Futures Slide, Oil Surges As Iran War Returns, Chip Stocks Tumble As Korea, SK Hynix Crash

US equity futures are lower on a combination of US/Iran escalation (which is feeding inflationary concerns) and a violent crash in South Korean stocks (which saw SK Hynix plunge by 15% overnight, the most on record, and unironically follows its record ADR launch in the US), which has put Semis and tech under renewed pressure. On the former, this drove oil prices higher overnight, but gains have been cut in half. On the latter, there is some anxiety around excessive capex spend (Goldman IG bond sales team warned over the weekend that demand for new hyperscaler supply has collapsed), but also some technical factors. As of 8:15am ET, S&P futs are down 0.4%, reversing their Friday gains which pushed the index just shy of a record; Nasdaq futures dropped 1% as Semis came for sale and Mag7 are mostly lower. Defensives are leading Cyclicals as the AI theme looks to be sold today but Fins / Energy are bid. Bond yields are up 1bp across the bulk of the curve with USD flat. Energy is leading commodity space those gains are materially off their highs with metals lower due to Precious metals; Ags are mostly lower. Today’s macro data is a non-event (June federal budget balance at 2pm ET) as the market awaits inflation / retail sales data as earnings kick off tomorrow. 

In premarket trading, Mag 7 stocks are mixed( Microsoft +0.3%, Alphabet +0.3%, Amazon +0.3%, Apple +0.2%, Meta -0.8%, Nvidia -1.2%, Tesla -0.6%)

• Agenus (AGEN) soars 46% after entering into a securities purchase agreement for a private placement of $85 million in upfront gross proceeds.
• American Express Co. (AXP) inches 1% higher after JPMorgan raised the recommendation on the company to overweight, saying the premium on the stock is warranted given the defensive nature of its revenues.
• Shopify (SHOP) is up 2% after Jefferies raised the stock to buy, saying second-quarter results will likely beat consensus.
• SK Hynix ADRs (SKHY) drop 8% after the stock fell by a record 15% in South Korean trading, underscoring growing investor concerns that its AI-fueled boom has become overstretched.
• TriCo Bancshares (TCBK) rises 7% after First Hawaiian agreed to buy the holding company for Tri Counties Bank. First Hawaiian (FHB) slips 6%.

In other corporate news, TSMC reported quarterly sales rose 36%, meeting high expectations and signaling global demand for AI hardware remains intact. Apple sued OpenAI for trade secret theft, accusing the company of a coordinated campaign to steal information about upcoming products. Stellantis’s shipments climbed 10% in the second quarter fueled by growth in North America, as the maker of Jeep sport utility vehicles and Ram pickup trucks pushes on with a turnaround plan. Elliott is said to have built a large stake in car-insurance software provider CCC Intelligent Solutions, which has been exploring a potential sale. Conmed is said to be exploring options including a potential sale amid takeover interest from private equity firms.

Worries that the artificial-intelligence boom has become overstretched sent chips stocks plunging in Seoul. SK Hynix, which has embodied the retail frenzy for AI and the popularity of leveraged ETFs that have fed wild swings in the stock, fell by the most on record in Seoul. Korea’s Kospi also crashed, and suffered its 7th marketwide circuit breaker for 2026. Nasdaq 100 futures slid 1% as memory stocks such as Micron and Sandisk fell sharply in premarket trading. 

South Korea is increasingly shaping sentiment around the AI trade following the Kospi’s chip-driven outperformance this year. The rally has turned volatile in recent weeks as investors question whether AI hyperscalers’ spending will generate sufficiently strong returns to justify continued investment. Traders also pointed to the risk of a rotation into SK Hynix’s newly listed American depositary receipts, which surged on their debut on Friday. The ADR slid 7.9% in early trading on Monday.

An escalation in violence in the Middle East weighed further on sentiment as the US and Iran exchanged strikes into Monday and issued conflicting claims over whether the Strait of Hormuz was open. The flare-up sent Brent as much as 5% higher before paring gains to trade 3.4% higher at around $78.50 a barrel.

