Futures Jump On Hopes Of War De-escalation, Korea Enters Bear Market On Memory Rout

Futures are higher on a WSJ report that Trump is considering exiting the middle east conflict even if the Strait of Hormuz is not reopened; but the market is deciding whether this is a genuine intent to leave or another feint given the previous US attacks during negotiations and that Trump has yet to adjust his Apr 6 deadline. As of 8:00am, S&P futures are 1.1% higher, at session after approaching correction territory yesterday. Nasdaq futures rise 1%, with memory stocks lagging amid reports of DRAM prices plunging as much as 30%. In premarket trading, Mag7 names are higher as part of an ‘Everything Rally’ with bids to both Cyclicals and Defensives. In global markets, South Korea’s Kospi index slid 4.3%, entering a bear market as it extended its drop from a February high to 20%. SK Hynix Inc. slumped more than 7%.  Bond yields are down 3-5bp, with the 10Y yield down to 4.30% after nearly hitting 4.50% two days ago; the Dollar is also lower. Commodities are mixed with crude/gasoline mixed (US avg price rises above $4/gal vs. $2.98 one month ago), after fading an earlier bounce, highlighting the paralysis created by the continually shifting White House statements. Precious metals are rallying as base metals are mixed, and Ags are bid. The macro data focus will be on JOLTS and Consumer Confidence.

In premarket trading, Mag 7 stocks are all green (Meta +1.5%, Microsoft +1.6%, Alphabet +1.4%, Amazon +1.5%, Apple +0.8%, Nvidia +1.3%, Tesla +1%)

• Apellis Pharmaceuticals Inc. (APLS) soars 138% after Biogen Inc. agreed to acquire the company for $5.6 billion.
• Centessa Pharmaceuticals (CNTA) rises 48% after Eli Lilly & Co. agreed to buy the sleep drug maker in a deal worth up to $7.8 billion.
• FactSet Research Systems (FDS) gains 6% after the financial data company boosted its adjusted earnings-per-share forecast for the full year. It also reported adjusted EPS and revenue for the second quarter that beat expectations.
• McCormick (MCK) rises 1.8% after Unilever said talks to sell most of its food business to the maker of spices are advanced. McCormick reported earnings on Tuesday and made no mention of the Unilever deal.
• PepGen (PEPG) plunges 44% after the biotech gave clinical data from a mid-stage trial of its drug candidate for a type of muscle disease. Analysts say the data is mixed and Oppenheimer notes that the selloff might be overdone.
• Phreesia (PHR) tumbles 23% after the healthcare software company lowered its full-year revenue forecast far below the analyst consensus. At least four brokerages downgraded their rating on the stock.
• Scholar Rock (SRRK) rises 11% after the company resubmitted its biologics license application for apitegromab, a muscle-targeted therapy for children and adults with spinal muscular atrophy, to the US Food and Drug Administration.
• T1 Energy (TE) falls 17% after the solar equipment manufacturer reported a wider than expected fourth-quarter loss per share and higher-than-expected expenses.

Stocks are bouncing in the final session of a brutal month as traders welcome a WSJ report that Trump may be willing to end the Iran war even without reopening the Strait of Hormuz (although subsequent comments by Trump suggest that this is merely the latest bluff). Signs of an increased desire for de-escalation from Trump may reduce anxiety over his threats to attack Iranian energy infrastructure. On the other hand, Tehran would be left in control of the key oil shipment chokepoint. Meanwhile, Iran hit a fully laden Kuwaiti oil tanker off Dubai in a drone attack. 

Without a ceasefire or tangible progress in negotiations, the market will keep “fading the administration’s ‘everything is going well’ happy talk,” Vital Knowledge’s Adam Crisafulli wrote in a note. Carmignac Gestion’s Kevin Thozet observed that “Trump can’t simply turn an on/off switch on the crisis.” Other observers argue that rhetoric alone about a potential end to the conflict cannot create certainty for the market. 

In a social media post, Trump said Iran has “essentially” been decimated and that allies should either buy jet fuel from the US or “take it” from the Strait of Hormuz. Still, an Iranian drone strike on a fully laden Kuwaiti oil tanker off Dubai emphasized the continuing danger. “One can’t exclude a swift resolution, but it won’t mean going back exactly to where we were in February,” said Kevin Thozet, a member of the investment committee at Carmignac. “Investors are seeing the glass half-full. During the past 15 years or so, buying the dip has been absolutely key.”

