Market Rebounds on Eased Geopolitical Fears, Oil Pulls Back: Monday Wrap-Up

Economic

Summary:

Global markets showed signs of recovery on Monday as investors recalibrated their positions following initial panic over the Israel-Iran conflict. Oil prices pulled back after surging, stocks rose across key indices...

Markets Stabilize Amid Hopes of Contained Conflict

After a volatile weekend marked by escalating tensions between Israel and Iran, investors appear to be reassessing the immediate risks of a broader regional conflict. Global markets began the week with cautious optimism. S&P 500 futures climbed 0.5%, and European and Asian equities followed suit, signaling a rebound from Friday’s selloff. That day, geopolitical concerns triggered a flight to safety and drove oil prices higher, with Brent crude spiking as much as 5.5%.

On Monday, however, calmer sentiment prevailed. Brent crude erased part of its gains, dipping 0.4% to $73.94 per barrel, while gold fell 0.5% from Friday’s record peak of $3,414.85 an ounce as risk-off bets unwound.

Risk Assets Rise as Traders Buy the Dip

Investor behavior reflected a broader confidence that the conflict, though severe, would likely remain geographically limited. Fund managers like Enguerrand Artaz from La Financière de l’Echiquier characterized market positioning as “buy-the-dip,” especially with strong momentum still in place. The Nasdaq 100 futures rose 0.6%, while the Dow Jones futures gained 0.4%. The MSCI Asia Pacific and Emerging Markets indices each rose 0.7%, suggesting a broad-based recovery.

Bond markets, however, responded to renewed inflation concerns as oil volatility lingers. US 10-year Treasury yields rose to 4.44%, up five basis points, reflecting unease that any sustained oil price increase could reaccelerate inflation and delay monetary easing. Germany and the UK’s 10-year yields also nudged higher to 2.57% and 4.57%, respectively.

Currencies and Crypto Follow Risk Sentiment

Currency markets reflected shifting investor sentiment. The US dollar retreated modestly, with the Bloomberg Dollar Spot Index falling 0.1%. The euro rose to $1.1578, while the yen weakened to 144.29 per dollar, signaling reduced demand for safe-haven assets. Meanwhile, cryptocurrencies gained sharply. Bitcoin surged 2.2% to $107,019.01, and Ethereum rallied 4.9% to $2,626.14, extending their year-to-date gains.

Looking Ahead: Central Bank Decisions and G7 Summit

Attention is now shifting to upcoming monetary policy announcements from the Federal Reserve and the Bank of Japan later this week. While no immediate rate changes are expected, investors will closely watch forward guidance for clues about rate cut timing, especially as inflationary risks from geopolitical tensions remain in play.

Additionally, the G7 summit will bring global leaders together amid fragile geopolitical and economic conditions, potentially shaping near-term market sentiment.

Monday’s recovery in global markets appears to be a temporary relief rally rather than a return to pre-crisis momentum. While investors are hopeful that Israel-Iran hostilities remain contained, any signs of escalation or knock-on effects in energy markets could quickly revive volatility. For now, markets are balancing optimism with vigilance as geopolitical developments, central bank signals, and inflation risks converge.

Source: Bloomberg

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Economic

Mounting Fiscal Pressures Challenge Past Pledges

When Chancellor Rachel Reeves introduced £40 billion in tax rises last fall, alongside a £70 billion boost in public spending, she insisted the increases were a singular event. However, the shifting economic and fiscal landscape has left her with limited room to maneuver. The Treasury’s modest £9.9 billion of fiscal headroom is now under threat from slower-than-expected growth, weaker tax receipts, and rising debt interest payments — trends that could undermine the UK’s fiscal stability by the time of the next budget review.

Economists at ING warn that even a modest downgrade of the UK’s 2026 growth forecast — from 1.9% to 1.5% — could halve this headroom. A sharper revision could wipe it out entirely. With Reeves holding firm to her fiscal rule that day-to-day spending must be funded by taxes, not borrowing, her options narrow to either spending cuts or further tax increases.

Growth Downgrades and Tariff Fallout Worsen the Outlook

The fragility of the UK’s economic recovery was exposed with April’s GDP contraction of 0.3%, largely attributed to the dual drag of trade tariffs and last year’s tax hikes. Economists now cast doubt on the Office for Budget Responsibility’s (OBR) growth projections, noting that their optimism could be misplaced. Paul Johnson from the Institute for Fiscal Studies (IFS) warned that even small forecast downgrades could trigger fresh tax rises, as current plans are already balancing on a knife’s edge.

