Gulf ceasefire leaves market facing known unknowns

LONDON – When Donald Trump completed his trip to Saudi Arabia, Qatar and the United Arab Emirates in May, complete with trillion-dollar pledges of investment, the Middle East seemed on the path to stability. A month on, following a 12-day war between Israel and Iran, the US bombing of Iranian nuclear facilities, and a retaliatory missile attack by Tehran on Qatar, the question is whether the ceasefire arranged by the US president can revive the previous optimistic mood. There are too many known unknowns for that to be the case.

Oil traders are behaving as if everything is back to normal. Brent crude contracts for August delivery were trading at USD 69 a barrel early on Tuesday, where they were just before Israel attacked Iran on June 13. The subsequent price spike to USD 80 a barrel allowed for the possibility that Tehran might retaliate by disrupting the tankers carrying a fifth of global oil supply that pass by its southern coast. Tuesday’s post-ceasefire price plunge implies that risk has receded.

If Saturday’s US attacks on Iranian nuclear facilities destroyed any prospect of the country obtaining an atomic bomb, oil traders would be right to be relaxed. Coupled with the diminished powers of Iranian proxies like Hezbollah, the region would be tangibly safer than before. Yet it’s far from certain that the nuclear threat has been defused. Iran’s Supreme Leader Ayatollah Ali Khamenei remains in place, and the location and condition of Iran’s stocks of enriched uranium are unclear.

Iran also looks less stable. The Islamic Republic has lost a slew of senior military leaders, and Monday’s relatively ineffectual retaliatory strike on Qatar projected weakness more than strength. Iranian authorities have sped up the search for a replacement for the 86-year-old Khamenei, five insiders with knowledge of the discussions told Reuters, but the process to replace a leader in power since 1989 may not be smooth.

Meanwhile, it’s far from clear that Israel’s campaign is over. Military success will likely shore up Prime Minister Benjamin Netanyahu’s governing coalition. Yet while Netanyahu has declined to say explicitly he is seeking regime change in Iran, he has said it “could be a result” of Israeli attacks. On Tuesday morning, Iran and Israel both claimed the other had violated the terms of the truce.

Officials in Saudi, the UAE and Qatar also have scope to feel relatively optimistic. After all, even if Iran’s nuclear capabilities have not been “totally obliterated”, as Trump claimed, progress has probably been extensively delayed.

Yet those countries arguably had the same reassurance ten years ago when the United States and other leading countries signed the Joint Comprehensive Plan of Action to limit Iran’s nuclear plan. More recently, Trump had seemed on a path to restoring the agreement.

Instead, Middle Eastern countries now face a potentially unstable mix: a vengeful and chastened Iran, and an Israel that feels there is unfinished business. There is plenty of scope for future shocks.

CONTEXT NEWS

Israeli Defence Minister Israel Katz said on June 24 he had ordered the military to strike Tehran in response to what he said were missiles fired by Iran in a violation of a ceasefire announced hours earlier by US President Donald Trump.

However, Iran’s ISNA student news agency said reports that Iran had fired missiles at Israel after the ceasefire took effect were false.

Both Israel and Iran had confirmed the ceasefire after it was announced by Trump.

The pan-European STOXX 600 Index was up 1.4% at 542.6 points, as of 0708 GMT. Brent crude prices dropped to USD 67 a barrel in earlier trading but rose to trade at USD 69 a barrel as of 0850 GMT.

(Editing by Peter Thal Larsen; Production by Oliver Taslic)

Japan’s Nikkei rises after Trump announces Iran-Israel ceasefire

TOKYO – Japan’s Nikkei share average rose on Tuesday after US President Donald Trump said Iran and Israel agreed to a ceasefire, which boosted global investors’ risk appetite.

The Nikkei ended 1.14% higher at 38,790.56 after touching 38,990.11, its highest since mid-February. The broader Topix rose 0.73% to 2,781,35.

