Iran – Neither war nor peace
Developments around Iran remain highly uncertain, but the most likely near-term outcome is the continuation of the same fragile “no-war, no-peace” environment, with periodic military exchanges followed by attempts to contain the escalation. The renewed hostilities and Trump’s comments that the agreement with Tehran was effectively over initially triggered a sharp spike in oil prices and a brief risk-off move across markets. However, concerns eased as Trump repeatedly reassured markets that “Iran wants a deal”. Both sides still appear interested in avoiding a full-scale conflict, but the lack of clarity around the framework leaves markets exposed to further headline-driven volatility.
Ankara NATO Summit – Geopolitics took centre stage
The NATO summit in Ankara was a major source of geopolitical headlines, with discussions centred on Ukraine, European security, defence spending and the future role of the US within the alliance. Trump’s position on Ukraine had become somewhat more supportive in the weeks leading up to the summit, marking a shift from his earlier scepticism towards continued US assistance. Nevertheless, his stance remained fluid and highly transactional. Erdogan used the summit to reinforce Turkey’s role as an indispensable NATO member, a strategic intermediary in the Ukraine and Iran conflicts and, a key security partner for both Europe and the US.
US CPI – The July hike risk is not dead yet
US CPI data will be released this week, with consensus expecting headline inflation to slow to 3.8% YoY from 4.2%, partly as some of the recent oil-driven increase is mechanically reverses. The release will be particularly important ahead of the Fed’s July meeting, with markets currently pricing around a 25% probability of a rate hike. Although the latest NFP report was weaker than expected, several indicators continue to point to resilient US activity. With the Fed providing little forward guidance, any upside inflation surprise, particularly in the core components, could materially revive expectations of a hike at the July meeting.
Algebris Investments’ Global Credit Team
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