Trump has repeatedly swung between saying a deal with Iran is close and warning he’s prepared to escalate the US campaign. On Monday, he threatened to target Iran’s energy infrastructure and desalination plants if the strait stays shut. He earlier set Tehran an April 6 deadline to reopen the waterway. “There’s clearly some complacency across the market; there’s no capitulation whatsoever to be found in flows, fundamentals or through a technical analysis,” said Karen Georges, an equity fund manager at Ecofi in Paris. “Despite the rise today, I would say the market is reluctant to take a strong directional bet.”

Equities are, nonetheless, primed to rip higher on positive news about the war following large-scale unwinding of risk by hedge funds and CTAs. The concern is that, post an initial bounce, worries about the economy and the path for interest rates will trigger further volatility episodes, setting up stocks for months of roller-coaster conditions. 

European stocks are also higher across the board in the wake of a WSJ report suggesting that US President Trump is willing to end the Iran war even if the Strait of Hormuz remains closed. The Stoxx 600 is set to end 1Q lower by just over 1% and down nearly 8% from February’s record high; mining and financial services stocks leading gains. Meanwhile, energy shares are the biggest laggards. Here are the biggest movers Tuesday:

• Demant rises as much as 4.5%, the biggest gainer in the Stoxx 600 Health Care Index on Tuesday morning, after Danske Bank upgraded its rating on the stock to buy from hold
• Unilever shares rise as much as 1%, trading only marginally higher than the May 2024 low reached last week, after the company confirmed discussions to sell most of its food business to McCormick
• 4iG shares rise as much as 15% after the Hungarian telecommunications and defense group says it is selling its 49% stake in Hirtenberger Defence to Czech peer CSG
• Borregaard shares rise as much as 4.9% after an upgrade to buy from Kepler Cheuvreux, which makes a series of changes to its ratings to favor what it sees as the more resilient names in the European chemicals sector
• Ashmore rose as much as 4.5% in London on Japan Post Insurance Co.’s plans to invest roughly $1 billion more in the British money manager’s emerging markets funds
• Pets at Home shares gain as much as 5.2%, the most in two months, after the specialist retailer reported progress in turning around its Retail arm
• Raspberry Pi shares rise as much as 30% after the maker of low-cost computers said revenues for 2026 are expected to be materially higher than current market expectations
• Future slumps as much as 30%, to the lowest since October 2017, after what JPMorgan describes as a weak first-half trading update
• Inventiva shares sink as much as 20% after the French biopharmaceutical company said it expected topline results of its late-stage clinical trial evaluating lanifibranor

Space is also making headlines this week, with Virgin Galactic soaring in late trading after it resumed some sales of commercial space flights. NASA is making final preparations for the Artemis II missions, while what a history-making SpaceX IPO could mean for the space economy is discussed in the Big Take podcast. In other corporate news, Unilever said talks to sell most of its food business to McCormick are advanced and a final deal could be announced later on Tuesday. Boeing will team up with Rheinmetall to offer drones known as the Ghost Bat to Germany’s military.

The Iran war’s impact on prices is beginning to show in economic data. The euro area saw its steepest jump in inflation since 2022 as the Iran war pushed energy costs sharply higher, reinforcing expectations that the European Central Bank will have to raise interest rates. Consumer prices rose 2.5% from a year ago in March – up from 1.9% the previous month and the highest since January 2025. Markets are pricing as many as three quarter-point hikes in the ECB’s deposit rate this year, from its current level of 2%.

“The March rise in inflation is likely the beginning of a sustained pickup,” wrote Bill Diviney, ABN Amro’s senior euro-zone economist. He expects the ECB to raise rates in April and June “in order to pre-empt any de-anchoring of inflation expectations.”

In Asia, a slump in chipmakers fueled stock losses after Monday’s rout in US-listed peers. South Korea’s Kospi index slid 4.3%, extending its drop from a February high to 20%. SK Hynix Inc. slumped more than 7%. US chipmakers such a Micron Technology Inc. and Sandisk Corp., meanwhile, underperformed in premarket trading.

In FX, the Bloomberg Dollar index falls. USD/JPY slips 0.2% to 159.37; Month-end flows make for choppy trading while hedge funds are rolling over short-term options exposure over the next week, Europe-based traders say. EUR/USD drops 2.9% this month, the most since July; it’s little changed on the day at 1.1469. AUD/USD rises as much as 0.3% to 0.6875 before paring gains; it’s up a fifth consecutive quarter, the longest winning streak since 2007.

