Gold inches up on safe-haven demand as Middle East tensions rise

Gold prices edged up on Tuesday as Iran-Israel tensions boosted safe-haven demand but a stronger dollar capped gains, while silver surged to a 13-year high.

Spot gold rose 0.2% to USD 3,390.59 an ounce as of 0151 pm EDT (1751 GMT). US gold futures settled 0.3% lower at USD 3,406.9.

The US dollar index firmed 0.8%, making dollar-priced bullion more expensive for other currency holders.

“Geopolitical uncertainty, with the Israeli-Iran war that will probably escalate before it de-escalates, is going to keep a floor under the market for safe-haven bidding,” said Jim Wycoff, senior analyst at Kitco Metals.

US President Donald Trump said that he wanted a “real end” to the nuclear dispute with Iran, and indicated he may send senior American officials to meet with the Islamic Republic as the Israel-Iran air war raged for a fifth day.

Elsewhere, the Federal Reserve will announce its policy decision on Wednesday, followed by Chair Jerome Powell’s press conference.

The US central bank is widely anticipated to leave its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December.

A low-interest-rate environment and geopolitical uncertainty tend to boost gold’s appeal.

Central banks around the world expect their gold holdings as a proportion of their reserves to increase over the next five years, a survey by the World Gold Council showed.

Data showed that US retail sales dropped more than expected in May, but consumer spending remained supported by solid wage growth.

Spot silver gained nearly 2% to USD 37.05 per ounce, reaching its highest level since February 2012.

Citi in a note said silver could rise to USD 40 over the next six to 12 months.

“We expect silver availability to tighten on consecutive years of deficit, sticky stockholders requiring higher prices to sell, and robust investment demand,” it added.

Platinum was up 1.5% to USD 1,264.61 and palladium rose 1.7% to USD 1,047.54.

(Reporting by Sarah Qureshi and Ashitha Shivaprasad in Bengaluru; Editing by Jan Harvey and Vijay Kishore)

Wall Street edges lower, oil climbs as Middle East conflict grinds on

NEW YORK – Wall Street indexes edged lower and oil kept climbing on Tuesday as US President Donald Trump left the Group of Seven summit early and investors awaited a series of interest rate decisions by major central banks this week.

Trump returned to Washington a day before the summit ends as the Israel-Iran conflict intensified, saying US patience was wearing thin but he would not kill Iran’s leader “for now.”

The news nixed market hopes for more progress at the summit on issues like the sweeping tariffs Trump has promised to impose on many allies.

“The market was anxious to hopefully hear updates on trade agreements out of the G7 and the news of Trump leaving early was disappointing, although we all know why,” said Eric Sterner, chief investment officer at Apollon Wealth Management.

“The market is paying attention to the (Middle East) conflict but it feels that’s contained to those two countries,” Sterner said. “It does cause concern, especially if Iran does anything with the Strait of Hormuz,” he added, noting around 20% of the world’s oil supply passes through that waterway.

US crude continued to surge and settled 4.46% higher at USD 74.97 a barrel, while Brent rose to USD 76.54 per barrel, up 4.52% on the day.

Stocks stayed under pressure, with the Dow Jones Industrial Average extending losses to 0.78% on the day. The S&P 500 fell 0.84% and the Nasdaq Composite shed 0.92%.

No disruptions to crude supply have been reported, although news of a collision between two ships in the Gulf of Oman sent another brief jolt through the oil market overnight.

Analysts noted that the VIX volatility index has risen in the last week, but at around 21 it is well below April’s highs above 60 and nowhere near the records, above 80, hit during the 2008 financial crisis.

“This is happening at a point in time where we are less sensitive, first of all the fact being that oil prices are still down year to date, and secondly the macro economy is … showing that financial markets are relatively resilient at the moment,” Bjarne Breinholt Thomsen, head of cross asset strategy at Danske Bank, said in a webinar on Tuesday.

Stocks in Europe also sagged. The STOXX 600 closed around its lowest in three weeks.

CENTRAL BANKS LOOM

Investors awaited meetings this week by the Federal Reserve, Bank of England and Swiss National Bank. The Bank of Japan left short-term interest rates unchanged on Tuesday, at 0.5% as expected.

