US crude opened the week above $76 per barrel, and Brent crude briefly pushed above $84 per barrel. However, both benchmarks quickly gave back gains. Natural gas also spiked at the open, breaking above its 100-day moving average, before retreating. The US dollar edged higher on haven flows, while gold, which opened at record levels, is also paring gains. The early trading reaction points to a surprisingly muted response from markets despite intensifying Middle East tensions.

Some analysts argue that escalating conflict could ultimately dampen global growth and cap oil’s upside. Others believe rising prices could encourage shale producers to boost output. Realistically, the risk of disruptions in the Strait of Hormuz – a critical chokepoint for a third of global oil flows – means the balance of risks remains tilted to the upside. Many experts warn that current tensions between Israel and Iran look more serious than in recent years, and that a broader conflict could send oil prices north of $100 per barrel.

In equities, European futures are trading slightly lower in Asia, while US futures are modestly higher after Friday’s sharp selloff, which saw the S&P 500 drop more than 1% amid geopolitical concerns. Energy stocks led Friday’s gains but may give back some ground as oil prices fail to build on this morning’s jump.

In corporate news, Visa and Mastercard shares fell between 4.5% and 5% on reports that Walmart and Amazon are exploring the possibility of launching their own stablecoins to reduce payment costs and delays. Such a move could mark a significant development for the digital asset space, potentially opening the door for corporate funding via token issuance rather than traditional debt or equity markets. It’s a space worth watching for the future of crypto and tokenized finance.

Back in traditional markets, Japan’s Nikkei is up nearly 1% this morning, supported by a weaker yen and reports that Japan and the EU may step up cooperation on defense industry initiatives. European defense stocks remain in focus amid rising geopolitical tensions and questions over US commitments. In contrast, Chinese equities are under pressure following mixed economic data. Retail sales growth in May surprised to the upside at 6.4% (vs <5% expected), but investment and industrial production figures disappointed, likely reflecting slower exports and the impact of tariffs. The Hang Seng slipped back below the 24,000 mark.

This week, markets will remain focused on Middle East developments, energy prices, and a slew of central bank decisions: the Fed, BoE, SNB, and BoJ are all in play.

On Tuesday, the Bank of Japan (BoJ) is expected to keep rates unchanged and slow the pace of its asset purchase tapering. With trade and geopolitical tensions mounting, the BoJ is likely to avoid additional stress on Japanese sovereign bonds. A dovish stance could cap yen appreciation, provide support for Japanese equities, and help stabilize bond markets. Many now expect the BoJ’s next rate hike won’t come before Q1 2026.

On Wednesday, the Federal Reserve (Fed) is also expected to hold rates steady. A cut before the September meeting appears unlikely. Officials are likely to remain cautious given trade-related uncertainties and may want to observe how potential tariffs affect inflation. Strong labour market data gives them breathing room. Meanwhile, the University of Michigan’s consumer sentiment index saw its largest monthly jump in June, suggesting that despite geopolitical turmoil, tariff threats, deportation debates, and social unrest, US consumers remain remarkably resilient.

On Thursday, the Bank of England (BoE) is also expected to stay on hold, despite growing concerns over the UK’s fiscal path. Meanwhile, the Swiss National Bank (SNB) is widely expected to cut its policy rate to 0% to ease upward pressure on the franc and support the economy. Trade tensions between Switzerland and the US also loom large: Swiss exporters face more than 30% tariffs if no deal is reached.

So far, negotiations have yielded no breakthrough. Swiss equities have lagged their European peers since the post-April 2 rebound, recovering only about two-thirds of their March–April losses – despite broad expectations of an SNB rate cut. This suggests that unless trade frictions ease and the franc weakens, a rate cut alone may not be enough to spur risk appetite.