In rates, treasury futures hold modest gains led belly sectors, with 5-year yields nearly 5bp richer on the day, outperforming European bonds. US session features several economic data points led by consumer confidence and JOLTS job openings, while Treasuries may receive support from month-end index rebalancing at 4pm New York time. US yields are at least 3bp richer across the curve with 5s30s spread wider by around 2bp as belly outperforms. 10-year, about 4bp lower near 4.31%, outperforms bunds and gilts. Continued belly outperformance trims 2s5s30s fly by nearly 3bp, adding to Monday’s 3.5bp drop. The below-expected euro-zone inflation data passed with little market reaction as traders await more evidence on the extent of the Iran war on price pressures.

In commodities, WTI crude oil futures have pared a 3.9% advance to multiyear high to about 0.4% and around $108 per barrel for the June contract following report that US President Trump is willing to end military operation in Iran even if Strait of Hormuz remains closed.  Spot gold is up for a third session in a row, higher by 0.8%. Bitcoin is down 0.5% after a brief foray below $66,000.  

US economic data calendar includes January FHFA house price index and S&P Cotality home prices (9am), March MNI Chicago PMI (9:45am, several minutes earlier for subscribers), March consumer confidence and February JOLTS job openings (10am) and March Dallas Fed services activity (10:30am). Fed speaker slate includes Goolsbee (12pm), Schmid (1:10pm), Barr (3pm) and Bowman (5:10pm)

Market Snapshot

• S&P 500 mini +0.9%
• Nasdaq 100 mini +0.8%
• Russell 2000 mini +1.4%
• Stoxx Europe 600 +0.7%
• DAX +0.7%, CAC 40 +0.5%
• 10-year Treasury yield -3 basis points at 4.32%
• VIX -1.7 points at 28.87
• Bloomberg Dollar Index little changed at 1221.56
• euro little changed at $1.147
• WTI crude -0.9% at $101.92/barrel

Top Overnight News

• US gasoline prices climbed above an average of $4 a gallon for the first time since August 2022, one of the most visible measures of consumer pain. BBG
• President Trump told aides he’s willing to end the U.S. military campaign against Iran even if the Strait of Hormuz remains largely closed, administration officials said, likely extending Tehran’s firm grip on the waterway and leaving a complex operation to reopen it for a later date. WSJ
• The IRGC announced that the Strait of Hormuz is fully under the control of its soldiers, and “the slightest movement of the enemies will be hit by missiles and drones”, adding that “the operation continues”, IRGC’s public relations channel reported.
• Strait of Hormuz to be run by multinational coalition under White House plan, The Telegraph reported; Second proposal put forward by Pakistan and regional powers. Rubio stressed there would be “no fees, and free circulation” through the key shipping route, according to one interpretation of his intervention.
• Houthis in Yemen are monitoring American movements at bases in the Horn of Africa that may signal an imminent American move in the Red Sea, according to Israeli Radio journalist. According to the Yemeni intelligence sources, Washington intends to create a maritime security zone in the Red Sea region and the base in Djibouti will become the center of command and control and rapid intervention. Yemeni officers said that there are American movements in order to bring the Red Sea and the Bab al-Mandab strait into the campaign.
• Chinese suppliers say they’re raising prices for their goods because of the recent swings in oil prices resulting from the Iran war and closure of the Strait of Hormuz. A prolonged impasse in the critical waterway also raises the possibility of product shortages. CNBC
• A gauge of activity in China’s sprawling manufacturing sector returned to expansion in March in part thanks to seasonal factors, but as the war in the Middle East raises supply shock risks, businesses are starting to feel the pressure. China saw manufacturing (50.4, up from 49 in Feb and ahead of the consensus forecast of 50.1) and non-manufacturing (50.1, up from 49.5 in Feb and ahead of the consensus forecast of 49.9). WSJ
• Unilever is in advanced talks to combine its food unit with McCormick, in a deal that may include a $15.7 billion upfront cash component and McCormick shares. The agreement may be announced today. BBG
• Euro-area inflation jumped the most since 2022 as the Iran war pushed energy costs sharply higher. It quickened to 2.5% this month, up from 1.9% the previous month. BBG
• Iran is pushing the Houthis to prepare for a renewed campaign against Red Sea shipping, contingent upon any further escalation by the US in its war on the Islamic Republic. BBG
• Eli Lilly To Acquire Centessa Pharmaceuticals For $38.00 In Cash Per Share Plus One Non-Transferrable Contingent Value Right. BBG
• States are pushing ahead with their own AI regulations despite warnings from the White House to allow the federal government to set rules for the industry. NYT