Trump late on Monday announced a complete ceasefire between Israel and Iran, potentially ending the 12-day war that saw millions flee Tehran and prompted fears of further escalation in the war-torn region.

“Following Trump’s announcement, the market turned to risk on,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

Technology stocks led gains on the Nikkei, with start-up investor SoftBank Group 9984.T jumping 5.58%. Chip-making equipment maker Tokyo Electron 8035.T rose 3.65%.

“But the yen’s gains against the US dollar capped the Nikkei’s gains,” Yasuda said.

The dollar fell after the news of the ceasefire, pushing the yen up 0.7% to 145.15. The yen fell to as low as 148 per dollar, its weakest in more than a month.

A stronger Japanese currency tends to hurt the shares of exporters as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

Honda Motor lost 1.14%, while Nissan Motor slipped 2.55%.

Energy stocks fell as US crude futures tumbled, with Inpex falling 6.79% to be the worst percentage loser on the Nikkei. Oil refiner Idemitsu Kosan and Eneos Holdings slipped 2.09% and 1.96%, respectively.

Shipping firms also fell, with Kawasaki Kisen and Mitsui OSK Lines losing 1.3% and 1.42%, respectively.

Of more than 1,600 stocks trading on the Tokyo Stock Exchange’s prime market, 64% rose and 31% fell, with 4% trading flat.

(Reporting by Junko Fujita; Editing by Sonia Cheema, Sumana Nandy, and Mrigank Dhaniwala)

US bond market braces for surge in Treasury supply in second half

BOSTON – The bond market is bracing for up to USD 1 trillion of additional US Treasuries supply in the second half of the year once lawmakers address the looming debt ceiling problem, possibly permanently, top rates strategists said on Tuesday.

Any new issuance will likely be focused on shorter-dated debt, including bills.

With the flood of Treasuries, market participants are left to wonder: who is going to buy them all? Treasury issuance is meant to address the US government’s huge fiscal deficit.

President Donald Trump’s sweeping tax-cut and spending bill would lead to a larger-than-expected USD 2.8 trillion increase in the federal deficit over the decade, despite a boost to US economic output, the nonpartisan Congressional Budget Office projected.

The US Senate could vote on Friday on Republicans’ tax and spending measure, said Treasury Secretary Scott Bessent on Tuesday, and he was confident the House would then pass that version.

“We are just about to go through a level shift,” said Mark Cabana, head of US rates strategy at BoFA Securities, during a panel discussion on Tuesday at the Money Fund Symposium in Boston. “You’re going to see this big issuance clip and it’s coming within the next few months. You can debate exactly when they raise the debt limit, but the X-date is coming soon.”

Bessent had said that the so-called X-date when the government would exhaust remaining borrowing capacity under the federal debt ceiling would come sometime during the mid-to-late summer. When the debt ceiling is reached the Treasury is unable to increase borrowings, but if it is lifted or eliminated, the government can then issue more debt.

Cabana’s forecast is for new supply of Treasuries to hit USD 1 trillion by the end of the year. Gennadiy Goldberg, head of US rates strategy at TD Securities, also expects an increase of nearly USD 1 trillion in issuance this year, with about USD 700 billion supply in August and September.

A surge in Treasury supply could increase repurchase, or repo rates, which refer to the cost of borrowing short-term cash using Treasuries or other debt securities as collateral. Higher Treasury supply typically saturates the market with additional collateral, which can initially lower repo rates due to excess supply. However, if supply exceeds demand substantially, it may lead to higher repo rates as lenders demand more compensation for holding larger volumes of securities.

Goldberg thinks this year’s supply will be concentrated on the front end of the Treasury curve – the two-year to the seven-year sector.

“Our expectation is that the Treasury keeps issuance focused on the very front end of the curve in terms of coupons. We’re not expecting auction size increases until the middle to end of next year, so August or November of 2026, and we don’t expect any increases in the long end either,” Goldberg said.

