Daily Summary - Escalation in the Middle East. FOMC fears inflation

🌍 Geopolitics and Conflict in the Persian Gulf

• President Donald Trump announced the official end of the ceasefire with Iran during the NATO summit in Ankara, calling the previous agreement a "waste of time" and the Iranian authorities "liars."
• U.S. forces conducted a massive retaliatory strike on over 80 targets in Iranian territory (including air defenses) in response to strikes targeting commercial vessels in the Strait of Hormuz.
• Iran directly violated the terms of the temporary, 60-day memorandum concluded last month, which guaranteed safe and free passage for ships in exchange for the suspension of U.S. sanctions and the commencement of talks on the nuclear program. Iran's attack involved at least three commercial units, including a liquefied natural gas (LNG) tanker. Tehran responded to the retaliation with another wave of strikes, this time targeting locations in Bahrain and Kuwait.
• Washington immediately restored full sanctions on global trade in Iranian oil, revoking previous waivers.
• Donald Trump signaled the resumption of the port blockade, which intensifies market fears of a return to full-scale war.
• During the NATO summit in Ankara, Trump announced possible further air strikes on Iran and pointed to potential volatility in the oil market in the short term, while predicting significant declines in the long term. Trump indicated that at the same time, he does not expect a full-scale war.
• Oil continued its strong gains today, with Brent oil testing the $80 per barrel level, while WTI rose to $75 per barrel.

📊 Stock Market: Indices and Equity Market

• Global equity markets recorded significant declines. Capital fled from risk on the exchanges in New York, London, and Tokyo.
• US500 retreated by 0.4%, while the technological US100 almost eliminated the entire decline, which was related to the positive tone of information that China is to allow top AI companies to purchase H200 chips.
• In Europe, declines were very strong for the second session in a row, where major benchmarks lost from 1.5% to as much as 2% (DE40 and SPA35).
• Despite the recent sell-off of companies related to memory, today we observed a recovery in such entities as SanDisk or Applied Materials.
• The Chinese Alibaba recorded a strong rebound today in anticipation of stronger financial results and the possible desire of investors for exposure to cheaper AI-related companies. The company's shares rebounded today by as much as 10%.

🛢️ Commodities and Energy

• Oil prices recorded a strong, even 7% increase from the perspective of the last 24 hours and about 3% since the beginning of today's session. The gains were partially negated after Trump indicated that he does not expect a full-scale war and will not hinder potential negotiations.
• The oil forward curve shifted into deep backwardation, illustrating a drastic shift in prices at the short end of the curve. A strong widening of calendar spreads is visible, although their value still remains below the 1.00 USD level.
• The market is paying a huge premium for immediate physical delivery, while only a week ago a contango structure was recorded, triggered by the acceleration of deliveries from the Middle East.
• Crude oil inventories rose unexpectedly by 3 million barrels, but at the same time, we are seeing a massive drop in petroleum product inventories. Strategic reserves in the U.S. continue to decline below the 320 million barrel level.
• Spot gold prices fell by as much as 1.5% to a value below 4050 USD per ounce. Later, a slight rebound occurred.

💰 Macroeconomics, Currencies and Bonds

• The return of geopolitical threat has updated the inflation risk globally due to potential interruptions in energy supply chains.
• Money markets have begun to massively price in a hawkish scenario, drastically increasing the probability that the Federal Reserve will raise interest rates in October.
• FOMC Minutes show that inflation concerns are real, and most Fed members see grounds for adjusting monetary policy if the worst-case scenario of price increases materializes.
• At the same time, it should be remembered that the Fed is reducing its communication and decisions will be less predictable.
• Despite the risk stemming from geopolitics, EURUSD is rebounding today and local highs around 1.1430 are being tested after the FOMC minutes.
• On the other hand, USDJPY continues its gains and is testing 162.5.

🪙 Cryptocurrencies

• The digital asset market found itself under strong selling pressure as a result of the general retreat of investors from risk.
• Bitcoin (BTC) declined by 1.8%, falling to a valuation of 62200 USD.
• The price of Ethereum (ETH) fell by 1.7%, bringing the quotes of the second largest cryptocurrency to the level of 1736 USD.