United States
Iran responded to U.S. military strikes by targeting American bases in Qatar but notably refrained from threatening oil shipments through the Strait of Hormuz. This measured approach eased market fears, prompting a sharp drop in oil prices and a broad shift back into risk assets.
By the end of the session, the S&P 500 rose 57 points (+0.96%) to close at 6,025, with gains across all sectors except energy. Consumer discretionary led the rally. The Dow Jones Industrial Average climbed 0.89% to 42,581, while the Nasdaq Composite gained 183 points (+0.94%) to finish at 19,630.
Investor sentiment was further buoyed by comments from Federal Reserve Vice Chair Michelle Bowman, who suggested that the time may be approaching to consider rate cuts—citing that risks to employment may now outweigh inflation concerns. Her remarks echoed those of Fed Governor Christopher Waller on Friday. Markets are now watching closely for any shift in tone when Fed Chair Jerome Powell testifies before Congress later today. While two rate cuts are currently anticipated later this year, Bowman’s and Waller’s remarks raise the possibility of a cut as early as the July meeting.
Adding to the positive momentum was stronger-than-expected economic data. The Flash Purchasing Managers’ Index (PMI) for June came in at 52.8, beating expectations of 52.2. The manufacturing PMI held steady at 52. Any reading above 50 indicates expansion.
Bond yields declined on the back of the day’s developments. The U.S. 2-year Treasury yield dropped 5 basis points to 3.86%, while the 10-year yield fell 3 basis points to 4.34%. The easing of Middle East tensions also pushed the U.S. dollar lower, with the Bloomberg Dollar Index falling 0.24%, reversing gains seen during Monday’s Asian session.
In stock-specific news, Tesla surged 8.23% to USD 248.68 after launching its robotaxi initiative in Austin, Texas. Enthusiastic responses from analysts and social media amplified investor optimism around the company’s progress in autonomous vehicle technology.
Meanwhile, oil stocks declined in response to falling crude prices. ExxonMobil dropped 2.58% and ConocoPhillips lost 3.15%. Conversely, nuclear energy stocks advanced after New York Governor Kathy Hochul indicated the state may consider constructing a new nuclear power facility. Constellation Energy gained 3.37% on the news.
Financials also performed strongly. Northern Trust jumped 8.01% following reports that Bank of New York Mellon had approached the company to discuss a potential merger. BNY Mellon shares fell 2.17%. Other major banks participated in the rally, with JPMorgan adding 1.19%.
Looking ahead, markets will focus on Fed Chair Powell’s testimony and key inflation data due later this week, especially if geopolitical risks in the Middle East continue to subside
Europe
European equities closed lower on Monday, as investors remained cautious in the absence of an Iranian response to U.S. military action during European trading hours. This lingering uncertainty weighed on sentiment, with the Euro Stoxx 600 falling 0.28% to 535.03. Sector performance was broadly negative, with only four sectors finishing higher while seven declined.
In the UK, similar caution prevailed. The FTSE 100 dropped 0.19% to 8,758, marking a three-week low, as investors awaited further geopolitical developments.
Economic data provided a mixed picture. Germany’s composite PMI returned to growth territory, coming in at 50.4—above economists’ expectations of 49 and an improvement on May’s 48.5. The uptick was driven by a rebound in manufacturing activity and raised hopes that Europe’s largest economy might be turning a corner. However, broader eurozone data painted a less optimistic view, with the composite PMI holding flat at 50.2, showing no sign of renewed momentum.
Germany also announced plans to boost defence spending to 3.5% of GDP by 2029, to be funded through a EUR 400 billion borrowing program. Despite the headline, the defence and aerospace sub-sector declined 0.74% on the day.
In corporate news, Novo Nordisk dropped 5.29% after presenting trial data for its obesity treatment CagriSema. While the drug showed positive results in reducing blood sugar and promoting weight loss, the reported mild side effects and lack of clear superiority over Eli Lilly’s competing drug disappointed investors.
Bond markets were relatively stable. The German 10-year bund yield edged down 1 basis point to 2.51%, while UK 10-year gilt yields fell 4 basis points to 4.49%.