Reeves has committed to significant increases in public service spending — notably in health and defense — and already reversed unpopular proposals like cuts to pensioners’ winter fuel payments. This leaves little appetite or political space for spending cuts. Nor is borrowing a viable escape, given her self-imposed constraints. The result is a fiscal box that points decisively toward higher taxation.

Breaking Promises or Finding Alternatives?

Tax hikes would conflict with Labour’s 2024 manifesto pledges not to raise income tax, national insurance, or VAT. Prime Minister Keir Starmer is reportedly reluctant to breach these commitments, fearing accusations of broken promises. Still, with few alternatives, the Chancellor may need to take politically difficult steps.

According to Eurasia Group’s Mujtaba Rahman, Reeves may explore smaller, more discreet revenue-raising measures. These could include extending the freeze on income tax thresholds until 2030, reducing pension tax relief for high earners, imposing a £3 billion levy on the gambling industry, and revising council tax bands, which are still based on outdated 1991 property valuations. While these moves may be more palatable than direct tax increases, they still carry economic and political risks.

Chancellor Reeves is confronted with the paradox of fiscal responsibility in a slowing economy. Her political capital rests on balancing spending ambitions with revenue constraints, yet the economic tide is turning against her. Unless growth rebounds unexpectedly or the OBR maintains its current forecasts, further tax measures — whether direct or disguised — seem increasingly unavoidable. As the Autumn Budget approaches, Reeves must choose between political credibility and fiscal credibility, with no easy path forward.

Source: CNBC

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Glendon

Commodity

Hostilities between Israel and Iran rumbled into a fourth day with little sign of an end to the fighting. Iran fired several waves of drones and missiles over the last 24 hours, while Israel continued hitting the Islamic Republic’s capital, Tehran, killing another senior military official. Since Friday, 224 people have been killed in Iran, according to the government, which said most of the casualties were civilians. Iranian attacks have killed 23 people in Israel and injured more than 400.

US President Donald Trump raised the possibility of an agreement to end the conflict, but said the two sides may need to “fight it out” before they’re ready for a deal. Israel has signaled it will not let up in its campaign to destroy Tehran’s nuclear capabilities.

Meanwhile, oil markets braced for further fighting that could disrupt supply from a region that produces about a third of the world’s crude. Israel launched an attack on Iran’s South Pars gas field, forcing the halt of a production platform. After surging Friday, Brent jumped as much as 5.5% at the open on Monday before paring gains to trade around $75 a barrel, while West Texas Intermediate was near $74.

China’s shoppers appear unperturbed by the tariff rollercoaster. Retail sales grew 6.4% last month, the fastest pace since December 2023 and exceeding all estimates, according to official data. Still, it may not represent a long-term turnaround in the country’s consumption slump. Retail sales may have been boosted by online retailer JD.com’s 618 annual shopping festival beginning around mid-May this year instead of the end of the month last year.

Just as world leaders meet at the G-7 summit in Canada, Chinese President Xi Jinping is heading to Kazakhstan for talks with Central Asian leaders. Xi is scheduled to have face-to-face talks with Kazakh President Kassym-Jomart Tokayev in what is only the Chinese president’s third trip abroad this year. A key objective for Xi will be to help prepare China's economy against a potential wider rift with the US.

The economic uncertainty fueled by Trump’s trade tariffs has weighted on Singapore’s property market. Only 311 new private homes were sold last month, the fewest in five months. Real estate firms have grown more cautious as the outlook for the Southeast Asian financial hub has dimmed. Developers launched no major projects for sale in May — a pause that further weighed on sales figures.

The man suspected of killing a Democratic state lawmaker and her husband in Minnesota has been caught. Vance Boelter was arrested on Sunday evening after a manhunt that lasted more than 24 hours. The FBI had been offering a $50,000 reward for information leading to Boelter’s arrest. Melissa Hortman, the Democratic leader in the state House, and her husband, Mark, were fatally shot Saturday at their house in Minneapolis.

Taiwan’s Starlux Airlines is closing in on a $4 billion deal for almost a dozen Airbus A350-1000 widebody jets, according to people familiar with the matter. The purchase would cement the airline’s long-haul expansion plans as it eyes adding flights to Europe and the US east coast. The airline had planned to expand capacity by as much as 50% this year, but that is more likely to be closer to 20%-to-30%, its CEO said in a recent interview.