“The sharp selloff in Korean equities from the June peak is raising questions with some investors regarding the sustainability of the AI trade more broadly,” said Daniel Murray at EFG Asset Management. “With Middle East tensions rising again, this too has added to market consternation.”

Beyond this morning’s knee-jerk reaction to Middle East escalation, investors face a packed calendar of major catalysts this week, including key US inflation readings, Warsh’s first testimony as Fed chair, major bank earnings and AI updates from ASML and TSMC. The week ahead is likely to herald a ramp-up in earnings volatility “where crowded trades will get audited,” notes Mark Taylor, director of sales trading at Panmure Liberum, who expects reactions to results to be “simple and asymmetric: beats are the baseline; misses are punished without mercy.” 

With tech set to dominate this earnings round, Taylor underlines the risk of disappointment “when extreme positioning, leverage and elevated expectations collide with even the faintest hints that AI-driven memory pricing and capex may not compound at the same pace indefinitely.” Investors need to see that AI demand is broadening beyond a narrow customer base, he adds.

In politics, the death of Senate Judiciary Committee member Lindsey Graham leaves the panel without one of Trump’s staunchest allies as senators weigh Todd Blanche’s attorney general nomination. A California business tax credit cap aimed at saving $4 billion threatens to drive away film and television production, according to a letter signed by a bipartisan group of lawmakers.

European stocks are muted with telecommunications and energy shares the biggest outperformers, while the tech and construction sectors lag. Stoxx 600 little changed at 641.30 with 255 members down, 332 up, and 13 little changed. Here are the biggest movers Monday:

• UK homebuilders rise after The Times reported that Andy Burnham, the UK’s presumptive next prime minister, is to be presented with plans to revive the “Help to Buy” program, a potential boost to sales and margins for the sector, according to JPMorgan analysts
• Akzo Nobel shares rise as much as 4.8% after the chemicals firm rejected Nippon Paint’s a €7.5 billion offer for its decorative paints business and said it would continue to pursue an agreed merger with Axalta Coating Systems
• Gjensidige shares jump as much as 4.7%, the most since September, after the Norwegian insurance company reported net income for the second quarter that beat the average analyst estimate
• Fraport gains as much as 3% after BNP Paribas upgraded the airport services company to outperform from neutral, citing improving cash flow outlook as the company’s decade-long investment cycle comes to an end
• Pagegroup shares rise as much as 10% after the recruitment company reported much better figures than feared during the second quarter, as analysts flagged improving trends across its markets
• DocMorris shares gain as much as 12%, the most since April 16, after the Swiss pharma retailer is upgraded to buy from hold at Deutsche Bank, with analysts noting fading funding risks and upside to earnings
• Plus500 shares fall as much as 15%, the most in six years, as the trading platform operator delivers an outlook that met, but did not surpass, current market forecasts
• Kongsberg shares fall as much as 8.5% after the firm reported Ebitda for the second quarter that Morgan Stanley called disappointing with few positive surprises and signifying a challenge to current valuation levels
• Oxford Nanopore shares plunge as much as 20%, the most on record, after the British DNA-sequencing company reported weaker-than-expected first-half revenue

Asian stocks fell to the lowest in a month on renewed tensions in the Middle East and as SK Hynix shares in Seoul tumbled the most on record. The MSCI Asia Pacific Index dropped as much as 2.2%. SK Hynix sank 15%, while Samsung Electronics and Kioxia Holdings also declined. Korea’s Kospi index slumped 9%, triggering a market-wide trading suspension. “The selloff in Korea is a function of crowded positioning in memory stocks, especially in light of the renewed Middle East tensions and post the euphoria of SK Hynix ADR listing, said Vey-Sern Ling, managing director at Union Bancaire Privee. “Near-term rotation into valuation-depressed sectors like China tech could continue.”  SK Hynix crashed the most on record in Seoul after its US-listed shares surged 13% on Friday. Traders attributed the selloff to profit-taking and investors shifting into the American depositary receipts. Chinese AI-related stocks also plunged amid concerns over rich valuations.