US Treasury yields fell ahead of the Fed’s scheduled update, which is widely expected to produce no immediate change in interest rates.

But market participants will be monitoring new projections on how Trump’s tariffs could affect growth and inflation. Traders are pricing in two cuts by the end of the year.

They are also tuning in to comments from Chair Jerome Powell, who Trump has repeatedly criticized for not lowering interest rates.

“One thing that settled the markets earlier this year was the independence of the Fed and the fact they would not be influenced, but data-driven,” said Matt Rubin, chief investment officer at Richmond, Virginia-based Cary Street Partners.

“Jerome Powell is going to continue to express that they are focused on data at this point, and that data does not warrant a cut.”

The US 10-year note last yielded 4.385%, 6.9 basis points down from 4.454% late on Monday.

(Additional reporting by Lucy Raitano in London and Johann M Cherian and Ankur Banerjee in Singapore; Editing by Kim Coghill, Bernadette Baum, David Evans, Deepa Babington, and Richard Chang)

Foreign central banks are shrinking US asset exposure: McGeever

ORLANDO – As debate rages around ‘de-dollarization’ and the world’s appetite for dollar-denominated assets, one major cohort of overseas investors appears to be quietly backing away from US securities: central banks.

That’s the conclusion to be drawn from the New York Fed’s latest ‘custody’ data, which shows a steady decline in the value of Treasuries and other US securities held on behalf of foreign central banks.

There are many ways to gauge foreign demand for US assets, and they often send conflicting signals. Moreover, the broadest and most accurate measures, like US Treasury International Capital (TIC) or the International Monetary Fund’s ‘Cofer’ FX reserves data, come with a long lag of two months or more.

The New York Fed custody holdings figures are weekly, which is as ‘real time’ as it gets in the world of central bank flows.

These figures last week showed that the value of US Treasuries held at the New York Fed on behalf of foreign central banks fell to USD 2.88 trillion. That’s the lowest since January, and the USD 17.1 billion decline was also the biggest fall since January.

Including mortgage-backed bonds, agency debt and other securities, the total value of foreign central banks’ US custody holdings at the New York Fed last week dropped to USD 3.22 trillion, the lowest since 2017.

That figure has fallen by around USD 90 billion since March, just before President Trump’s ‘Liberation Day’ tariff debacle on April 2, with more than half of the decline coming from Treasuries.

If these moves are representative of broader trends, then FX reserve managers are reducing their exposure to US bonds, as a share of their overall holdings and in nominal terms too.

MURKY PICTURE

It’s not easy to get a firm handle on the exact composition of central banks’ dollar-denominated assets, which are worth trillions and are spread across multiple sectors, jurisdictions and continents. This is why different cuts of central bank data can tell different stories.

For example, the latest TIC data show that foreign holdings of US Treasuries rose to a record USD 9.05 trillion in March, with official sector holdings increasing as well. The official sector held nearly USD 4 trillion of bills and bonds, around 45% of all foreign exposure.

But these figures are nearly three months out of date, and foreign demand for Treasuries in recent months – in the secondary market and, more recently, at auction – has been driven by private sector institutions, not the official sector.

There are large pools of ‘hidden’ FX reserves too potentially worth trillions of dollars, held in offshore accounts, overseen by quasi-official entities like sovereign wealth funds or, in the case of China, state banks.

Meghan Swiber, director of US rates strategy at Bank of America, says the fall in custody holdings is a warning sign, especially as it has been accompanied by a modest decline in foreigners’ usage of the Fed’s overnight reverse repo (RRP) facility.

When Treasuries mature, foreign central banks will often park the cash at the RRP. But they haven’t been doing that lately, Swiber says, meaning both their Treasury holdings and overnight cash balances at the Fed are falling.

“We worry about foreign demand going forward,” Swiber wrote on Monday, also pointing out that it’s “unusual” for reserve managers to reduce their US Treasury holdings when the dollar is weakening. “This flow likely reflects official sector diversification away from dollar holdings.”

The USD 28.5 trillion Treasury market is deep and liquid, and central banks remain significant participants in it. They are cautious and careful by nature, meaning any changes to their holdings will be gradual.

But the weekly custody data suggest some central banks may already be getting that ball rolling.

