Futures Tumble, Oil Soars On Mounting Fears US Will Strike Iran

US equity futures tumbled amid mounting speculation the US will join Israel’s war against Iran some time this weekend, fueling uncertainty and concerns about the inflationary impact of higher crude prices. S&P and Nasdaq 100 futures tumbled 0.8% on a day when cash trading in US stocks and Treasuries is closed for a public holiday. Europe’s Stoxx 600 gauge declined 0.4%, setting the index on course for a third day of losses. Asian shares dropped more than 1%.

Brent crude neared $78 a barrel, approaching last week’s post war high and extending gains in a week where market reaction to the Middle East conflict has been most concentrated in oil. The dollar edged higher against a basket of currencies.

Traders’ sentiment sank after a late Wednesday report from Bloomberg that senior US officials are preparing for a possible strike on Iran in the coming days, pointing to potential plans for a weekend strike. Fed Chair Jerome Powell’s signaling of imminent tariff impact on consumer prices also added to risk-off sentiment.

“If the US does strike, you’re going to see a big knee-jerk reaction,” said Neil Wilson, investor strategist at Saxo UK. “No one will be wanting to make big long bets.”

Trump has for days publicly mused about calling for a strike on Iran. He told reporters at the White House Wednesday that he prefers to make the “final decision one second before it’s due” because the situation is fluid.
The odds for the US to become involved are “quite high at this moment in time,” said Anna Rosenberg, head of geopolitics at Amundi Investment Institute.

“For the US, this is a moment to take out a big geopolitical headache, which is Iran potentially developing a nuclear weapon,” Rosenberg told Bloomberg TV. “Having said that, acting comes with a lot of consequences too. Trump will have to make a really difficult decision.”

Elsewhere, among the barrage of monetary policy decisions in Europe, the Bank of England kept its benchmark rate on hold at 4.25%. While the outcome was in line with economists’ expectations, more committee members than anticipated had voted for a cut. The pound fell before erasing the loss. Earlier, the Swiss National Bank cut its interest rate to zero as policymakers sought to deter investors from pushing up the franc, which has gained almost 10% against the dollar this year. In Norway, officials surprised with the central bank’s first post-pandemic reduction of borrowing costs.

European equities fell Thursday with consumer products and travel and leisure shares leading declines, while energy and telecommunications stocks advanced. Stoxx 600 falls 0.5% to 537.69 with 482 members down, 100 up, and 18 little changed. here are the top European movers:

• Stora Enso surges as much as 20%, the most on record, after the Finnish packaging company said it is considering options including a sale or spin-off of its Swedish forest holdings
• Vodafone shares rise as much as 1.3% after the company announced Pilar López as its next chief financial officer to replace Luka Mucic, who stepped down in May
• Eutelsat shares soar as much as 21% after it struck a 10-year deal with the French government, providing the country’s military with the priority access to the company’s OneWeb low-Earth orbit constellation for as much as €1 billion
• European luxury stocks drop, led by Richemont and Swatch, after a report showed Swiss watch exports fell 9.5% in May, driven by US downturn following a strong month of April
• Zurich’s SMI benchmark stock index falls 1%, underperforming European peers, after the Swiss National Bank cut interest rates to zero
• Whitbread shares slip as much as 2.9% to the lowest intraday level in six weeks as the Premier Inn owner’s first-quarter update shows continued weakness in the UK
• Mandatum shares drop as much as 6% after one of its investors offloaded shares at a discount to Wednesday’s closing price
• Breedon Group shares drop as much as 7.9%, the biggest decline in more than five years, after RBC Capital Markets lowered its price target on the building materials supplier, warning temporary challenges may weigh on the share price
• Hays slumps as much as 20%, the most in nine years, after the staffing firm released an unscheduled update, saying that current tough market conditions would persist into FY26, with permanent recruitment activity levels especially weak
• Kenmare Resources shares plummet as much as 33%, the most since 2010, after terminating talks with a consortium about a possible takeover of the London-listed miner due to a disagreement on its valuation

Earlier in the session, Asian equities were caught in a broad selloff on Thursday, with Hong Kong-listed Chinese stocks leading the losses, as investors feared the possibility of the US entering the conflict in the Middle East. The MSCI Asia Pacific Index slid as much as 1.4%, its biggest intraday slump since April 16. Technology names like TSMC, Tencent and Alibaba were the biggest drags on the regional benchmark. A gauge of Chinese stocks listed in Hong Kong slumped 2.1%, marking its third session of retreat. Thailand’s equity benchmark also lost more than 2% to head for its lowest close since March 2020 after the government’s second-largest party quit the ruling coalition. Stock benchmarks in Indonesia and Taiwan were other major losers in Asia, while equities in South Korea, Philippines and Vietnam rose. The US market will be shut today for a holiday.