A more detailed look at global markets courtesy of Newqsuawk

APAC stocks were mixed with some indecision seen amid fluctuations in oil and mixed geopolitical headlines, including US President Trump’s threats to obliterate Iran’s energy infrastructure if a deal is not made soon, although he was also reported to have told aides he is willing to end the military operation in Iran without reopening Hormuz. ASX 200 rallied with gains led by strength in tech, telecoms and financials, while there was little impact from the RBA minutes, which stated that board members agreed financial conditions needed to be restrictive and that a further tightening would likely be needed, but disagreed on whether to hike at the meeting. Furthermore, members agreed that it is not possible to predict the future path of the cash rate with any confidence, given the Middle East conflict. Nikkei 225 retreated at the open but is off lows amid mixed data and fluctuations in oil. Hang Seng and Shanghai Comp failed to sustain early gains and dipped into negative territory despite better-than-expected Chinese official PMI data, and with participants reflecting on a deluge of earnings releases.

Top Asian News

• Chinese NBS Non-Manufacturing PMI (Mar) 50.1 vs. Exp. 49.9 (Prev. 49.5).
• Chinese NBS General PMI (Mar) 50.5 vs. Exp. 50.2 (Prev. 49.5).
• Chinese NBS Manufacturing PMI (Mar) 50.4 vs. Exp. 50 (Prev. 49.0, Low. 48.8, High. 50.5).
• Japanese Tokyo CPI YoY (Mar) Y/Y 1.4% vs. Exp. 1.7% (Prev. 1.6%).
• Japanese Tokyo Core CPI YoY (Mar) Y/Y 1.7% vs. Exp. 1.8% (Prev. 1.8%, Low. 1.6%, High. 2.1%).
• Japanese Tokyo CPI Ex Fresh Food and Energy YoY (Mar) Y/Y 2.3% vs. Exp. 2.4% (Prev. 2.5%).
• Japanese Retail Sales YoY (Feb) Y/Y -0.2% vs. Exp. 0.8% (Prev. 1.8%, Low. -1.1%, High. 1.3%).
• Japanese Retail Sales MoM (Feb) M/M -2.0% vs. Exp. -0.9% (Prev. 4.1%).

European bourses (STOXX 600 +0.9%) continue to rebound, as the STOXX 600 bounces out of correction territory. The IBEX 35 and DAX 40 outperform, while the AEX is the slight laggard due to losses in ASML. European sectors are entirely in the green, ex. Energy. Basic Resources and Financial Services top the sector pile. While a rebound in metals prices supports Basic Resources, UBS is amongst the banks supporting financials after the FT reported that Swiss lawmakers have signalled some compromise on its USD 22bln capital plan.

Top European News

• German institutes to cut 2026 economic growth forecasts amid the Iranian war, Reuters sources suggest; 2026 growth outlook seen at 0.6% (prev. 1.2%), 2027 growth seen at 0.9% (prev. 1.4%). CPI is seen at 2.8% for 2026 and 2027. Iranian war and energy costs were cited as the reasons for the cuts.