Taiwanese stocks outperformed the broader Asian market as Taiwan Semiconductor Manufacturing Co. reported quarterly sales that matched analyst estimates. Investors are now shifting their focus to TSMC’s full earnings report on Thursday. Jakarta’s benchmark index gained 1.9%, the most in more than a week, after S&P Global Ratings affirmed Indonesia’s investment-grade score and stable outlook. In other moves, Nippon Paint Holdings fell 2.1% in Tokyo after it made an offer for Akzo Nobel NV’s decorative paints business in the past month. CATL’s shares in Shenzhen climbed 3% as Wall Street banks urged investors to accumulate shares after the recent slide.

In Fx, the dollar barely budged. The yen slumped back below 162 after the GPIF said it does not plan to reallocate assets. 

In rates, treasuries are slightly cheaper across the curve. Bonds in Europe and Asia were the hardest hit, with the yield on two-year UK gilts up six basis points to 4.28%. The rate on 10-year Treasuries rose one basis point as traders added to wagers that the Federal Reserve will raise interest rates as soon as September, after a renewed push higher in oil prices as the US and Iran dispute whether the Strait of Hormuz is open, with the US carrying out another wave of strikes against Iran. Two-year Treasury yields touch highest since early 2025. Monday’s US session has few scheduled events. US yields cheaper by 1bp-2bp across a marginally steeper curve, the 10-year around 4.575% with bunds and gilts lagging by 1bp and 3bp in the sector; all are following WTI crude oil prices higher, which are up around 3.5%.  IG dollar issuance slate includes three deals so far. No Treasury coupon supply expected until the 20-year bond reopening on July 22. 

In commodities, brent trades around $78/barrel to add to last week’s rise, though had come close to $80 earlier in the session and has been paring its gain. Iran said its memorandum of understanding with the US is in “crisis” and the two sides disagree on whether the Strait of Hormuz is open. Gold is dropping to move back below $4,100/oz, and Bitcoin is sinking too.

The US economic data calendar includes June federal budget balance at 2pm; CPI and PPI reports are ahead this week. Fed calendar includes Waller at 12:30pm; Chairman Warsh is scheduled to testify on its Semi-Annual Monetary Policy Report before the House Financial Services and Senate Banking committees over next two days

Market Wrap

Top Overnight News

• The US and Iran exchanged fresh strikes while issuing conflicting declarations over whether the Strait of Hormuz is open to shipping. Oil up 3% BBG
• Over the past several weeks, the investment-grade corporate bond market has struggled to absorb a combined $75 billion of bond issuance from NVDA, SPCX, and AMZN. That marks a shift from earlier in the year, when investors were generally happy to hand money to so-called AI hyperscalers by any possible means. WSJ
• Warsh’s first big call will be whether or not to undo last year’s cuts. A steadier economy and stubborn inflation have put a rate increase in play. The new chairman, who testifies this week, hasn’t tipped his hand. WSJ
• Three prominent artificial intelligence developers released new models over the past week. They all promise to be more advanced, but their biggest immediate selling point may not be what they can do but how little they charge to do it. BBG
• China’s crude imports look poised to recover from a months-long slump as the country relaxes fuel export curbs, raises run rates and snaps up prompt Middle East supplies, with analysts and traders forecasting a return to strategic stockpiling later this year. BBG
• Taiwan Semiconductor Manufacturing Co reported a 67.9% year-on-year rise in its June sales on Monday, ahead of its second-quarter earnings release later this week. CNBC
• The yen weakened after Reuters reported that Japan has no plans to overhaul the GPIF’s asset allocation. Chief Cabinet Secretary Minoru Kihara said the GPIF routinely undertakes an appropriate review of its portfolio and will make amendments if required. BBG
• Meta plans to spend an additional $40 billion on its data center campus in Louisiana, bringing total costs to above $250 billion. BBG
• Companies from Silicon Valley to Europe are turning to Chinese AI models as they try to cut the cost of using the technology and reduce their dependence on US frontier labs. FT
• The distribution of investor views surrounding the path of monetary policy in coming months is wide. Goldman economists’ baseline forecast is that the FOMC will leave the policy rate unchanged this year but they assign a 25% probability to a scenario where the Fed hikes. Market pricing is more hawkish, reflecting a base case of nearly 50 bp of hikes through mid-2027, with uncertainty around that outlook. Option pricing signals greater than a 50% likelihood of hikes, but also substantial probabilities to scenarios where the Fed cuts or remains on hold. Conversations with clients reflect a similarly wide range of expectations. Investors also express an unusually wide distribution of views regarding the implications of any given Fed policy path for equities. Goldman

