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Market Wrap

The US struck Iran for a second day to curb threats to shipping in the Strait of Hormuz, revoking Iran’s oil export waiver and threatening further escalation. Iran vowed immediate retaliation and claims to have hit US-linked bases. Both sides accuse each other of violating a fragile truce, jeopardizing stalled peace talks. Market reaction to these attacked was jump in oil prices Crude oil surged sharply, US equities closed mixed, with tech stocks outperforming. Treasury yields rose across the curve in a modest bear-flattening move. The DXY pared earlier gains to close flat at about 101. Expect Indian rupee to depreciate on rising oil prices .

The inbound Tanker traffic through the Strait of Hormuz has nearly halted. In early Asian trading, Brent futures briefly topped USD80 a barrel and WTI jumped above USD75, extending the gains overnight. Ther was hardly any inbound tanker traffic to the strait which was not related to Iran

Fed minutes from the June meeting, released Wednesday, The June FOMC meeting minutes, released overnight, showed growing concern among policymakers over inflation even as worries over the labour market slightly receded., adding to hawkish repricing across the front end of the curve. Fed Chair Kevin Warsh is scheduled to testify before the Senate Banking Panel on July 15 on the semi-annual monetary policy report. The Fed funds futures are pricing in a total hike of 38bp by year end and a total rate hike of 39bp by October 2027. Sentimentally positive for USD

IMF revised down global growth target to 3% for 2026, from 3.1% predicted in April, and a slowdown from the 3.5% average recorded over the previous two years. The global economy as a whole has, so far, weathered the shock from the war better than feared.

US President Trump threatened to halt all trade with Spain at the NATO summit, though he later said Spain had agreed to pay more on defence and was "very generous." Spanish stocks were the worst-performing major European market on Wednesday as a result. Negative for Euro

The DJIA and the S&P 500 fell 1.1% and 0.3% respectively, while the Nasdaq Composite gained 0.2%. The Eurostoxx 50 fell 1.8%. The Dollar Index was little changed at 101.05. EUR-USD was flat at around 1.1420. The US 2Y yield rose 3bp to 4.22% and the 10Y rose 3bp to 4.58%. The German 10Y yield rose 10bp to 3.09%, and the UK 10Y yield rose 13bp to 4.97%. Brent crude oil prices surged 5.2% to USD78.02, while WTI rose 4.4% to USD73.52. Gold fell 0.7% to USD 4,077.

Data watch: Geopolitical headlines are likely to drive markets. As for economic data, weekly initial jobless claims for the week of 4 Jul and existing home sales for Jun will round out the US data calendar for the week.