The head of JPMorgan Chase & Co.’s European business is relocating to New York while continuing to run the lender’s Europe, Middle East and Africa business. Filippo Gori will continue to spend at least half his time in London, a person familiar with the matter said. His relocation will enable him to act as an international voice at the lender’s New York headquarters.

China should slash the number of movies it produces each year in half to allow the industry to thrive long term, according to one of the country’s top producers. Wang Changtian, president of Beijing Enlight Media, said China produces too many movies, which prevents them from being competitive. His remarks come after his studio released Ne Zha 2, which took in more than $2 billion in ticket sales globally, making it the top grossing film in the world this year.

The Trump administration is tapping tent companies, private prison operators and disaster-relief providers to build a massive expansion of immigration detention space. US Immigration and Customs Enforcement last month identified 41 companies that can bid for some of the $45 billion earmarked for the administration’s detention rollout.

The move comes as ICE facilities across the country are at or over capacity because the administration has dramatically increased immigration arrests in the nation’s interior. To meet a 3,000 arrest per day quota set by White House Deputy Chief of Staff Stephen Miller, immigration officials are targeting groups that they haven’t typically pursued, including high school students, farmworkers and people attending court hearings. The aggressive ramp-up has led to nationwide protests against ICE.

Source: Bloomberg Europe

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Daniel Carter

Political

Middle East Situation

Trails of Iranian ballistic missiles light up the night sky as seen from Gaza City during renewed missile strikes launched by Iran in retaliation against Israel on June 15, 2025.

Tehran will "pay the price" for its fresh missile onslaught against Israel, the Jewish state's defense minister warned Monday, as markets braced for a fourth day of ramped-up conflict between the regional powers.

Fire exchanges have continued since Israel's Friday attack against Iran, with Iranian media reporting Tehran's latest strikes hit Tel Aviv, Jerusalem and Haifa, home to a major refinery. CNBC has reached out to operator Bazan for comment on the state of operations at the Haifa plant, amid reports of damage to Israel's energy infrastructure.

Iran's Revolutionary Guard said overnight it deployed "innovative methods" that "disrupted the enemy's multi-layered defense systems, to the point that the Zionist air defense systems engaged in targeting each other," according to a statement obtained by NBC News.

Israel has widely depended on its highly efficient Iron Dome missile defense system to fend off attacks throughout regional conflicts — but even it can be overwhelmed if a large number of projectiles are fired.

Why Iran won't block the Hormuz Strait oil artery even as war with Israel looms

The fresh hostilities are front-of-mind for investors, who have been weighing the odds of further escalation in the conflict and spillover into the broader oil-rich Middle East, amid concerns over crude supplies and the key shipping lane through the Strait of Hormuz connecting the Persian Gulf and the Gulf of Oman.

Oil prices retained the gains of recent days and at 09:19 a.m. London time, Ice Brent futures with August delivery were trading at $73.81 per barrel, down 0.57% from the previous trading session. The Nymex WTI contract with July expiry was at $72.7 per barrel, 0.38% lower.

Elsewhere, however, markets showed initial signs of shrugging off the latest hostilities early on Monday.

Spot prices for key safe-haven asset gold retreated early morning, down 0.42% to $3,417.83 per ounce after nearly notching a two-year-high earlier in the session, with U.S. gold futures also down 0.65% to $ 3,430.5.

Tel Aviv share indices pointed higher, with the blue-chip TA-35 up 0.99% and the wider TA-125 up 1.33%.

European stock markets opened higher Monday, meanwhile, and U.S. stock futures were also in the green.

Luis Costa, global head of EM sovereign credit at Citigroup Global Markets, signaled the muted reaction could be, in part, attributed to hopes of a brisk resolution to the conflict.

"So markets are obviously, you know, bearing in mind all potential scenarios. There are obviously potentially very bad scenarios in this story," he told CNBC's "Europe Early Edition" on Monday. "But there is still a way out in terms of, you know, a faster resolution and bringing Iran to the table, or a short continuation here, of a very surgical and intense strike by the Israeli army."

U.S. response in focus

As of Monday morning, Israel's national emergency service Magen David Adom reported four dead and 87 injured following rocket strikes at four sites in "central Israel," reporting collapsed buildings, fire and people trapped under debris.

