While the news that the US is giving itself two weeks to decide whether to intervene in Iran – which is slightly better than earlier reports suggesting they would go in this weekend – has somehow eased tensions, looming uncertainties pushed US and European equities lower yesterday. I’m not sure the US buying itself time can be interpreted as a sign of de-escalation.

European futures are slightly better bid in Asia, perhaps due to interest in European military and defense stocks, which particularly benefit the German DAX and the British FTSE. Rheinmetall is now replacing Kering – the maker of Gucci bags – in the Stoxx 50 index.

Energy stocks are also closely watched, as US crude consolidates gains near and above $75pb with looming upside risks. We’re starting to hear impressive forecasts – as is always the case in escalation markets, with some pointing to a potential jump in crude prices to the $130–150pb range if Iran were to block oil and gas flows through the Strait of Hormuz, where 20% of global supply transits. Satellite images show Iran is rushing to push its oil to market rapidly. It’s said that their exports surged 44% since last week compared to the past 12-month average – likely to boost revenues and act before any potential strike on its oil facilities.

So what’s happening feels like dark clouds gathering in the sky. And the calm in the market could be the calm before a storm.

As such, risks to oil and gas remain tilted to the upside. Nat gas just hit $4 per MMBTu yesterday and is consolidating gains around this level this morning. Gold is not performing as well as it did during the worsening trade headlines, as some flows have been diverted to the US dollar and US Treasuries. But interestingly, the dollar is also giving back some of its early-week gains, and the Swiss franc continues to amass safe-haven flows despite the Swiss National Bank’s (SNB) decision yesterday to lower rates to 0% in an attempt to weaken the franc and support Swiss exporters, who are hit by a terrible combination of tariffs and a strong currency.

Indeed, Swiss watch exports dropped nearly 10% in May. Exports to the US fell 25% – after surging almost 150% the month before the tariffs hit – and exports to major markets including China, Japan, and the UK also declined. So yes, Swatch Group is not doing well these days. The SMI’s reaction to yesterday’s rate cut was not brilliant either. The index is preparing to test the critical Fibonacci support of the post-April 2nd rebound – which stands near the 11,823 mark and serves as a dividing line between the current positive trend and a medium-term bearish consolidation.

The problem is, if a zero-rate policy couldn’t cheer investors up or weaken the franc, there’s not much else the central bank can do. Having exposure to a domestic real estate ETF is probably a safer choice.

Elsewhere, the Bank of England (BoE) refrained from cutting its policy rate yesterday in a widely expected decision. But the composition of the MPC vote was slightly more dovish than expected, with three members (instead of two) voting to cut rates. The message was extremely balanced. MPC members acknowledged the weakening jobs market, softening price pressures in services, slower growth due to Chancellor Reeve’s heavy budget consequences, and Trump’s erratic trade policies. But they also pointed to potential surges in oil and food prices. Six members thought it best to wait until at least August to determine whether a rate cut is justified. Fair enough. Cable is back to 1.35, the EURGBP is consolidating just below 0.8550, and the FTSE 100 sold off under the weight of rising geopolitical tensions. Still, defense and energy stocks should offer some support to the index amid worsening Middle East tensions.

Overall, the week brought two more rate cuts beyond the SNB to Europe. The Riksbank and Norges Bank also opted to cut rates this week to support their economies amid trade and geopolitical headwinds. Meanwhile, the IMF said in a report published yesterday that risks to European growth have shifted sharply to the downside. They forecast the euro area will grow 0.8% this year, despite European Central Bank (ECB) support and European governments’ efforts to boost spending. The IMF called for a ‘decisive push’ to deepen the single market.

The problem is, European governments are drifting to the political right amid the global geopolitical chaos, making the path forward more complex. Either Europeans realize they are too small individually to stand up to increasingly aggressive major powers and decide to stick together – or they will fall apart. But since things move slowly in Europe, I don’t expect either scenario to materialize anytime soon. So the ECB will likely have to continue doing the heavy lifting.

The EURUSD continues to benefit from dollar weakness. The strong euro helps temper inflationary pressures. As long as the dollar stays weak and inflation remains contained, the ECB will have room to act. Is that a reason to keep buying European stocks? Time will tell.

Before we go, today is Triple Witching Day, when futures and options expire simultaneously, often leading to higher volatility. Repositioning flows could drive sharp market moves in the final hours of the trading week and early next week.