Iran War

• Explosions were heard around Iran’s Bandar Abbas and Qeshm Island on Monday afternoon, Mehr News reported, while there is also the possibility of clashes in the Persian Gulf and the Strait of Hormuz.
• Reported fire at Kharg Island appears to be a result of routine flaring, according to Nour News.
• Iran’s Foreign Ministry spokesperson said the US violated all clauses of the MoU in less than a month and stated that Iran will not execute commitments in the MoU as long as the US is not fulfilling its commitments. He added that the MoU is in “crisis” phase. Muscat talks with Oman were solely focused on the Strait of Hormuz. On the recent strikes, none of the US bases in any country in the region have been removed from the target list and that the defensive strikes of Iran are solely against the bases, facilities and positions used by the US to attack Iran, including their logistical and support facilities. In terms of further talks, mediators are still continuing their efforts to mediate between Iran and the US in recent days and Iran is in contact with mediators.
• Iran’s IRGC said only way to open the Strait of Hormuz is to end US military interventions and respect the sovereignty of the countries bordering it.
• There is no clear timetable for Israel’s withdrawal from the experimental areas in southern Lebanon amid a policy of consolidation and non-compliance with the framework agreement, Al Araby reported citing sources.
• US President Trump threatened that the US military would “completely decimate and destroy all areas” of Iran if its leaders attempted or carried out an assassination on him.
• US forces said they struck 140 Iranian military targets on Saturday and were also reported to have carried out another round of strikes on Sunday, while Iran targeted at least five US allies across the Middle East in drone and missile assaults early on Sunday, as well as announced that the Strait of Hormuz would be closed until further notice. However, the Joint Maritime Information Centre said the path along the Omani coastline is still available for transit, while it was separately reported that a Chinese tanker transited through Hormuz via an Iran-designated route.
• US official said around 20 commercial vessels transited through the Strait of Hormuz in coordination with the US military over the last 24 hours, in addition to several vessels without US coordination, according to Axios.
• US military announced on Sunday evening that it began a new wave of strikes against Iran to continue degrading its ability to attack civilian mariners and commercial ships transiting the Strait of Hormuz, while Iranian TV reported explosions in Qeshm, Jask, Bandar Abbas and Sirik.
• US Central Command denied a claim by Iran that three US service members were killed in Kuwait, while it stated that there have been no reports of US casualties in the region, with all personnel accounted for and safe. CENTCOM later commented that it completed a new wave of offensive strikes on Iran, hitting dozens of targets at multiple locations to degrade Iran’s ability to continue attacking international shipping flowing through the Strait of Hormuz.
• Kuwait’s military said three border posts were attacked and that a drilling platform owned by the Kuwait Oil Company was struck in a drone attack, while it was separately reported that US intelligence sources noted observations that Iran was preparing to carry out a massive attack on the UAE and Kuwait.
• Iran said it caused heavy damage to Jordan’s Prince Hassan Airbase, as well as claimed it targeted the Al-Udeid Airbase in Qatar and a US Navy logistics base in Dukm, Oman. Furthermore, Iran also targeted Kuwait and the US base in Bahrain.
• Iranian Supreme Leader Mojtaba Khamenei issued a written statement, vowing to avenge the death of his father and said that it was the demand of the nation.
• Iran’s Foreign Ministry condemned US attacks on Iranian infrastructure, which it said were a violation of the ceasefire deal and the UN Charter, while it warned Gulf states over the use of territory for US attacks.
• Iran’s Deputy Foreign Minister Gharibabadi said no action against Iran should go unanswered and called for a pre-set response to any attempt against Iran, its military, Supreme Leader and officials.
• Iranian lawmaker and member of the Iranian Parliament’s National Security and Foreign Policy Committee, Kashkavi, said Iran prefers to manage the Strait of Hormuz through cooperation with regional states, particularly Oman, and stated that the clear official position is that future management of the Strait will be arranged by Iran.
• Iran denied social media reports that claimed the Bushehr nuclear power plant had been attacked, while its nuclear agency said all units continue to operate normally and that the plant is in a safe and stable condition.
• Iraq’s PM is to visit Washington on Monday, while oil and gas deals are expected to be announced, although the Islamic Resistance in Iraq warned the government against US economic deals and demanded a US troop withdrawal.
• Yemen’s Foreign Ministry reiterated that Yemen would continue its support of Iran in the face of ongoing US and Israeli aggression.
• Israeli artillery conducted further shelling in southern Lebanon, according to Lebanon’s National News Agency.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were pressured with the major regional indices all in the red following a fresh exchange of strikes between the US and Iran, which underpinned oil prices and yields, while Iran also declared the Strait of Hormuz would be closed until further notice. ASX 200 was dragged lower by underperformance in the tech, utilities, mining, materials and resources sectors, but with the downside cushioned by resilience in the top-weighted financial industry. Nikkei 225 pulled back from resistance around the 69,000 level with Japanese exporters pressured by higher oil prices and concerns of renewed shipping disruptions. KOSPI was pressured by chip-related selling amid heavy losses in the likes of Samsung Electronics and SK Hynix, despite the latter’s strong debut last Friday on the Nasdaq. Hang Seng and Shanghai Comp conformed to the negative mood, albeit with the downside limited in Hong Kong as participants also digested preliminary H1 earnings updates and with China raising Southbound Bond Connect quota to USD 118bln.