NOTABLE EUROPEAN DATA RECAP

FX

• DXY lacks direction, and holds within a 100.30-100.64 range; the peak for today was made overnight, but then sank from these levels on reports via the WSJ, which suggested that US President Trump told aides he’s willing to end the war without reopening Hormuz. A factor which clearly indicates some early signs of easing tensions, though it raises concerns regarding the future governance of the Strait itself. DXY swung from peaks to troughs within an hour of the report, before then gradually pushing back towards the mid-point of the aforementioned range, as the European session got underway. Focus from a US standpoint now turns to US JOLTS, which are expected to ease to 6.87mln (from 6.946mln). A slew of Fed speakers are also on the docket, including Bowman, Barr, Goolsbee and Schmid.
• G10s are mixed against the USD. GBP is the marginal outperformer, potentially benefiting from the lower energy prices, which somewhat alleviates growth-related concerns, at least for now. Sticking on the growth front, Final UK GDP growth in Q4 printed 1% Y/Y (exp. 1%, prev. 1.2%) – a report which spurred no move in Cable. To the bottom of the pile reside the CHF and Kiwi, albeit losses are incremental at this stage.
• Elsewhere, EUR is steady, and was little moved to a resilient German jobs report, whilst a cooler-than-expected EZ inflation metric spurred some pressure in the single currency. In a bit more detail, headline Y/Y jumped to 2.5% (prev. 1.9%) and a touch beneath the consensus. As is the case across Europe, the surge in inflation has been attributed to the recent strength in energy prices; for reference, the core figure actually cooled from the prior to 2.3% (prev. 2.4%). EUR/USD fell to 1.1462 post-day before scaling back a touch. The ECB will welcome this report, given that it favours a “wait and see” approach.
• JPY is flat this morning, after relative outperformance in the prior session, spurred by jawboning. USD/JPY currently resides within a 159.48-159.97 range, and towards the lower end of the prior day’s session. Overnight, the release of softer-than-expected Retail Sales and slower Tokyo inflation had a limited impact on the JPY – ING opines that the inflation figure will not “deter BoJ’s April hike”; analysts opine that the trifecta of 1) surging oil prices, 2) weak JPY and 3) rising Shunto wage growth, all play in favour of a near-term hike. Attention now turns to the Tankan survey on Wednesday, a report which policy members brought to focus at the last BoJ confab.

Fixed Income

• Fixed income on a firmer footing as energy benchmarks initially pulled back, though WTI remains above USD 100/bbl, Brent above USD 105/bbl and Dutch TTF north of USD 50/MWh. The main update came via the WSJ, reporting that US President Trump told his aides that he is willing to end the conflict even without reopening the Strait of Hormuz. The move towards potentially ending the conflict has weighed on energy and, in turn, pressured yields. However, the uncertainty around Hormuz means the energy, and by association, price risks have not meaningfully diminished at this point.
• USTs are firmer but off best levels, and within 110-22+ to 111-02 parameters. Ahead, the docket is headlined by Fed speak; however, the events/topics involved somewhat diminish the likelihood of pertinent updates.
• Bunds follow global action. Initially stronger, before giving back some of the earlier gains heading into the EZ inflation measures for March – a report which encapsulates the early impact of the Iran war, and the surge in energy prices. In brief, headline Y/Y was cooler-than-expected, and plays in favour of the ECB’s “wait and see approach”. In reaction, Bunds ticked higher by a handful of ticks, though the move proved fleeting.
• Gilts in-fitting with peers. Firmer by around 50 ticks at best but have given up around half of that and are below the 88.00 mark in 87.65-88.23 parameters. No reaction to the final Q4 GDP series, or a slight upward revision to the 2025 total.
• Germany sells EUR 3.811bln vs exp. EUR 5.0bln 2.10% 2028 Schatz: b/c 1.5x (prev. 1.61x), average yield 2.62% (prev. 2.72%), retention 23.78% (prev. 22.6%).
• BoJ said it plans to buy JPY 255bln of 1–3 year JGBs three times a month in April–June (prev. JPY 270bln, three times); JPY 230bln of 3–5 year JGBs three times a month (prev. JPY 245bln, three times). Plans to buy JPY 80bln of 10–25 year JGBs three times a month in April–June (prev. JPY 95bln, three times). Plans to buy JPY 75bln of JGBs 25+ years of maturity two times a month (prev. JPY 75bln, two times).