While trading in cash treasuries was closed, the 10Y yield as implied by Treasury futures was about 1bp lower vs the Thursday close.

Market Wrap

• S&P 500 futures fell 0.8%
• Nasdaq 100 futures fell 0.8%
• Dow Jones Industrial Average fell 0.7%
• The Stoxx Europe 600 fell 0.6%
• The MSCI World Index fell 0.3%

Top Overnight News

• Israel hits nuclear sites, Iran strikes hospital as war escalates: RTRS
• Israel’s airstrikes aim to break foundations of Khamenei’s rule in Iran: RTRS
• Oil Climbs as Investors Await Trump’s Plan on Iran Conflict: BBG
• MAGA Brawls Over Prospect of Trump Joining Strikes on Iran: WSJ
• Investors see quick stock market drop if US joins Israel-Iran conflict: RTRS
• In Los Angeles, Iranian Jews Dream of an Iran They Could One Day Visit: WSJ
• BoC Governor Macklem said the world had already been becoming more fragmented before Trump was elected, so businesses were still facing uncertainty: Reuters.
• EU increasingly resigned to 10% baseline tariff in US trade talks, European sources say: RTRS
• US Focus on Auto Trade Gap Is Sticking Point for Japan Deal: BBG
• Japan to cut super-long bond sales by 10% to calm markets, draft shows: RTRS
• SpaceX’s Starship Explodes on Test Stand in Another Setback: BBG
• EU antitrust regulators were set to open a full-scale investigation into the USD 36bln Mars bid for Kellanova (K) as regulators were concerned about Mars’ high market share in certain products in some EU countries: RTRS
• Shell CEO Warns of ‘Huge Impact’ If Strait of Hormuz Blocked: BBG
• Syria completes first global SWIFT transfer since war, governor says: RTRS
• Microsoft is planning thousands more job cuts aimed at salespeople: BBG
• California Utilities Weigh Power Shutdowns as Dry Winds Approach: BBG
• Meta is reportedly in talks to hire a former GitHub CEO to join AI efforts: The Information.
• Pan American Airways Relaunches as a Private Jet Tour Operator: BBG
• Australia’s teen social media ban faces a new wildcard: teenagers: RTRS
• A Town That Pioneered the Juneteenth Holiday Is Now Calling Off the Party: WSJ

Tariffs/Trade

• The Chinese Ambassador to the US called for US tariffs on China to be removed completely, according to Bloomberg.
• German Chancellor Merz expressed hope for an agreement in the US-EU tariff row in the coming days, according to Reuters.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded subdued following the mixed close on Wall Street, where traders juggled the FOMC alongside geopolitics, with markets apprehensive as US President Trump keeps participants in the dark about his touted move on Iran. ASX 200 saw its losses cushioned by a recovery in gold miners. The index came off highs after employment surprisingly contracted. Nikkei 225 marginally underperformed with USD/JPY briefly dipping under 145.00 and a trade deal with the US proving elusive. Hang Seng and Shanghai Comp were subdued in tandem with the broader risk tone, with China-specific newsflow once again taking a back seat to geopolitics. US equity futures were subdued following the choppiness seen during the Fed, with attention overnight on geopolitics. Futures saw some weakness on reports via ABC that US President Trump was getting comfortable with the idea of taking out Iran’s Fordow nuclear facility with multiple strikes. Another leg lower was seen as Bloomberg reported that the US was reportedly eyeing this weekend as a possibility for an Iran attack and was preparing for a possible strike in the coming days. European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 -0.2% after cash closed down -0.4% on Wednesday.

Top Asian news

• HKMA maintains its base rate at 4.75%, as expected (in lockstep with the Fed).
• Magnitude 6 earthquake strikes off coast of Hokkaido, Japan region according to GFZ.
• PBoC injected CNY 203.5bln via 7-day reverse repos with the rate maintained at 1.40%.