Top Asian News

• China raised the Southbound Bond Connect quota to USD 118bln, while the new quota represents a 60% increase for Hong Kong debt access.
• China’s nationwide electricity load hit a record high of 1.518bln kilowatts on Friday.
• China is cracking down on top ratings for corporate bonds with regulators pressuring agencies to limit AAA designations for high-interest borrowers, according to FT.
• Chinese AI lab Zhipu’s founder said frontier AI should remain broadly accessible instead of being controlled by select individuals.
• Japanese Chief Cabinet Secretary Kihara said GPIF to tweak its basic portfolio as needed.
• Japan entered the reusable rocket race with its first experimental rocket taking off and returning in a limited test flight by JAXA.
• South Korea July 1st-10th Exports rose 53.9% Y/Y (prev. +85.9%), Imports rose 17.4% Y/Y (prev. +35.6%), Trade Balance is at a provisional surplus of USD 6.36bln.

European bourses (STOXX 600 -0.1%) start the week on the back foot but off worst levels, with price action being primarily driven by energy prices and the re-escalation of US-Iran tensions. European sectors have improved at the open, now printing a mixed picture. Telecoms (+1.9%) top the sector pile, followed by Energy (+1.2%) and Media (+0.6%). To the downside are Travel & Leisure (-0.4%), Construction (-0.8%) and Tech (-0.7%).

Top European News

• BoE is said to be hit by internal divisions over shake-up, with critics stating that a failure to give clear signals is ‘confusing’ and risks wrongfooting the bond markets, according to FT.
• UK’s Burnham reportedly explores holding an expanded autumn Budget, with the incoming PM considering combining the fiscal statement with a spending review to set out his political strategy, according to FT.
• UK Chancellor Reeves is to focus on AI opportunities in her speech to the City on Tuesday, which is likely to be her last City of London event and final opportunity to defend her legacy.
• Spain approved a USD 8bln housing plan that would triple government spending in public housing over four years.