(The opinions expressed here are those of the author, a columnist for Reuters)

(By Jamie McGeever; Editing by Jan Harvey)

Investors want clear ocean management rules to scale up funding

LONDON – A UN push for investment to protect the world’s oceans yielded around USD 10 billion in deals at a conference last week, way below the estimated annual need as many investors seek clearer regulation on ocean management before committing funds.

While political leaders at the United Nations conference in Nice took steps to tackle overfishing and pollution threatening delicate ecosystems and the people who depend on them, getting countries to agree to better governance has proven tough.

Just 50 countries have so far ratified a new High Seas treaty which sets out rules agreed by more than 130 nations in 2023 to govern international waters and clamp down on harmful practices. The United States, pulled out of various climate initiatives by President Donald Trump, is among those yet to ratify the treaty.

The lack of a clear governing framework and robust ocean-related data has stymied private sector finance to date, said Oliver Withers, head of nature at British lender Standard Chartered.

“The major dynamic that doesn’t apply to terrestrial is the high seas don’t belong to any one individual sovereign,” he said. “It is a significant challenge, there is no single sovereign responsible for the high seas.”

Of the deals chalked up in France, the bulk came from public sector banks, including USD 2.5 billion in funding by the Development Bank of Latin America and the Caribbean (CAF) and 3 billion euros (USD 3.5 billion) from a group of development banks to fight plastic pollution.

While a step up, the total figure falls far short of what is needed. Between 2015 and 2019, only USD 10 billion was invested against the UN estimate of USD 175 billion in required annual funding.

“Public finance isn’t enough but private finance is even less. So I think it’s a space in its infancy,” said Francine Pickup, Deputy Director, Bureau for Policy and Programme Support at the U.N. Development Programme.

Pickup said improving the policy backdrop and regulation, including removing subsidies she said encouraged harmful practices such as overfishing, was key, followed by the creation of a pipeline of investments including in start-ups focused on ocean-related technology.

To date, the sector has received just a small slice of overall funds, data shared with Reuters by industry tracker Sightline Climate showed.

Between 2020 and 2025, ocean tech received just 0.4% of the USD 202 billion invested across all sectors during that period, although the data showed a stronger start to 2025.

“What we seek as investors is that governments and the policymakers address systemic risks,” said Robert-Alexandre Poujade, biodiversity lead at BNP Paribas Asset Management, adding he would welcome the treaty “if it has lots of teeth and enforcement mechanisms”.

Fixing the funding shortfall also requires a concerted effort by policymakers and investors to tackle overlapping challenges to protecting marine biodiversity and ocean health.

A warming planet is heating up the oceans, exacerbating effects such as water acidification and coral bleaching that climate scientists say will be improved if the world manages to cut carbon emissions as planned.

Overfishing and polluting sea vessels, offshore oil drilling and, potentially, deep-sea mining that collectively damage ocean health also require firmer policy action, scientists, ocean experts and investors say.

While action has hitherto been slow, there were signs of progress in Nice, as more than 20 countries backed a call by France to prevent deep sea mining; and a number of fresh Marine Protected Areas were created.

“In a sense the ocean is the last area that we have been pillaging without thinking about tomorrow,” said Flavien Jouber, Seychelles’ minister for agriculture climate change and environment, describing it as a “sense of free-for-all”.

(USD 1 = 0.8693 euros)

(Reporting by Simon Jessop, Virginia Furnsess, and Kate Abnett; Additional reporting by Marc Jones in London; Editing by Emelia Sithole-Matarise)

Israel-Iran conflict highlights dollar’s tarnished safe-haven appeal: McGeever

ORLANDO, Florida – A dramatic spike in the potential for all-out war between Israel and Iran would typically be expected to spark an immediate and strong rally in the US dollar, with investors seeking the safety and liquidity of the world’s reserve currency.

That didn’t happen on Friday.

The dollar’s response to Israel’s strikes on Iranian nuclear facilities and military commanders, followed by Tehran’s initial threats and retaliation, was pretty feeble. The dollar index, a measure of the currency’s value against a basket of major peers, ended the day up only around 0.25%.

