- The first session of the week delivered a surge in volatility, driven mainly by the outbreak of war in Iran. The initial panic appears to have quickly given way to cautious optimism. The Russell is leading gains, index futures are up about 0.7% into the close. Other Wall Street benchmarks are hovering around the previous close.
- Despite partial price normalization as the session progressed, the conflict is clearly shaping capital flows. Travel-related stocks are under pressure: airlines, cruise operators, and travel agencies. Gaining are companies benefiting from oil production and distribution, as well as weapons systems manufacturers.
- In the US, PMI and ISM manufacturing data were released. Sentiment was supported by prints above expectations. PMI came in at 51.6 versus 51.2 expected. ISM rose to 52.4 versus expectations of 51.7. A major concern, however, is the strongly inflationary reading for industrial prices, which jumped to 70.5.
- Donald Trump commented on the military operations in the evening. He announced an escalation of air strikes on Iran and reiterated the defence minister’s remarks that the US “does not rule out” a ground invasion.
- In Europe, investors witnessed one of the worst sessions in months, with all major indices down more than 1%. The steepest declines were seen in Germany, where the DAX fell as much as 2.4%.
- The consequences of the conflict in the Middle East are far harsher for Europe than for the US. The problem is not only higher oil and gas prices. The Persian Gulf is one of the world’s key hubs for aluminium processing, and this metal is essential for Europe’s industrial base.
- PMI readings were also published in Europe. Data beat expectations in Sweden (56.1), Germany (50.9), France (50.1), and Italy (50.6). Disappointing prints came from Poland (47.1), the UK (51.7), and Switzerland. Spain’s reading was broadly in line with expectations (50.0).
- In Germany, retail sales data showed a deeper-than-expected slowdown. In January (seasonally adjusted), sales fell by 0.9% versus an expected 0.4%.
- Rising geopolitical uncertainty and expectations of increased US oil and gas purchases strengthened the dollar by 0.7% against the euro, 0.8% against the yen, and 1.5% against the franc. The euro also weakened by more than 0.5% versus the pound.
- In agricultural commodities, last week’s late move is being unwound. Wheat is down 3%, while cocoa is up 3%.
- Full-scale military activity around the Strait of Hormuz pushed oil prices to levels not seen since Operation “Midnight Hammer” in mid-2025. The initial spike of more than 10% was later pared back to 5–6%. Natural gas futures also cut gains from 7% to 3%.
- In precious metals, profit-taking is visible in silver, which is down more than 5%. Gold is up 1%.
- Tensions in the Middle East proved supportive for crypto. Nearly all tokens are posting meaningful gains. Bitcoin is up 5%, climbing above $68k. Ethereum is also up 5% and back above $2,000. Solana is up more than 5% and is trading around $87 into the close.
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