“In fact, I wouldn’t be surprised if there are some decreases in size on the long end, but twos, threes, fives, sevens, that’s where the Treasury is going to really look to finance themselves, not 10s, not 20s, not 30s. So it’s really that and bills.”

Adding to Goldberg’s point, Ian Lyngen, head of US rates strategy at BMO Capital Markets, noted that the US Treasury has become so market-sensitive that it is willing to pull back on longer-term issuance if it leads to volatility in yields.

It is not just the Treasury Department that has been more cognizant of the market’s reaction, he said, but also Japan’s Ministry of Finance and the UK.

Money market funds, whose assets hit a record USD 7.4 trillion in June, are well-positioned to absorb part of that Treasury supply, the strategists said. However, there has been a modest shift recently away from Treasuries by these money funds and into private repo transactions because of the latter’s higher rates.

(Reporting by Gertrude Chavez-Dreyfuss in Boston; Editing by Alden Bentley and Matthew Lewis)

Dollar drops on Middle East optimism, euro highest since 2021

NEW YORK – The dollar fell on Tuesday and the euro rose to its highest level since October 2021 after a ceasefire between Iran and Israel was announced, even as Federal Reserve Chair Jerome Powell repeated that he expects inflation to begin rising this summer.

The ceasefire began to take hold on Tuesday under pressure from US President Donald Trump, raising hopes for an end to the biggest ever military confrontation between the Middle East arch-foes.

“The market right now is unwinding the Middle East trade,” said Adam Button, chief currency analyst at ForexLive in Toronto.

The euro and yen gained as oil prices tumbled. The European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the US is a net exporter.

The single currency was last up 0.38% at USD 1.162 after earlier reaching USD 1.1641. The dollar weakened 1% to 144.68 Japanese yen.

Risk-sensitive assets, including the Australian dollar, also gained on improving risk sentiment. The Aussie was last up 0.68% versus the greenback at USD 0.6503.

Sterling rose 0.77% to USD 1.3626 and reached USD 1.3648, the highest since January 2022.

The US currency fell even after Powell said in testimony before US Congress that he and many at the Fed expect inflation to start rising soon, and that the central bank was in no rush to ease borrowing costs in the meantime.

Traders were particularly attuned to his remarks after two other Fed policymakers indicated they support near-term rate cuts, citing concerns over the labor market and falling expectations about a resurgence in inflation.

“The market was looking for a strong pushback regarding the possibility of a rate cut, but Powell continues to sit on the fence,” said Button.

“The big debate at the Fed right now is in the jobs market. Waller and Bowman are saying they’re seeing signs of softness, whereas Powell said we don’t see weakness in the labor market,” Button said.

Fed Vice Chair for Supervision Michelle Bowman said Monday the time to cut interest rates appears imminent,t while Fed Governor Christopher Waller on Friday that the Fed should consider cutting interest rates at its next meeting.

US President Donald Trump said on Tuesday that interest rates in the country should be lowered by at least two to three percentage points.

Fed funds futures traders are pricing in 60 basis points of cuts this year, up from around 46 basis points before Waller’s comments on Friday. That indicates expectations that two 25-basis-point cuts are certain, with a rising chance of a third reduction.

A cut at the Fed’s July 29-30 meeting continues to be seen as very unlikely, with the first cut expected in September.

If the economy deteriorates and the Fed cuts interest rates faster than currently expected, that could be very negative for the dollar, said Vassili Serebriakov, an FX strategist at UBS in New York.

However, “if it doesn’t, if the Fed doesn’t cut until September and then delivers just two cuts this year, we’re probably looking at some dollar weakness, but it’s unlikely to be very significant, especially for pairs like dollar/yen, because the dollar still just benefits from carry quite a bit.”

Data on Tuesday showed that US consumer confidence unexpectedly deteriorated in June as households worried about business conditions and employment prospects over the next six months.

In cryptocurrencies, bitcoin gained 1.72% to USD 105,589.