To be sure, the dollar fared better than US stocks or Treasuries, which both fell sharply on Friday. But with oil surging over 7% and gold up a solid 1.5%, a strong ‘flight to quality’ flow would have lifted the dollar more than a quarter of one percent.

The US currency’s move was particularly weak given the dollar’s starting point on Friday. It was at a three-and-a-half year low, having depreciated 10% year to date, with sentiment and positioning heavily bearish. Yet a significant geopolitical shock generated barely a knee-jerk bounce.

For comparison, the dollar rose more than 2% in both the first week of the 2006 Israel-Lebanon War and in the week following Israel’s invasion of Southern Lebanon last year.

The dollar’s weak response to this latest Middle East conflict supports the narrative that investors are now reassessing their high exposure to dollars, in light of some of the unorthodox policies put forward by US President Donald Trump in recent months.

The dollar was down slightly early on Monday, and gold and oil were giving back some of Friday’s gains too, as markets regained a foothold at the start of a busy week packed with key central bank meetings.

PAINED SMILE

The dollar has historically been one of the best hedges against short-term volatility sparked by geopolitical risk, behind gold and on a par with oil, according to research published last year by Joe Seydl, senior markets economist at JP Morgan Private Bank.

Indeed, a Journal of Monetary Economics paper from last year stated plainly, “The dollar is a safe-haven currency and appreciates when global risk goes up,” a trend resulting from the “fundamental asymmetry in a global financial system centered around the dollar” built up over the course of several decades.

That latter part of that argument hasn’t changed.

The dollar accounts for almost 60% of the world’s USD 12 trillion FX reserves, with its nearest rival, the euro, accounting for around 20%. Almost two-thirds of global debt is denominated in dollars, and nearly 90% of all FX transactions around the world has the greenback on one side of the trade.

That means traders, financial institutions, businesses, consumers and governments still need to be more exposed to dollars than any other currency, even if they question the direction of current US policy.

However, the dollar’s downside ‘structural’ risks are growing, analysts at Westpac noted on Sunday, as concern over Washington’s fiscal health and policy uncertainty erode the dollar’s ‘safe-haven identity’. Investors are now looking to hedge their large dollar exposure more than ever.

If this dampens their instinctive demand for dollars in periods of sudden geopolitical tension, uncertainty and volatility, then the so-called ‘dollar smile’ theory could be challenged.

This ‘smile’ is the idea that the dollar appreciates in periods of financial market stress as well as in ‘risk on’ periods of strong global growth and investor optimism, but sags in between. This idea was first outlined over 20 years ago by then currency analyst and now hedge fund manager Stephen Jen.

If the Israel-Iran conflict continues to escalate, that dollar smile could get rather lopsided.

(The opinions expressed here are those of the author, a columnist for Reuters)

(By Jamie McGeever; Editing by Chizu Nomiyama)

Japan bourse’s activist clash is a welcome sign

HONG KONG – By the standards of sharper-elbowed markets, the recent dust-up between activist investor Strategic Capital and the Tokyo Stock Exchange is positively mild. For Japan’s historically sleepy stock market, however, it’s a sign of progress for what remains a relatively young and underdeveloped activist ecosystem.

The short version of the clash, reported on June 9 by news outlet Toyo Keizai, goes like this: until recently, if a foreign investment fund held more than 10% of a Japanese stock and didn’t file paperwork confirming itself as having multiple backers, the exchange considered those holdings illiquid. Tokyo-based Strategic Capital built up a stake of over 10% in Osaka Steel 5449.T via its own foreign fund, but chose not to file said paperwork.

That pushed the free float of the Nippon Steel subsidiary below the threshold to remain listed, putting pressure on the parent to acquire the “child” listing and lining up a nice payout for Osaka Steel’s minority shareholders.

The gambit looked pretty clever until April 23, when the bourse issued guidance stating such shares would now be considered liquid by default, even without the paperwork. Cue an announcement from Osaka Steel that its free float suddenly met the minimum — and frustration from Strategic Capital, which penned a letter of complaint to the stock exchange.

It is still early days for activism in Japan, which makes such conflicts valuable in setting ground rules and expectations. The upshot of this spat for market participants is twofold: for one, the specific tactic deployed on Osaka Steel won’t work in the future, and more generally, the bourse probably won’t look favorably on activists trying to force delistings via a technicality.