FX

• G10s are mixed against the Buck. Kiwi continues to benefit from rate repricing; JPY underperforms amid the familiar terms of trade/differentials factors.
• USD fails to benefit from the lift in energy benchmarks, following constructive Iranian Foreign Ministry rhetoric this morning: “defensive strikes of the Islamic Republic of Iran are solely against the bases” and “Iran is in contact with mediators”. This pulled both the Buck and Energy off session highs. In addition to the focus on geopolitics, the Greenback positions into a number of key risk events this week including CPI and Warsh’s testimony. Price action since the emergence of London participants has been bearish, with DXY falling from an overnight 101.22 peak to a session low of 100.79.
• JPY underperforms amid the factors mentioned above, alongside the view that Finance Minister Katayama’s GPIF remarks last week were another episode of attempted verbal intervention. Source reports this morning noted Japan has no immediate plan to change target asset allocations of its state pension funds but could work within existing allowable ranges to direct more investment to domestic assets. A report which pressured the currency and saw it rise to a 162.35 peak as the source report further reduces the credibility of Katayama’s remarks (see 08:09 BST analysis).
• Kiwi is the best G10 performer as markets add to RBNZ tightening bets with two 25bp hikes now fully priced – a handful of bps more than the close on Friday. AUD/NZD trundled lower since the Sunday re-open, marking a session trough just below 1.20.

Fixed Income

• Fixed income benchmarks initially fell at the open, as energy prices rose and a re-escalation of US-Iran tensions, but have come off worst levels at the start of European cash trade. Over the weekend, US forces struck 140 Iranian military targets on Saturday and took further action on Sunday, while Iran attacked US bases in the Gulf and announced that the Strait of Hormuz is closed.
• USTs (-1 tick) rotate in a 108-26+ to 109-01 range, with yields falling a touch from 4.60%. On the Fed speaker front, Fed’s Waller is slated to speak later today, while a flurry of speakers are expected throughout the week. In terms of market pricing, the October meeting is the first fully-priced hike by the Fed, with a further hike fully priced by Apr’27.
• Bunds (-5 ticks) fell to a trough of 125.20 before coming off their lows, currently trading at session highs of 125.51. The data front from the EZ is quiet, with final inflation figures across the euro area slated for the week. On the supply front, the EU is to sell 3-, 7-, and 15-year Bonds. The sale should go fine, with the 3-year to receive decent demand.
• Gilts (-18 ticks) underperform. There has been plenty of political news over the weekend: 1) Burnham is considering a big budget in November, 2) a review of the Help to Buy scheme is on the table from Burnham, and 3) Chancellor Reeves to focus on AI opportunities at her Mansion House speech. The November budget will be highly-watched, as usual, with allies and experts reportedly pushing Burnham, who is set to become PM on July 20th, to consider a land tax, greater public control of utilities and a more ambitious devolution strategy. Some of the underperformance can be explained by the strength in the crude complex, given the UK’s high reliance on external energy.

Commodities

• Crude benchmarks jumped c. 3.7% overnight (vs current +2.3%) amidst the latest bout of US-Iran strikes, and after the Iranian’s announce that the Strait of Hormuz is shut until further notice. Traffic through the Strait has slipped to multi-week lows, with only 6 vessels passing on Sunday (lowest in five-weeks).
• As the European morning got underway, price action was fairly rangebound; however, some volatility was seen following comments by the Iranian Foreign Minister. He began the presser fairly hawkish, where he stated that Iran would not fulfil the MoU as long as the US doesn’t. Some modest upside was seen in benchmarks, but this was soon reversed after he stated that strikes against regional neighbours are “solely” against US bases. He also added that they are in contact with mediators.
• It is interesting that the FM has chosen to say that Iran is “solely” acting against US bases, rather than also mentioning energy facilities. It indicates, at least for now, that the country is attempting to avoid a wider escalation. However, overnight, the Kuwait Oil Company said that its drilling platform was struck. Brent Aug’26 trades firmer by c. 2.3% and holds towards the lower end of a USD 77.72-79.80/bbl range.
• Spot gold (-1.3%) extends lower this morning amidst the reemergence of inflationary woes, as energy prices grind higher this morning. Currently holding within a USD 4,044-4,075/oz range. Elsewhere, base metals are entirely in the red given the negative risk tone. 3M LME Copper (-0.3%) trades within a USD 13,364-13,480/t range.
• OPEC MOMR is expected at 13:00BST/08:00EDT.
• Kuwait has set its August OSP for extra-light crude to Asia at USD 5/bbl discount to the Oman/Dubai average.
• ADNOC sets the August OSP for Murban crude at USD 80.01/bbl.
• Iranian Customs has issued a directive to lift the ban on the export of chemical, polymer and petrochemical products.