(Reporting by Karen Brettell; Additional reporting by Stefano Rebaudo, editing by Deepa Babington)

Shares rally, oil prices tumble as Trump announces Iran-Israel ceasefire

SYDNEY – Global shares rallied and the dollar extended declines on Tuesday after US President Donald Trump said Iran and Israel had agreed to a ceasefire, sending oil prices into a deep dive as concerns over supply disruptions ebbed.

Writing on his Truth Social site, Trump implied a ceasefire would go into effect in 12 hours, after which the war would be considered “ended”.

A senior Iranian official confirmed Tehran had agreed to the ceasefire with Israel. Israel’s Channel 12 reported Prime Minister Benjamin Netanyahu had agreed in a conversation with Trump to a ceasefire as long as Iran stopped its attacks.

Oil prices fell almost 4%, having already slid 9% on Monday when Iran made a token retaliation against a US base, which came to nothing and signalled it was done for now.

With the immediate threat to the vital Strait of Hormuz shipping lane seemingly over, US crude futures fell another 3.4% to USD 66.24 per barrel, the lowest since June 11.

“To the extent that we’ve got a reduction in the risk of a renewed oil price spike, I think that plays positively from a risk point of view. I think it sort of removes that downside global growth risks,” said Ray Attrill, head of FX strategy at the National Australia Bank.

“I think that would encourage people in the view that maybe the US dollar can sort of resume its downtrend here and that.”

Risk assets rallied, with S&P 500 futures up 0.5% and Nasdaq futures NQc1 0.7% higher. EUROSTOXX 50 futures jumped 1.1% and FTSE futures rose 0.3%.

The MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8% while Japan’s Nikkei rallied 1.3%.

News of the ceasefire saw the dollar extend an overnight retreat and slip 0.3% to 145.70 yen, having come off a six-week high of 148 yen overnight. The euro rose 0.2% to USD 1.1594 on Tuesday, having gained 0.5% overnight.

The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter.

Against its major peers, the US dollar index slumped 0.6% overnight and was last unchanged at 98.20.

Ten-year Treasury yields rose 1 basis point to 4.353%, while interest rate futures 0#FF: slipped as investors rowed back a little on expectations for rate cuts.

The Treasury market had rallied on Monday after Federal Reserve Vice Chair for Supervision Michelle Bowman said the time to cut interest rates was getting nearer as risks to the job market may be on the rise.

Fed Chair Jerome Powell will have his own chance to comment when appearing before Congress later on Tuesday and, so far, has been more cautious about a near-term easing.

Markets still only imply around a 22% chance the Fed will cut at its next meeting on July 30.

The risk-on mood saw gold prices ease 0.6% to USD 3,346 an ounce.

(Reporting by Wayne Cole and Stella Qiu, Noel Randewich in San Francisco; Editing by Sam Holmes)

Oil prices fall to over one-week lows as Trump announces Israel-Iran ceasefire

Oil prices tumbled on Tuesday to their lowest level in more than a week as US President Donald Trump said a ceasefire has been agreed between Iran and Israel, relieving worries of supply disruption in the area.

Brent crude futures fell USD 2.69 or 3.76% to USD 68.79 a barrel as of 0006 GMT, after falling more than 4% earlier in the session and touching its lowest level since June 11.

US West Texas Intermediate crude slumped USD 2.7, or 3.94%, to USD 65.46 per barrel, having hit its weakest level since June 9 earlier in the session and falling around 6%.

Trump announced on Monday that Israel and Iran have fully agreed to a ceasefire, adding that Iran will begin the ceasefire immediately, followed by Israel after 12 hours. If both sides maintain peace, the war will officially end after 24 hours, concluding a 12-day conflict.

He said that a “complete and total” ceasefire will go into force with a view to ending the conflict between the two nations.

“With the ceasefire news we are now seeing a continuation of the risk premium built into crude oil price last week all but evaporate,” said Tony Sycamore, analyst at IG.

Iran is OPEC’s third-largest crude producer, and the easing of tensions would allow it to export more oil and prevent supply disruptions, a major factor in oil prices jumping in recent days.