Yet Osaka Steel, which trades at just 79% of book value, per LSEG, looks very much like the sort of underperforming “child” listing the exchange says it wants done away with. If it makes a habit of scotching activist strategies at will, the bourse risks undermining its broader strategy of using market forces to push listed groups to streamline governance and boost returns.

On its own, however, the recent move looks unlikely to do serious damage. Pressure from activists has already helped spur record year-to-date share buybacks of more than 12 trillion yen, according to figures from Nomura. And with a record 50 Japanese companies facing activist proposals this earnings season, per Nikkei Asia, there will be plenty of action in the coming weeks. Expect more wrinkles to get ironed out as the parties involved hammer out where the lines are. All for the better.

CONTEXT NEWS

Strategic Capital, a Tokyo-based activist investor, penned a letter of complaint to the Tokyo Stock Exchange after guidelines announced by the bourse in late April changed how it determined the liquidity of shares held by foreign investment funds, Japanese business magazine Toyo Keizai reported on June 9.

The change recategorized a stake of over 10% in Osaka Steel held by Strategic Capital via a foreign investment fund as liquid, pushing the free float of the Nippon Steel subsidiary back above the 25% threshold to remain listed on the exchange’s Standard Market.

(Editing by Antony Currie; Production by Ujjaini Dutta)

US yields rise as markets react to Middle East conflict

US Treasury yields rose Friday afternoon, on track to snap a four-day losing streak after Israel’s strike on Iran shocked markets, pushing oil prices higher and pressuring stocks.

Israel struck Iranian targets on Friday for a second night in what it said was a move to block Tehran from developing nuclear weapons.

The attack on multiple targets sparked a surge in oil prices and rekindled inflation concerns, which overshadowed economic and trade news earlier in the week that boosted demand for US sovereign debt and pushed yields lower.

Consumer data from the University of Michigan also showed an unexpectedly large jump in sentiment and expectations. However, markets appeared to show little interest in light of the unfolding violence in the Middle East.

Earlier in the week, yields had fallen on cooler-than-expected consumer inflation data, reported progress in reaching a detente in US-China trade relations and signs of deepening weakness in the US labor market.

Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income, said that rather than a typical flight to safety in US sovereign debt, the rising yields instead pointed to markets better positioned to absorb an outburst of violence in the Middle East.

When Iraqi leader Saddam Hussein invaded Kuwait in 1990, for example, the United States was in recession and oil supplies were tighter, he said.

“But when you’re in a world that’s already seen a fair amount of geopolitical and military activity in that region and elsewhere, and the economy’s on a fairly good footing with a good oil supply, the market is less susceptible,” said Tipp.

Investors in the coming week will turn their eyes to the next policy announcement from the Federal Reserve, but futures currently predict the central bank will not cut rates before September.

The yield on the benchmark US 10-year Treasury note was last up 6.7 basis points to 4.424%, nevertheless leaving it down about 8 basis points for the week.

The yield on the 30-year bond rose 7.2 basis points to 4.915%, down about 4 basis points since the prior week.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 46.4 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 5 basis points to 3.956%, leaving it down nearly 14 basis points for the week — the biggest weekly decline since mid-April.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.320% after closing at 2.284% on June 12.

The 10-year TIPS breakeven rate was last at 2.294%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Douglas Gillison in Washington; additional reporting by Davide Barbuscia in New York; Editing by Paul Simao and Lisa Shumaker)

Investors unnerved as Israel-Iran conflict fuels oil market rally

NEW YORK/GDANSK – Investors were on edge as financial markets reopened on Sunday, with crude oil prices initially up near 4% as markets were gripped by the escalating threat of a sweeping conflict in the Middle East. US stock futures opened marginally lower.

Israel and Iran launched fresh attacks on each other on Sunday, killing and wounding civilians and raising concerns of a broader regional conflict, with both militaries urging civilians on the opposing side to take precautions against further strikes. Yemen’s Iran-aligned Houthis joined the fray.

Images from Tehran showed the night sky lit up by a huge blaze at a fuel depot after Israel began strikes against Iran’s oil and gas sector – raising the stakes for the global economy and the functioning of the Iranian state.