European equities fell Thursday with consumer products and travel and leisure shares leading declines, while energy and telecommunications stocks advanced. Stoxx 600 falls 0.5% to 537.69 with 482 members down, 100 up, and 18 little changed.

Top European News

• BoC Governor Macklem said the world had already been becoming more fragmented before Trump was elected, so businesses were still facing uncertainty, according to Reuters.
• EU antitrust regulators were set to open a full-scale investigation into the USD 36bln Mars bid for Kellanova (K), according to Reuters sources, as regulators were concerned about Mars’ high market share in certain products in some EU countries.
• Microsoft (MSFT) is planning thousands more job cuts aimed at salespeople, Bloomberg reported.
• Meta (META) is reportedly in talks to hire a former GitHub CEO to join AI efforts, according to The Information.

FX

• DXY was modestly firmer, holding the bias seen post-FOMC, which initially resulted in a dovish reaction amid the 2025 dot plot being maintained, albeit with a hawkish shift in the composition. Afterwards, Fed Chair Powell pushed back on any dovish interpretation of policy in the short term, noting they would have to keep rates high to bring inflation all the way down, and said they would learn more over the summer when they could make smarter decisions. Overnight, the index saw some upticks and eventually climbed above 99.00 following reports that the US was reportedly eyeing this weekend as a possibility for an Iran attack, and was preparing for a possible strike in the coming days.
• EUR/USD saw slight weakness, but more so amid the upward bias in the Dollar, with the pair dipping back under the 1.1500 level in late US trade before breaching Wednesday’s low and finding support at 1.1450.
• GBP/USD hovered around the 1.3400 mark as traders gear up for the latest BoE policy announcement, in which the MPC was widely expected to keep policy steady with dovish dissent from Dhingra and Taylor.
• USD/JPY oscillated on either side of 145.00, with broader market sentiment cautious amid the fluid geopolitical landscape. USD/JPY saw its 21 DMA at 144.10 and 50 DMA at 144.01.
• Antipodeans were both softer, as their high-beta properties kept the pairs subdued amid the broader cautious mood. AUD/USD was also hampered by jobs data showing a surprise shed of jobs, driven by part-time roles. NZD saw deeper losses despite Q1 New Zealand GDP largely printing above forecasts, with downside momentum accelerating on a breach of 0.6000.
• PBoC set USD/CNY mid-point at 7.1729 vs exp. 7.1916 (prev. 7.1761)
• Brazilian Selic Interest Rate 15.0% vs. Exp. 14.75% (Prev. 14.75%); BCB sees the end of a tightening cycle, and will not hesitate to raise rates if appropriate.

Fixed Income

• 10yr UST futures saw losses as Fed Chair Powell pushed back on near-term rate cuts, but were underpinned overnight by the aforementioned geopolitics, with upticks seen amid reports that the US was preparing for a strike on Iran in the coming days.
• Bund futures caught up to some of the Fed-induced losses, but the downside was limited as markets remained anxious with the US reportedly preparing to strike Iran.
• 10yr JGB futures edged higher, with desks citing haven demand amid the Middle Eastern tensions, while Japan’s MoF was gearing up to hold a JGB primary dealers’ meeting on 20th June. Downticks in contracts were seen as Tokyo trade resumed and traders reacted to Reuters sources suggesting Japan plans to cut super‑long bond sales by 10 % to ease market concerns. A knee-jerk higher was then seen on the 5-year JGB auction which saw the highest cover since 2023.
• US Treasury Holdings (April, USD): China 757bln (prev. 765bln), Japan 1.135tln (prev. 1.131tln), UK 808bln (prev. 779bln).
• Japan sold JPY 2.4tln 5yr JGBs; b/c 4.58x (prev. 3.19x), average yield 0.9820% (prev. 0.9800%).
• Japan said to plan to cut super‑long bond sales by 10% to ease market concerns; Japan is set to cut scheduled JGB sales to the market by JPY 500bln from the initial plan to JPY 171.8tln in FY2025/2026, according to a draft revised plan cited by Reuters. It plans to cut sales of 20- and 30-year bonds by JPY 900bln each, to JPY 11.1tln and JPY 8.7tln, respectively, in FY2025/2026. The government also aimed to increase JGB sales to households by JPY 500bln to JPY 5.1tln, and to raise sales of 2-year JGBs, as well as one-year and six-month treasury discount bills, by JPY 600bln each, according to Reuters.