Both the oil contracts settled over 7% lower in the previous session after rallying to five-month-highs after the US attacked Iran’s nuclear facilities over the weekend, stoking fears of a broadening in the Israel-Iran conflict.

“Technically, the overnight sell-off reinforces a layer of resistance between approximately USD 78.40 (October 2024 and June 2025 highs) and USD 80.77 (the year-to-date high), and it’s clear that it will take something extremely unexpected and detrimental to supply for crude oil to break through this layer of resistance,” Sycamore added.

(Reporting by Anjana Anil in Bengaluru; Editing by Leslie Adler and Shri Navaratnam)

US yields fall after Fed’s Bowman says interest rate cuts may come sooner

NEW YORK – Yields on US Treasuries fell on Monday as Federal Reserve vice-chair Michelle Bowman unexpectedly signaled the first interest rate cut this year could come as soon as July.

Markets also saw Iran’s response on Monday to US attacks on its nuclear sites over the weekend as a sign that further escalation of the conflict is unlikely.

Bowman, recently tapped by US President Donald Trump to be the central bank’s top bank overseer, said she is growing more concerned about risks to the job market than the potential inflationary effects of tariffs.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, fell 5.7 basis points to 3.851%.

But investors still see little chance of a rate cut in the July meeting, and a 77% chance of rates being steady, according to CME’s FedWatch tool. That percentage barely changed following Bowman’s comments.

“I was surprised by her comments, a rate cut in July is not the consensus in the market,” said Will Compernolle, macro strategist at FHN Financial in Chicago.

Compernolle said even as Bowman’s comments reassured the market that rate cuts will happen this year, investors note that other Fed officials consider that they need more time to assess the effect of tariffs on inflation.

Odds of lower rates from September rose above 80%, while bets on lower rates from October climbed above 92%.

The yield on the benchmark US 10-year Treasury note fell 3.5 basis points to 4.34%, after retreating more than 6 basis points during the day.

Markets took a positive view of events in the Middle East, with oil prices falling 6% on Monday after Iran sent missiles against a US military base in Qatar. The missiles were intercepted, and there were no casualties, a result seen by investors as a sign that the conflict will not escalate.

“If oil prices do not rise, that’s good news to inflationary pressures,” said Vail Hartman, US rates strategist at BMO Capital Markets in New York.

Investors’ main worry was the potential closure of the Strait of Hormuz, Hartman said, which could have large repercussions on global energy trade.

On Monday, there were no clear indications that this would happen.

(Reporting by Tatiana Bautzer, editing by Deepa Babington, Nick Zieminski, and Nia Williams)

US stock futures rise after Trump says ceasefire reached between Israel and Iran

US stock futures rose on Monday after President Donald Trump said a ceasefire has been agreed to between Israel and Iran.

S&P 500 emini futures rose 0.3% and Nasdaq futures added 0.5%, suggesting traders expect Wall Street to climb when it opens on Tuesday.

(Reporting by Noel Randewich; Editing by Chris Reese)

Gold steady as Israel-Iran conflict escalates, US involvement uncertain

Gold held steady on Friday, with geopolitical tensions escalating in the Middle East as Israel and Iran continued their air war, while investors remained wary of possible US involvement.

FUNDAMENTALS

* Spot gold was steady at USD 3,367.60 an ounce, as of 0020 GMT. Bullion was down 1.9% so far this week.

* US gold futures were also stable at USD 3,384.20.

* The conflict in the Middle East intensified on Thursday when Israel bombed Iran’s nuclear sites, while Iran fired missile and drone strikes on Israel, including an overnight attack on an Israeli hospital. Neither side has signalled an exit strategy.

* US President Donald Trump will decide in the next two weeks whether the US will get involved in the Israel-Iran air war, the White House said on Thursday, raising pressure on Tehran to come to the negotiating table.

* Meanwhile, US special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi have spoken by phone several times since Israel began its strikes on Iran last week, in a bid to find a diplomatic end to the crisis, three diplomats told Reuters.