Trade/Tariffs

• EU is developing a “solidarity instrument” to support companies diversifying critical supplies away from China and cushion the impact of any Chinese retaliation in the event of a trade war.

Geopolitics: Ukraine

• Ukrainian military announced a drone attack that hit 15 Russian ships in the Sea of Azov, including 7 oil tankers. Additionally, the Ukraine Security Service said it struck a Russian oil depot in the Stavropol region, as well as storage tanks at Kavkaz port.
• Ukraine’s military said it hit an oil refinery in Russia’s Samara region, while Russia also said that Ukraine struck a tanker in the Sea of Azov.
• Ukrainian President Zelensky ousted Ukraine’s premier Svyrydenko as part of a shift in political strategy and is mulling naming Naftogaz CEO Koretskyi or former PM Shmyhai for the role.
• EU failed to agree on the 21st round of Russian sanctions after negotiations on Sunday.
• Slovakia’s President Pellegrini said Slovakia will not be involved in the new EUR 70bln aid package for Ukraine, nor will it supply weapons to Ukraine or fund further rearmament.

US Event Calendar

• 2:00 pm: United States Jun Federal Budget Balance, est. -128.25b, prior -292.65b
• 5:25 am: United States Fed’s Bowman Speaks on Financial Regulation
• 12:30 pm: United States Fed’s Waller Speaks at NYABE

DB’s Jim Reid 

As well as two epic World Cup semi-finals before that, and the start of the Open golf it’s a packed week ahead in markets. The headline events are tomorrow’s US CPI and Wednesday’s US PPI, alongside Fed Chair Warsh’s first Humphrey–Hawkins testimony before the House Financial Services Committee (tomorrow) and the Senate Banking Committee (Wednesday). Elsewhere, key data includes China’s Q2 GDP and their monthly data dump (Wednesday) and the UK’s May monthly GDP (Thursday) as well as the announcement of a new leader of the ruling UK Labour Party as a special conference on Friday. And just to keep everyone busy, Q2 US earnings season kicks off tomorrow with results from five major US banks. Q1 marked the strongest non-recessionary rebound since the late 1990s, so the bar is high. ASML (Wednesday) and TSMC (Thursday) should also provide an early read on global tech trends.

Since Friday night, the US–Iran conflict has intensified sharply, with Washington launching multiple rounds of strikes targeting Iranian air defences, radar systems and missile and drone capabilities, while Tehran has responded with attacks across the region and against shipping. The exchange has increasingly centred on the Strait of Hormuz, where Iran has claimed the waterway is effectively closed and warned vessels against transiting, even as US officials insist it remains open and are actively escorting commercial traffic. Reports of damage to vessels, intercepted missiles and drones, and strikes on military and energy-linked sites across the Gulf underscore the widening scope of the conflict. Oil markets have reacted, with Brent (+4.12%) climbing above $79 per barrel and US Treasuries back up a couple of basis points across the board. S&P (-0.56%), Nasdaq (-1.34%) and Stoxx (-0.95%) futures are all lower.

In addition, the Asia tech trade is seeing another slump overnight with the KOSPI (-7.96%) again the weakest performer, amid renewed semiconductor losses. The Nikkei (-2.31%) is also sharply lower. Elsewhere, the Hang Seng (-0.12%) is posting more modest declines, while mainland Chinese equities are under greater pressure, with the CSI 300 (-1.34%) and Shanghai Composite (-1.54%) both trading significantly lower. So a challenging start to the week.

Looking forward now, let’s run through the key details of the week ahead we previewed at the top. Front and centre is tomorrow’s US CPI report. Our economists expect lower gas prices to pull headline CPI down by -0.16% (vs. +0.47% in May), with core at +0.23% (vs. +0.21% previously). On a year-over-year basis, headline inflation is projected to fall from 4.25% to 3.81%, while core eases only marginally by 2bps to 2.83%.