Accusing Tehran of targeting civilians in Israel to prevent the Israel Defense Forces from "continuing the attack that is collapsing its capabilities," Israeli Defense Minister Israel Katz, a close longtime ally of Prime Minister Benjamin Netanyahu, said in a Google-translated social media update that "the residents of Tehran will pay the price, and soon."

The IDF on Sunday said it had in turn "completed a wide-scale wave of strikes on numerous weapon production sites belonging to the Quds Force, the IRGC and the Iranian military, in Tehran."

CNBC could not independently verify developments on the ground.

The U.S.' response is now in focus, given its close support and arms provision to Israel, the unexpected cancellation of Washington's latest nuclear deal talks with Iran, and President Donald Trump's historically hard-hitting stance against Tehran during his first term.

Trump, who has been pushing Iran for a deal over its nuclear program, has weighed in on the conflict, opposing an Israeli proposal to kill Iran's supreme leader, Ayatollah Ali Khamenei, according to NBC News.

Discussions about the conflict are expected to take place during the ongoing meeting of the G7, encapsulating Canada, France, Germany, Italy, Japan, the U.K. and the U.S., along with the European Union.

Source: CNBC

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Economic

Encouraging Data Fails to Convince the Fed

Recent economic indicators — including moderating inflation, stronger consumer sentiment, and a 4.2% unemployment rate — have painted a more favorable macroeconomic picture. Yet the Federal Reserve remains cautious. Former Cleveland Fed President Loretta Mester emphasized that while the data appears constructive, policymakers are waiting to see if these trends hold into the second half of 2025. The real challenge lies in forecasting the broader economic trajectory amid lingering uncertainty.

A key source of that uncertainty stems from President Trump’s tariff policy. Since his "Liberation Day" announcements in April, the administration has imposed and paused various duties, with many baseline tariffs — notably 10% on most countries — still active. The recent U.S.-China deal, while intended to de-escalate tensions, included a proposed 55% total tariff on Chinese goods, with the effective rate likely around 33%, according to analysts from Yale.

While some reciprocal measures have been delayed, specific sectors such as steel, aluminum, autos, and even Mexico and Canada (over fentanyl-linked penalties) continue to face trade restrictions. Until the Fed can fully assess how these protectionist policies affect inflation and growth, it is unlikely to act decisively on rates.

Strategists Predict September as Earliest Cut

Investor expectations for rate cuts are rising. As of Monday, CME FedWatch data shows a nearly 70% probability of easing beginning in September, up from 60% last week. A minority (around 20%) still hopes for a July cut, but market consensus points to patience. Brent Schutte of Northwestern Mutual stressed that only a material deterioration in the labor market could justify earlier intervention.

Schutte also warned that recent inflation relief may be temporary, due in part to pre-tariff inventory stockpiling by businesses and consumers. Historically, tariff-driven price increases have had delayed effects, which could complicate the Fed’s efforts to stabilize inflation expectations.

A Holding Pattern with Conditional Flexibility

HSBC economist Ryan Wang echoed the notion of “double-sided risks.” While higher goods prices due to tariffs may lift inflation, any sustained labor market cooling could exert downward pressure. This tension leaves the Fed in a “wait-and-see” phase, where it must weigh price stability against economic resilience.

The Fed’s current stance prioritizes confidence over speed. Policymakers are signaling that, although they recognize signs of moderation, they require more sustained evidence before altering the current rate regime. As Wang notes, a "benign" environment for cuts — one not driven by crisis but by a well-anchored inflation path — takes time to materialize.

Despite growing market enthusiasm for rate relief, Federal Reserve officials are exercising restraint. With tariff policy in flux, and inflation’s future path still uncertain, rate cuts before September remain unlikely unless unexpected economic stress emerges. For now, investors and businesses should prepare for a steady but cautious Fed — one that values clarity over speed in charting the path ahead.

Source: Yahoo Finance

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Daniel Carter

Political

Middle East Situation

Key Takeaways:

● Main event, leadership changes, market impact, financial shifts, or expert insights.

● No direct financial impact within crypto markets.

● Official sources provide varied responses to the proposal.

Trump Blocks Netanyahu's Proposal on Iran

The event underscores geopolitical tensions, highlighting the complexity of international relations and potential impacts on global stability.