“The market is very headline-driven and short-term focused, so there’s just a lot of volatility over the near term,” said Kathryn Rooney Vera, chief market strategist at StoneX Group.

Brent crude futures prices added just under 4% to trade near USD 76.94 after resuming trading on Sunday, having risen 7% on Friday as Israel and Iran first traded strikes. They later pared gains to trade up USD 2.14 at USD 76.37.

“It is noteworthy that while the Israelis have attacked Iran’s natural gas processing facility, which fuels its power grid, it hasn’t as of now hurt its oil export facilities,” said Eric Beyrich, portfolio manager at Sound Income Strategies. Of the early market moves, he said “this could all change as the day unfolds.”

Israel’s air offensive against Iran that began early on Friday, killing commanders and scientists and bombing nuclear sites in a stated bid to stop Tehran from building an atomic weapon, knocked risky assets including stocks, on Friday. It also lifted oil prices and prompted a rush into gold and the dollar, which resumed its role as a safe-haven asset for the first time in months.

Rallying oil prices pose a risk to the inflation outlook, as central banks around the world grapple with the impact on prices from Trump’s trade tariffs and the effect on economic growth.

Rooney Vera at StoneX said she was worried about possible supply restrictions in case of a closure of the Strait of Hormuz, a narrow shipping lane between Iran and Oman. Any closure could restrict trade and further impact global oil prices.

“That could worsen inflationary pressures,” she said.

Investors are skittish, and the S&P 500 appears to have stalled after rallying about 20% from its trade war-induced April low to near-record highs. Futures opened slightly lower on Sunday, with S&P 500 futures down 0.2% early in the overnight session.

“The equity market will breathe somewhat of a sigh of relief that Iranian military muscle is not at the level that some of us feared,” said Jack Ablin, chief investment officer of Cresset Capital.
Meanwhile, protests, organised by the “No Kings” coalition to oppose Trump’s policies, and the assassination of a Minnesota state lawmaker on Saturday, added to downbeat sentiment.

“It’s more of an oil story than an equity story at this point,” said Jim Carroll, senior wealth adviser and portfolio manager at Ballast Rock Private Wealth. “Stocks right now seem to be hanging on.”

The Cboe Volatility Index, often called the Wall Street “fear index,” finished at 20.82 on Friday, its highest close in three weeks.

(Reporting by Suzanne McGee, Saqib Iqbal Ahmed and Davide Barbuscia in New York, and Linda Pasquini in Gdansk; Editing by Alden Bentley, Richard Chang, Amanda Cooper, Susan Fenton, and Matthew Lewis)

Fed meeting in focus as investors seek rate-path hints

NEW YORK – The Federal Reserve’s balancing act between concerns about a weakening labor market and still above-target inflation will take center stage for investors in the coming week as they weigh risks to the rally in the US stock market.

The benchmark S&P 500 has rebounded sharply over the past two months as worries about the impact of trade barriers on the economy have eased since President Donald Trump’s “Liberation Day” announcement on April 2 sent the market plunging.

The rally hit a stumbling block on Friday as stocks fell globally and investors moved to safe-haven assets after Israel launched a military strike on Iran, and Iran fired missiles in response. Major US indexes ended down over 1% on Friday, with the S&P 500 falling 1.1%.

The Fed’s two-day monetary policy meeting could present the next major obstacle for markets. While the US central bank is widely expected to hold interest rates steady when it announces its decision on Wednesday, investors are eager for any hints about whether the Fed might be poised to lower rates in the coming months.

The fed funds rate has been at 4.25%-4.50% since the central bank last eased in December, by a quarter percentage point.

“What the Fed is going to have to try to do next week is encourage the belief that they are able to act without actually promising anything,” said Drew Matus, chief market strategist at MetLife Investment Management. “If they move rates lower too early before there is evidence that there is weakening in the economy that they can then point to, they raise the risk of actually boosting inflation expectations further.”

At its last meeting in May, the central bank said risks of both higher inflation and unemployment had risen. The Fed has a dual mandate to maintain full employment and price stability, and investors will be seeking any signs of whether officials are more concerned about one of those goals and what that means for the path of rates.

One area of focus on Wednesday will be an update to Fed officials’ projections about monetary policy and the economy, which were last published in March.

