U.S. Indices ended Monday’s trading session with gains in what was a very choppy session as Middle East tensions ruled the roost. At the reopening of trade, the crude complex gapped higher while US equity futures gapped lower after the US attacked Iranian nuclear sites over the weekend in what was a clear escalation of the Israel/Iran war. As such, WTI and Brent soared to highs of USD 78.40/bbl and 81.40/bbl, respectively, before swiftly paring amid profit-taking and an absence of further escalation in the US morning. However, as the session continued and European players left for the day, the Iranian retaliation attack on the US occurred, but it was largely seen as ‘de-escalatory’ and as such WTI and Brent tumbled to lows of USD 68.20/bbl and 71.15/bbl, highlighting a USD 10/bbl swing in benchmarks on the day, while US Indices gained. On Iran’s response, it was seen as a ‘symbolic’ attack on the US rather than one to cause damage – Iran warned Qatar and the Trump admin hours before the attack to limit the damage, and while they attacked the largest US military base in the Middle East, it has been widely circulated that it has been vacated with no personnel in it at the moment. Note, that reports initially said Iran targeted bases in Qatar, Kuwait, and Iraq, but a US military official confirmed no Iranian attack was recorded at any US base other than Qatar. The Dollar was also choppy but ultimately settled with losses amid risk-on trade to the benefit of the majority of G10 peers. On top of geopoliticals, which did dominate, Fed’s Bowman was notably dovish and joined the Waller camp in stating open to cutting rates as soon as the July FOMC meeting if inflation pressures stay contained. The reaction saw a dovish move across markets, so Treasuries and Equities lifted, while the Dollar sold off. Sectors were exclusively firmer, aside from Energy, which was weighed on by the losses in the crude complex. Elsewhere, US Flash PMIs garnered little reaction but Manufacturing was surprisingly unchanged, against an expected fall, while Services fell less than anticipated. Into the close, the above moves accentuated as Trump posted on Truth, the Iran response was very weak, confirmed Iran had let them know, no US officials died, and now encourages world peace. Fed Member Bowman (voter) struck a notably dovish tone, following in the footsteps of known dove Waller last week, continue to highlight a potential divide forming between FOMC Committee members. Bowman said she is open to cutting rates as soon as the July FOMC meeting if inflation pressures stay contained, and ‘it is time to consider adjusting the policy rate’. Bowman added they should put more weight on downside risks to the job market going forward, and trade policy is only likely to have ‘minimal impacts’ on inflation. She added data not showing much impact from trade policy shifts, the Government policy changes should lower inflation risks, and tariffs likely to have a small impact on inflation. Note, that Bowman, after Waller, is the second Committee member to signal a willingness for a July cut, and both of them are Governors. The year-end 2025 median SEP dot plot signalled 50bps of cuts, but with a hawkish composition, as if 1 Committee member shifted to 25bps of cuts this year (from 50bps) the median would have shifted to 25bps of cuts. Meanwhile, Goolsbee (voter) said it’s critical to look at soft economic data at the current moment of transition. On tariffs, the Chicago Fed President said the impact is blunted by lowered levels and exemptions, the surprise so far is that inflation has not jumped yet on tariffs, and “Less immediate pass through of tariffs relative to past”. Moreover, if they do not see an inflation jump on tariffs, then the economy is still on the golden patch. On the job market, Goolsbee noted so far, immigration enforcement hasn’t had a major impact on the job market. The U.S. Composite Index fell to 52.8 from 53.0, and was largely due to Services PMI falling to 53.1 from 53.7, albeit above the expected 53.0. Manufacturing was unchanged at 52.0, but again above the forecasted 51.0. The June flash PMI data indicated that the US economy continued to grow, but that the outlook remains uncertain while inflationary pressures have risen sharply in the past two months. The report further adds that stronger domestic demand is partly due to stock building, although “Such a boost is likely to unwind in the coming months”, and noted that “Prices for goods have meanwhile jumped sharply again, the rate of increase accelerating to a three year high as firms pass higher tariff-related costs on to customers.” The report concludes, “…data therefore corroborate speculation that the Fed will remain on hold for some time…”. Elsewhere, Oil had a massive reversal, closing Monday with a loss of 7% while Gold was flat.
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