Geopolitical Dynamics

Israeli Prime Minister Benjamin Netanyahu's government presented a plan to assassinate Iran's Supreme Leader Ayatollah Ali Khamenei to the United States.

Donald Trump, as the decisive U.S. authority, rejected the proposal, confirming geopolitical tensions remain high in the Middle East.

Donald Trump expressed that assassination discussions are inappropriate and that Iran has not killed an American, thus declining the plan. Official reactions varied, with Trump's actions aimed at preventing further escalation in the region.

"We communicated to the Israelis that President Trump is opposed to that. The Iranians haven't killed an American and discussion of killing political leaders should not be on the table," stated a senior U.S. official, emphasizing the administration's stance.

Market Implications

The rejection has not led to immediate shifts in the crypto markets or governmental actions. Market trends remain consistent, with no traceable financial response among crypto assets linked to the veto at the current time.

Financial implications might arise from potential geopolitical instability. Historically, major events in the Middle East, like the 2020 assassination of Qasem Soleimani, influenced market volatility, especially in cryptocurrencies such as BTC and ETH.

While the decision by Trump hasn't spurred immediate market actions, historical trends suggest geopolitical instability could influence future financial or regulatory outcomes. The market's reaction will unfold as further developments occur in the region.

Source: CryptoSlate

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Gerik

Economic

Oil Markets React Sharply to Escalating Conflict

Amid rising tensions between Israel and Iran, oil prices continued their upward trajectory on Monday. Brent crude climbed 95 cents to $75.18 per barrel and U.S. benchmark crude added 20 cents to $73.18. The price action followed Friday’s dramatic 7% surge after Israel’s airstrikes on Iranian nuclear and military targets, marking one of the most significant oil rallies since January.

Market participants remain especially wary of potential supply disruptions through the Strait of Hormuz, through which nearly a fifth of global oil supply flows. Iran, though under Western sanctions, remains a key oil producer with about 3.3 million barrels per day in output, and the conflict could further tighten supply and elevate global energy prices.

Equities: Mixed Reactions Across Asia

The equity landscape across Asia reflected investor uncertainty. Tokyo’s Nikkei 225 gained 1.3% on optimism surrounding Japan’s domestic economy, while South Korea’s Kospi also rose 0.9%. In contrast, Australia’s ASX slipped 0.2% and Hong Kong’s Hang Seng dropped slightly by 0.1%. Mainland China’s markets were largely flat, with mixed data showing retail sales improving 6.1% year-on-year but industrial production rising less than expected at 5.8%.

U.S. markets closed sharply lower on Friday, with the S&P 500 falling 1.1%, the Dow Jones Industrial Average down 1.8%, and the Nasdaq losing 1.3%. The declines reflected investor concerns over potential energy inflation, disruptions in consumer travel, and rising geopolitical instability.

Sector Impacts: Winners and Losers

Travel and leisure stocks were among the hardest hit due to anticipated fuel cost increases and potential declines in consumer confidence. Carnival shed 4.9%, Norwegian Cruise Line fell 5%, and United Airlines sank 4.4%. On the other hand, energy producers and defense contractors were beneficiaries of the geopolitical turmoil. Exxon Mobil and ConocoPhillips gained over 2%, while Lockheed Martin, Northrop Grumman, and RTX all advanced more than 3% on expectations of higher defense spending and oil-driven profits.

Gold held steady on Monday after a 1.4% rise Friday, as investors sought safety in the face of global instability. Treasuries, which typically attract inflows in times of fear, ironically saw yields rise as bond prices fell. This reflects growing worries that oil-driven cost increases could fuel a renewed round of inflation. Such fears are compounded by President Trump’s trade policies, with tariffs poised to increase input costs and undermine price stability.

The dollar edged higher to 144.37 yen, while the euro remained steady at $1.1537. A preliminary University of Michigan report released Friday showed consumer sentiment improving for the first time in six months, helped by a temporary tariff pause. Expectations for inflation also eased, but renewed oil shocks could reverse this trend swiftly.

The Asian markets’ mixed start to the week underscores the fragility of investor sentiment in the current geopolitical landscape. As the Israel-Iran conflict shows no signs of de-escalating and supply disruption risks mount, traders and central banks alike face difficult decisions. While defense and energy stocks may benefit from the turmoil, inflation fears could reshape monetary policy trajectories globally. Markets will remain on edge until clearer resolutions emerge from both the Middle East and upcoming Federal Reserve decisions.