* Trump reiterated his calls for the Federal Reserve to cut interest rates, saying the rates should be 2.5 percentage points lower.

* The Fed held rates steady on Wednesday, and policymakers retained projections for two quarter-point rate cuts this year.

* European officials are increasingly resigned to a 10% rate on “reciprocal” tariffs being the baseline in any trade deal between the US and the European Union, five sources familiar with the negotiations said.

* The US dollar index fell 0.2%, making greenback-priced bullion more affordable for overseas buyers.

* Elsewhere, spot silver was steady at USD 36.36 per ounce, platinum fell 0.7% to USD 1,297.89, while palladium was down 0.4% to USD 1,046.71. All three metals were headed for weekly gain.

(Reporting by Anmol Choubey in Bengaluru; Editing by Rashmi Aich)

Oil prices up nearly 3% as Israel-Iran conflict escalates, US response remains uncertain

CALGARY – Oil prices jumped almost 3% on Thursday as a week-old air war between Israel and Iran escalated and uncertainty about potential US involvement kept investors on edge.

Brent crude futures settled up USD 2.15, or 2.8%, to USD 78.85 a barrel, its highest close since January 22.

US West Texas Intermediate crude for July was up USD 2.06, or 2.7%, to USD 77.20 at 1330 EST (1730 GMT).

Trading volumes were light on Thursday due to a US federal holiday.

Israel bombed nuclear targets in Iran on Thursday, and Iran fired missiles and drones at Israel after hitting an Israeli hospital overnight.

There was no sign of an exit strategy from either side, as Israeli Prime Minister Benjamin Netanyahu said Tehran’s “tyrants” would pay the “full price” and Iran warned against a “third party” joining the attacks.

The White House said on Thursday that President Donald Trump will decide whether the US will get involved in the Israel-Iran conflict in the next two weeks.

That prospect has crude prices grinding higher, said Rory Johnston, analyst and founder of the Commodity Context newsletter.

“Consensus (in the market) is increasingly forming that we will see US involvement in some way,” Johnston said.

Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries, extracting about 3.3 million barrels per day of crude oil.

About 18 million to 21 million bpd of oil and oil products move through the Strait of Hormuz along Iran’s southern coast, and there is widespread concern the fighting could disrupt trade flows.

The risk of major energy disruption will rise if Iran feels existentially threatened, and US entry into the conflict could trigger direct attacks on tankers and energy infrastructure, said RBC Capital analyst Helima Croft.

On Thursday, JP Morgan said an extreme scenario, in which the conflict widens to the broader region and includes a Strait of Hormuz closure, could result in oil prices surging to USD 120 to USD 130 per barrel.

Goldman Sachs said on Wednesday that a geopolitical risk premium of about USD 10 a barrel is justified, given lower Iranian supply and risk of wider disruption that could push Brent crude above USD 90.

Even if Middle East tensions were to cool off in the coming days, oil prices are probably not headed back to the low USD 60 range they were trading at a month ago, said Phil Flynn, senior analyst at the Price Futures Group.

“I think this (conflict) knocks oil out of its complacency,” said Flynn. “I would argue that the market has been underplaying geopolitical risk.”

But DBRS Morningstar said in a note on Thursday that it expects any sudden oil price surge to be temporary. A higher oil price will exacerbate tariff-related headwinds to the global economy and oil demand, so as long as the conflict recedes, the war premium will deflate and prices will cycle lower, DBRS said.

Russia’s top oil official said on Thursday OPEC+ oil producers should proceed with plans to increase output, noting rising summer demand. Russian Deputy Prime Minister Alexander Novak said at an economic forum in St. Petersburg that OPEC+ should calmly execute its plans and not scare the market with forecasts.

(Reporting by Amanda Stephenson, Enes Tunagur, Colleen Howe, and Sam Li; Editing by David Goodman, Deepa Babington, and Rod Nickel)

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