Wednesday’s PPI will help complete the picture for core PCE. Our economists’ forecast is for a +0.23% increase (vs. +0.32% last month), which would see the year-over-year rate decline by 3bps to 3.38%. Within the details, the price index for portfolio management and investment advice will be worth watching, particularly given the boost from May’s equity rally.

After a relatively quiet spell for Fed speakers, this week brings a wave of communication ahead of the blackout period starting at the end of the week. Governor Waller begins today with a speech at NYABE. Chair Warsh follows with his testimony on Tuesday and Wednesday, while additional commentary comes after the CPI release (Governor Cook on Wednesday, and Vice Chair Jefferson, Dallas Fed’s Logan, and Kansas City Fed’s Schmid on Friday).

This week effectively represents the final window for policymakers to signal their thinking ahead of the July FOMC meeting. We expect Warsh to broadly stick to recent messaging and avoid firm guidance on near-term policy moves. In contrast, Waller has historically been more explicit about their reaction function, so today’s speech will be closely scrutinised for clues on their preferred policy path—even though it arrives before the CPI data.

Turning to the rest of the data calendar, Thursday’s June US retail sales and Friday’s industrial production will feed into estimates for Q2 real GDP growth. The preliminary University of Michigan survey (52.0 expected at DB vs. 49.5) on Friday will also be in focus, particularly inflation expectations, which have started to moderate from a high level after recent energy-driven increases.

On earnings, tomorrow features JPMorgan, Bank of America, Goldman Sachs, Wells Fargo and Citigroup. Wednesday brings Morgan Stanley alongside ASML, Johnson & Johnson and BlackRock, offering a useful cross-sector snapshot. Thursday is especially busy, with TSMC, Netflix, General Electric and UnitedHealth reporting across tech, industrials and healthcare. By Friday, attention shifts to European names including Volvo, Sandvik and Saab, rounding out the global picture.

Staying with the global theme, central bank decisions from the Bank of Canada (Wednesday, no change expected) and the Bank of Korea (Thursday, DB forecast a +25bp hike) will also be in focus. In China, growth is expected to slow to 4.4% YoY in Q2 (from 5% in Q1), with June activity data released alongside. More detail is available in our Chinese economists’ full week-ahead note here. Finally, the UK reports May monthly GDP on Thursday, the day before Andy Burnham is expected to be confirmed as Labour Party leader, ahead of him officially taking the PM reins a week today and tapping into the England World Cup winning celebrations. Oh wait this must be another major hallucination.

Recapping last week now and the main news was the re-escalation between the US and Iran, which led to a decent jump in oil prices as investors priced in more disruption around the Strait of Hormuz. Indeed, Brent crude was up +5.39% last week (-0.38% Friday) to $76.01/bbl. And even though it still left oil prices well beneath their peak earlier in the year, it still revived fears about more persistent inflation.  

That oil price spike hit European assets in particular, given the continent’s greater exposure to an energy shock. So sovereign bond yields saw a decent jump, with those on 10yr bunds up +13bps (-1.7bps Friday) to 3.06%. Moreover, investors also priced in a more hawkish ECB, with the amount of further hikes priced by December up +12.9bps on the week to 34bps. For equities, there was also a decent hit, with the STOXX 600 down -1.79% (+0.04% Friday), marking its biggest weekly decline since April.   

Over in the US, markets put in a relatively stronger performance, with equities supported by a stabilisation in chip stocks. That saw the Philly semiconductor index recover +2.70% (+0.06% Friday), with the S&P 500 ultimately up +1.23% (+0.42% Friday). Meanwhile, US Treasury yields also saw a more muted rise relative to Europe, with the 10yr yield only up +7.8bps (+1.0bps Friday) to 4.56%.   

Otherwise, there weren’t too many headlines from other asset classes. In FX, the dollar index was marginally unchanged, with a +0.09% rise. And in US credit the moves were also fairly muted, with US IG (+1.9bps) and HY (-4.3bps) spreads seeing small moves. However, there were slightly bigger moves in European credit, where Euro IG (-1.9bps) and HY spreads (-12bps) both tightened.