Commodities

• Crude futures are incrementally firmer this morning after reversing earlier losses despite light newsflow. WTI May’26 resides in a USD 100.83-107.15/bbl range, whilst Brent June’26 holds within a USD 104.72-109.99/bbl. Worth noting that in recent trade benchmarks are moving a touch higher, extending further into the green.
• Overnight, the complex dipped after the WSJ reported that US President Trump told aides he is willing to end the US military operation in Iran even if the Strait of Hormuz is not reopened. Do note the IRGC continues to provide hardline commentary, with attacks on Gulf countries ongoing. Geopolitics aside, some strength was seen in the crude complex after data showed that Oman’s crude OSP jumped USD 55.90/bbl.
• Spot gold rose after comments from Fed Chair Powell and Williams indicated policy remains in a good place, helping to temper rate-hike expectations; the bullion climbed before paring gains to trade near USD 4,555/oz, with the yellow metal currently holding in a USD 4,482.66-4,619.25/oz range at the time of writing. Goldman Sachs said gold could reach USD 5,400/oz by year-end, citing low speculative positioning, expectations for two Fed rate cuts and ongoing central bank demand, with official-sector buying seen at around 60 tonnes per month.
• Copper futures marginally benefitted from hopes of an earlier end to the Middle East conflict and after Chinese PMI data topped forecast, but then pared gains given the ongoing uncertainty in the Middle East conflict. 3M LME copper trades in a USD 12,122.00- 12,286.95/t range. Aluminium once again outperforms on the LME amid supply woes from the Middle East after Emirates Global Aluminium and Aluminium Bahrain were both targeted by Iran.
• Oman’s crude OSP at USD 124.05/bbl for May (vs USD 68.15/bbl for April), +USD 55.90/bbl, GME data shows.
• EU countries should prepare for prolonged disruption to energy markets from the Iran war, the EU energy commissioner said in a letter to EU energy ministers. Immediate impact on EU energy security of supply remains contained. EU countries should delay any non-emergency refinery maintenance. Countries should avoid measures that would increase fuel consumption or curb EU refinery output.
• South Africa’s Finance Minister is considering lowering the fuel levy, with the decision to be announced on Tuesday, according to a Government official.
• Libya’s National Oil Corporation said full production resumed at the Sharara and El Feel oilfields.
• Guyana oil production averaged 915k BPD in January and 918k BPD in February.
• Goldman Sachs expects gold to reach USD 5,400/oz by the end of 2026. Low speculative positioning and two Fed rate cuts to support this view. Projects around 60 tonnes of central bank buying per month.

Central Banks

• Fed’s Williams (voter) said uncertainty around inflation path is ‘high’ but the economy has been more resilient than expected and the base outlook for the economy has been good. Tariffs and Iran war will push up headline inflation. Expects the unemployment rate to edge down this year and next. Economy facing ‘unusual set of circumstances’. Expects higher headline inflation near term on war and tariffs. War could both push up inflation, and depress growth. Inflation expectations consistent with 2% inflation. Expects US GDP to be 2.5% this year amid help from various factors. Expects inflation to end this year at 2.75%, and back to 2% in 2027. Economy has been resilient among changes. No signs of second round inflation impact from tariffs. Low hiring rate might be boosting economic pessimism. Job market sending out mixed signals.
• ECB’s Muller said it is probable that rates will rise in the coming quarters, an April rate hike cannot be ruled out and reiterates that a hike may be needed if energy prices stay high.
• ECB’s Panetta warns against second-round wage effects; says monetary policy is better positioned vs 2022.
• RBA Minutes from March meeting stated that board members agreed financial conditions needed to be restrictive and that a further tightening would likely be needed but disagreed on whether to hike at the meeting. Agreed it is not possible to predict the future path of the cash rate with any confidence given the Middle East conflict. Rise in oil prices increased risk inflation would remain above target for a prolonged period. Oil prices around USD 100 would lift annual CPI inflation to around 5% in the June quarter. Rate hike could reduce the risk oil shock would flow into inflation expectations.
• PBoC is to maintain moderately loose monetary policy with stronger counter-cyclical adjustments, reiterates to make use of various tools in monetary policy control and to maintain ample liquidity and keep CNY stable.
• BoK Governor nominee Shin sees Middle East crisis as risk to the Korean economy and said inflationary pressure from extra budgets is limited, adds KRW liquidity is good and external factors affecting KRW have improved considerably.