Commodities

• Crude futures were subdued following a choppy Wednesday and amid Dollar strength, with some upside overnight seen on reports via ABC that US President Trump was getting comfortable with the idea of taking out Iran’s Fordo nuclear facility with multiple strikes: „There is now a movement to get ready for this.” Another leg higher was seen as Bloomberg reported that the US was said to be eyeing this weekend as a possibility for an Iran attack and was preparing for a possible strike in the coming days.
• Spot gold was buoyed overnight by the aforementioned geopolitics following post-Fed weakness.
• Copper futures were subdued in lockstep with the broader risk tone across markets.
• US EIA- Nat Gas, Change Bcf w/e 95.0bcf vs. Exp. 98.0bcf (Prev. 109.0bcf)
• Goldman Sachs said that following the rise in Brent to USD 76–77/bbl, it estimated a geopolitical risk premium of around USD 10/bbl. While its base case remained that Brent would decline to around USD 60/bbl in Q4, assuming no supply disruptions, the USD 10/bbl premium appeared justified in light of its lower Iran supply scenario—where Brent spiked just above USD 90/bbl—and in tail scenarios where broader regional oil production or shipping was negatively affected, according to Reuters.

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FOMC: STATEMENT

• The Federal Reserve left rates unchanged at 4.25-4.5%, as was widely expected, with the 2025 dot plot left unchanged at 3.9%, which signals 50bps of cuts this year, although the 2026 dot plot was revised higher to 3.6% from 3.4% and 2027 was revised up to 3.4% from 3.1%. However, there was some discourse over the number of cuts seen this year. Seven members see no cuts this year, vs. four in March, while two see worth 25bps of cuts, down from four in March, eight see 50bps (prev. nine), and two see 75bps of easing (unchanged from March).
• Highlighting the close proximity for the median dot, 9 members see FFR above the median, and 10 members see FFR at the median or below. GDP forecasts were cut for both 2025 and 2026 to 1.4% (prev. 1.7%) and 1.6% (exp. 1.8%), respectively, while unemployment rate forecasts ticked higher across all time horizons ex. long-run. Headline and Core PCE inflation dots were also notably lifted with the 2025-end headline rate seen at 3.0% (prev. 2.7%) and 2026 at 2.4% (prev. 2.2%).
• Regarding the statement, the Committee said the uncertainty about the outlook has „diminished further but remains elevated”, a change from the prior „increased further”, and it also removed the stagflation warning line that „risks of higher unemployment and higher inflation have risen”.

FOMC: PRESS CONFERENCE

• Fed Chair Powell largely echoed familiar remarks in that a patient and wait-and-see approach is appropriate. He also toed the usual line post SEPs that projections are subject to uncertainty, and are not a set plan.
• He recommended focusing on the near-term projections due to the difficulty of providing longer-term forecasts. Looking ahead, Fed Chair Powell said the time will come when they have more confidence, but he cannot say exactly when that will be.
• He stressed that as long as they have the kind of labour market they have, and inflation is coming down, the right thing to do is hold rates. Powell expects to learn a great deal more over the summer, adding they will make smarter decisions if they wait a „couple of months”.
• Powell noted inflation has been favourable over the last three months, but he expects to see more tariff impacts in the coming months and expects businesses to pass on costs to consumers, again stressing this is why the Fed need to be patient. Powell said they have to keep rates high to get inflation all the way down, and he described policy as „modestly restrictive”, noting it is not very restrictive. Powell in May said, „Policy is sort of modestly or moderately restrictive”.

FOMC: REACTION

• The unchanged 2025 dot plot initially resulted in gains in stocks and Treasuries, alongside a Dollar sell-off. However, moves had started to pare as the hawkish composition of the 2025 dot plot was digested, while the 2026 and 2027 dots were revised up. Meanwhile, inflation projections were revised up, growth forecasts were revised down and unemployment forecasts were revised higher, likely to incorporate the expected impact of tariffs.
• In Powell’s presser, he largely echoed familiar remarks in that a patient and wait-and-see approach is appropriate, and that they would learn more over the summer to make smarter decisions, weighing on T-notes, stocks and supporting the Dollar. However, Trump managed to steal the limelight through the Fed and markets saw pronounced downside in the crude complex and an upside in indices as he said he may meet with Iran.
• US President Trump posted critical language of Fed Chair Powell; „Too Late—Powell is the WORST. A real dummy, who’s costing America $Billions!”