US 10-year treasury benchmark yield at 4.43% this morning, up seven basis points from last Thursday’s pre-conflict close at 4.36%. The German 10-year Bund yield closed Friday up six basis points at 2.54%.
Japanese 10-year government bond yields also rose a few basis points Monday ahead of Tuesday’s Bank of Japan meeting, where the focus is on whether the central bank will consider slowing the taper of bond purchases, as no rate change is expected.
Commodities
Crude spiked again in early trading as Israel and Iran continued attacks on each other, before paring gains after Brent and WTI both fell a few cents short of breaking their respective highs from Friday’s spike at USD 78.50 and USD 77.60. So far, Israel has not been targeting oil fields and crude oil export facilities, highlighting the binary price outcome with an unlikely disruption to flows from Iran or through the Strait of Hormuz sending prices sharply higher, while a solution or no energy impact eventually could send prices lower by 5-10%. OPEC will publish its Monthly Oil Market Report today, with the IEA following suit on Tuesday.
Gold received a classic safe-haven boost on Friday as the conflict between Israel and Iran escalated, while silver and not least platinum—two recent outperformers—succumbed to profit-taking. Gold held above USD 3,400 despite a stronger than expected University of Michigan Sentiment print, which showed the first rise in six months as the risk of rising energy costs strengthens tariff-related inflation worries.
Currencies
The US dollar rose Friday, a day after it had broken lower versus the EUR and in Dollar Index terms, choppy action that clouds the outlook. The key EURUSD psychological level is near 1.1500, which was tested Friday and survived as chart support.
The Japanese yen remains weak on the combination of spiking oil prices, as the country is entirely reliant on oil imports for fuel, while rising bond yields are also yen-negative as yield spreads to Japan widen.
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