Geopolitics

• US President Trump tells aides he’s willing to end the war without reopening Hormuz, according to the Wall Street Journal.
• The IRGC announced that the Strait of Hormuz is fully under the control of its soldiers, and “the slightest movement of the enemies will be hit by missiles and drones”, adding that “the operation continues”, IRGC’s public relations channel reported.
• Strait of Hormuz to be run by multinational coalition under White House plan, The Telegraph reported; Second proposal put forward by Pakistan and regional powers. Rubio stressed there would be “no fees, and free circulation” through the key shipping route, according to one interpretation of his intervention.
• Israeli PM Netanyahu said it is possible to bypass the Strait of Hormuz issue and that economic interests exist to ensure free flow of oil and gas, while ideas have been proposed for post-war transfer of energy from Persian Gulf to Mediterranean ports.
• Israeli PM Netanyahu said Iran’s enriched uranium is Trump’s focus right now and US is leading military options to open Strait of Hormuz. Refuses to set any timeline on ending the Iran war.
• Israel Military Spokesperson said “we are prepared to keep operating for weeks to come”.
• Houthis in Yemen are monitoring American movements at bases in the Horn of Africa that may signal an imminent American move in the Red Sea, according to Israeli Radio journalist. According to the Yemeni intelligence sources, Washington intends to create a maritime security zone in the Red Sea region and the base in Djibouti will become the center of command and control and rapid intervention. Yemeni officers said that there are American movements in order to bring the Red Sea and the Bab al-Mandab strait into the campaign.
• Iran’s Ministry of Foreign Affairs denied US President Trump’s assertions that Washington and Tehran were engaged in talks, according to WSJ.
• One of Iran’s desalination plants on Qeshm Island is out of service since the strike and short-term repairs are deemed impossible, Borna reported citing a Health Ministry official.
• US reportedly attacks large ammunition depot in Isfahan, Iran, according to WSJ.
• Drone crashes in an open area at Iraq’s West Qurna 1 oilfield without exploding, state news reported.
• Chinese Foreign Ministry said three Chinese ships recently sailed through the Strait of Hormuz.
• Saudi Arabia intercepts 10 drones, Al Jazeera reported.
• Power outage hits east of Tehran following explosions.
• Explosions heard in Iraq’s Sulaymaniyah province and from US HQ in Baghdad’s Victoria base, according to Tasnim.
• Italy denies the US use of its Sigonella naval air station, according to Italian press.
• Russia’s Foreign Minister Lavrov says the Middle East crisis may spill over into a wider conflict.

US Event Calendar

• 9:00 am: Jan FHFA House Price Index MoM, est. 0.1%, prior 0.1%
• 9:45 am: Mar MNI Chicago PMI, est. 55, prior 57.7
• 10:00 am: Mar Conf. Board Consumer Confidence, est. 87.9, prior 91.2
• 10:00 am: Feb JOLTS Job Openings, est. 6890k, prior 6946k
• 12:00 pm: Fed’s Goolsbee Gives Opening Remarks at Eco Mobility Project
• 1:10 pm: Fed’s Schmid Speaks on Monetary Policy and Economic Outlook
• 3:00 pm: Fed’s Barr Discusses Stablecoin Regulation
• 5:10 pm: Fed’s Bowman Speaks on Small Business

DB’s Jim Reid concludes the overnight wrap

The market tone has become decidedly more positive overnight, with the driver being a Wall Street Journal report saying that President Trump had told aides he was willing to end the US military campaign against Iran, even if the Strait of Hormuz remained largely closed. So that’s raised hopes that the current phase of the conflict will wind down soon, and we’ve seen a clear market reaction in response. Most obviously, Brent crude oil futures have slipped back, coming down above $115/bbl before the article came out, to $113.04/bbl as we go to press. Moreover, equity and bond markets have rallied too, with S&P 500 futures up +0.80% this morning, whilst the 10yr Treasury yield is down another -2.4bps to 4.32%.

According to the WSJ article, Trump and his aides assessed that a mission to open the Strait of Hormuz would push the conflict beyond the four to six week timeline, and Trump had decided that the US should achieve its main goals of degrading Iran’s navy and missile stocks, and continue to pressure Iran diplomatically to resume trade flows. So even though the Strait of Hormuz wouldn’t return to normal in that scenario, markets still took the report positively, because it raised the perceived probability that the conflict might soon end, avoiding the more escalatory scenarios like further damage to energy infrastructure.

That said, the overnight newsflow hasn’t been entirely positive. Notably, oil prices had moved higher before the WSJ article, because Kuwait Petroleum Corp said that an oil tanker was attacked by Iran in a Dubai port. And in Asia, equity markets are down across the board, with losses for the KOSPI (-3.41%), the Nikkei (-1.16%), the Hang Seng (-0.51%), the CSI 300 (-0.58%) and the Shanghai Comp (-0.38%). That’s come despite a modest upside surprise in China’s official PMIs, with the manufacturing PMI at a one-year high of 50.4 (vs. 50.1 expected), whilst the non-manufacturing PMI rose to 50.1 (vs. 49.9 expected).