Australia
The Australian equity market recovered from early-session losses, where the ASX 200 had fallen as much as 1% following weekend news that the US bombed Iran’s nuclear enrichment facilities. Despite the initial drop, the index ended the day down just 0.36%, shedding 30 points to close at 8,474.90. The rebound in equity prices mirrored movements across Asian markets, as oil prices pulled back from an early surge. Investors interpreted the absence of immediate Iranian retaliation as a sign of potential de-escalation.
On the ASX 200, eight sectors closed lower while three advanced, with financials and energy leading the gains. Industrials were the day’s worst-performing sector.
The energy sector rose 0.13%, with Santos gaining 1.04% to $7.78. A weakening Australian dollar made the Abu Dhabi consortium’s bid for Santos—priced in USD at $5.76 (equivalent to AUD 8.97)—more attractive. Viva Energy jumped 4.35% to $2.16 following a broker upgrade.
Materials underperformed, led by declines in major iron ore miners. BHP dropped 1.55% to $35.64, and Fortescue fell 1.02%, as concerns grew over potential economic fallout in China from any supply chain disruptions in the oil market. Rio Tinto declined a modest 0.33% to $101.83 after settling a US$138.75 million class action lawsuit related to a Mongolian mine. Additionally, Fitch Ratings affirmed Rio’s credit rating at “A” with a stable outlook, helping limit the downside.
In financials, CBA rose 1% to a new all-time high of $184.30, benefiting from its perceived safety. Westpac also advanced, gaining 0.63%, while ANZ and NAB finished lower.
Among individual names, Qantas dropped 1.85% to $10.08 amid concerns about international travel. A2 Milk fell 3.87% on fears of a Chinese economic slowdown. Brambles was the worst performer among large caps, sliding 5.01% to $23.33 and giving back much of last week’s rally.
Against the sector trend, Metcash rose 2.7% to $3.80 after reporting stronger-than-expected results, driven by solid performance in its supermarkets division.
In fixed income, the yield on 10-year Australian government bonds rose 3 basis points to 4.21%. the Australian dollar weakened to close at 0.6418 against the US dollar in Monday’s trade. Overnight the lowering of tensions from the middle east saw it gain ground to 0.6459. The ASX200 futures also responded strongly overnight adding 0.77% with a gain of 65 points.
Commodities
Oil prices fell sharply after Iran responded to U.S. attacks with missile strikes on U.S. military bases in Qatar. The response was seen as measured, and traders interpreted it as a potential circuit breaker in escalating Middle East tensions. As fears of broader conflict eased, oil prices declined significantly. West Texas Intermediate crude dropped 7.22%, or US$5.33, to close at US$68.51. Brent crude fell even further, down 8.99% to US$70.09.
Investor concerns had centred on the possibility of disruptions in the Strait of Hormuz, a key chokepoint through which 20% of global oil supply flows. However, the conclusion that Iran would not seek to block the Strait led to relief in the market and contributed to the price declines. U.S. President Trump noted that Iran had signalled its intentions in advance and that there were no casualties, offering an opportunity for future diplomatic engagement.
Gold finished the day unchanged, pulling back from earlier gains to settle at US$3,368. Silver rose modestly by 0.25% to US$36.10. Bitcoin advanced 4.2% to US$103,803 as improved market sentiment encouraged a shift into risk assets.
Copper gained 0.35% in London, closing at US$9,668 per tonne. A squeeze in LME inventories continued to support spot prices, with immediate delivery commanding a US$280 premium over the three-month futures contract—the widest spread since 2021. The move reflects efforts to ship copper to the U.S. ahead of expected tariffs. Nonetheless, longer-term demand appears to be weakening as Chinese smelters ramp up exports due to softer domestic consumption. Iron ore prices also edged higher, closing at US$94.40 in New York, up 0.65% for the session.
Economic Calendar
US:
- Home Prices Index (Apr) – 11:00pm
- Conference Board Consumer Confidence (Jun) – 12:00am
- Richmond Fed Manufacturing Index (Jun) – 12:00am
- Fed Chairman Powell Testimony- 12:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