Larry Werther, chief US economist of Daiwa Capital Markets America, will be watching estimates for unemployment. While the Fed officials’ last projection was for unemployment to end 2025 at 4.4%, Werther is projecting a year-end rate of 4.6%, saying recent data including jobless claims has indicated softening in the labor market.

“If the unemployment rate is expected to move higher, just aligning with what we’ve seen in the labor market, and inflation isn’t expected to move much beyond what the Fed is projecting, then it opens the door to further easing in support of the labor market later this year,” Werther said.

Fed funds futures indicate markets expect two rate cuts by the end of this year, with the next one likely in September, according to LSEG data. Such bets were bolstered by benign inflation reports this week.

Investors are also focused on Trump’s selection to succeed Fed Chair Jerome Powell, with the president regularly urging the central bank to lower rates. Trump earlier this month said a decision on the next chair would be coming soon, although he said on Thursday that he would not fire Powell, whose term ends in May 2026.

The release of monthly retail sales on Tuesday will also be in focus. Investors want to see if tariffs are leading to higher prices that pressure consumer spending.

Trade developments are likely to continue to keep markets on edge, with a 90-day pause on a wide array of Trump’s tariffs set to end on July 8. A trade truce this week between China and the United States offered hope that the two countries can reach a lasting resolution, but the absence of detailed terms left room for potential future conflict.

The S&P 500 is up 1.6% so far this year. But the index has gained 20% since its low for the year on April 8, and is 2.7% off its record high set in February.

“The market has rallied so hard, so fast,” said Marta Norton, chief investment strategist at retirement and wealth services provider Empower. “There is vulnerability to anything that doesn’t support that kind of benign narrative that has been established.”

(Reporting by Lewis Krauskopf in New York; Editing by Alden Bentley, Nick Zieminski and Matthew Lewis)

Oil firm as intensifying Israel-Iran conflict stokes supply disruption fears

TOKYO – Oil prices climbed on Monday, extending Friday’s rally, as renewed strikes by Israel and Iran over the weekend increased concerns that the battle could widen across the region and significantly disrupt oil exports from the Middle East.

Brent crude futures rose USD 1.12, or 1.5%, to USD 75.35 a barrel by 0019 GMT, while US West Texas Intermediate crude futures gained USD 1.10, or 1.5%, to USD 74.08. They had surged more than USD 4 earlier in the session.

Both benchmarks settled 7% higher on Friday, having surged more than 13% during the session to their highest levels since January.

The latest exchange of strikes between Israel and Iran on Sunday resulted in civilian casualties and heightened fears of a broader regional conflict, with both militaries urging civilians on the opposing side to take precautions against further strikes.

The latest developments have stoked concerns about disruptions to the Strait of Hormuz, a vital shipping passage.

About a fifth of the world’s total oil consumption, or some 18 to 19 million barrels per day (bpd) of oil, condensate and fuel, passes through the Strait.

“Buying was driven by the ongoing Israel-Iran conflict, with no resolution in sight,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

“But as seen last Friday, some selling emerged on concerns of overreaction,” he said.

While markets are watching for potential disruptions to Iranian oil production due to Israel’s strikes on energy facilities, heightened fears over a Strait of Hormuz blockade could sharply lift prices, Tazawa added.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), currently produces around 3.3 million bpd and exports more than 2 million bpd of oil and fuel.

The spare capacity of OPEC and its allies, including Russia, to pump more oil to offset any disruption is roughly equivalent to Iran’s output, according to analysts and OPEC watchers.

US President Donald Trump said on Sunday he hopes Israel and Iran can broker a ceasefire, but added that sometimes countries have to fight it out first. Trump said the US will continue to support Israel but declined to say if he asked the US ally to pause its strikes on Iran.

German Chancellor Friedrich Merz said he hoped a meeting of the Group of Seven leaders convening in Canada on Sunday would reach an agreement to help resolve the conflict and keep it from escalating.

Meanwhile, Iran has told mediators Qatar and Oman that it is not open to negotiating a ceasefire while under Israeli attack, an official briefed on the communications told Reuters on Sunday.

(Reporting by Yuka Obayashi in Tokyo; Editing by Matthew Lewis, Paul Simao, and Muralikumar Anantharaman)

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