That overnight newsflow adds to the mixed signals markets have been getting over the last 24 hours. Indeed, Trump posted yesterday that if a deal weren’t reached shortly with Iran, and if the Strait of Hormuz weren’t opened, then the US would target “all of their Electric Generating Plants, Oil Wells and Kharg Island”. But in the same post, he also said that the US was “in serious discussions with a new, and more reasonable, regime to end our military operations in Iran”, which added to hopes for a negotiated settlement. So given there were signs pointing in both directions, markets were fairly steady in response. We also heard that Pakistan’s Foreign Minister will be visiting China today, after his meeting with officials from Egypt, Saudi Arabia and Turkey over the weekend, raising questions whether Beijing might play a role in guaranteeing any possible future ceasefire.

Given the competing headlines, Brent crude ended yesterday broadly flat, although it was still up +0.19% to $112.78/bbl, marking its highest closing level since July 2022. That came alongside a more pronounced rise for WTI (+3.25%), which also closed above $100/bbl for the first time since July 2022, at $102.88/bbl. Indeed, we’re now at the last day of Q1, and despite the overnight stabilisation in oil prices, Brent crude is on track for its biggest quarterly gain since Q3 1990 when the Gulf War began, having risen over +85% this quarter as it stands. So that outpaces the +81% bounce in Q2 2020, when oil prices recovered after more than halving in March 2020 as the pandemic moved into its most serious phase.

Otherwise, rates markets put in a decent performance yesterday, with investors turning their focus towards the dovish implications from a potential growth shock, rather than inflation. In addition, we heard from Fed Chair Powell, whose comments were interpreted dovishly, saying that inflation expectations were “well anchored beyond the short term”. So that eased fears that the Fed would rush to hike, and he also said that “policy is in a good place for us to wait and see”. Later on, we also heard similar comments from New York Fed President Williams who said “policy is well positioned” and that long-term inflation expectations were consistent with the Fed’s 2% goal.

That backdrop meant investors priced out the chance of central bank rate hikes this year. For example, Fed futures were expecting 3bps of rate cuts by December at the close, a change from much of last week when they were pricing in rate hikes this year. Meanwhile at the ECB, the number of hikes this year also fell from 76bps on Friday to 74bps by the close. So even though Brent crude was basically steady yesterday, the market tone became noticeably less hawkish.

With fewer rate hikes priced in, that also helped to bring yields down on both sides of the Atlantic. That was particularly clear for US Treasuries, where the 10yr yield (-8.0bps) saw its biggest decline since the start of the conflict, falling back to 4.35%. It was a similar story in Europe, where 10yr bund yields (-5.8bps) fell back from their post-2011 high to 3.03%, whilst 10yr OATs (-6.5bps) fell from their post-2009 high to 3.77%. Interestingly, there was also a marked decline in real yields, with the US 10yr real yield (-6.9bps) down to 2.04%. But even with yesterday’s rally, 10yr Treasury yields are still on course for their biggest monthly jump since 2024, with the 10yr yield up by +39bps since the end of February.

Despite the bond rally, equities had a more mixed session on Monday. European stocks outperformed, with the STOXX 600 (+0.94%), the FTSE 100 (+1.61%) and the DAX (+1.18%) all seeing solid gains. However, the market mood deteriorated after Europe went home and the S&P 500 ultimately closed -0.39% lower on the day, despite trading +0.92% at the open. So that left the S&P 500 within 1% of technical correction territory, down -9.10% from its late January peak. A large part of yesterday’s decline came due to a slump in chips stocks, with the Philadelphia Semiconductor Index down by -4.23%, even as most S&P 500 constituents closed higher on the day supported by lower nominal and real yields.

Otherwise yesterday, we did get a few data releases. In Germany, the flash CPI print moved up as expected in March, with the EU-harmonised measure rising to +2.8%, having been at +2.0% in February. We’ll get the Euro Area-wide print later this morning, so that’s one to keep an eye on for the ECB, particularly with pricing for a rate hike in the balance currently. Over in the US, we also had the Dallas Fed’s manufacturing index, which fell to -0.2 in March (vs. 2.0 expected).

Looking at the day ahead now, and data releases include the Euro Area flash CPI print for March, German unemployment for March, the US Conference Board’s consumer confidence indicator for March, the JOLTS job openings for February, and the FHFA house price index for January. From central banks, we’ll hear from the Fed’s Goolsbee, Barr and Bowman, and the ECB’s Panetta, Muller, Kazimir and Sleijpen.