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What’s happening: US stocks rose sharply on Monday with investors widely expecting the Israel-Iran conflict to be contained despite the recent escalations.
What happened: Iran fired retaliatory missiles at US bases in Qatar and Iraq on Monday, following US strikes on Iranian nuclear facilities over the weekend.
Despite the escalation, investor sentiment remained positive as per the Fear and Greed index.
Why it matters: US stocks started the session in the red, as markets reacted to the news of President Donald Trump deciding to jump into the ongoing Israel-Iran war.
After the US attacked three nuclear sites, Iran threatened to close the Strait of Hormuz through which one-fifth of global oil and gas supply flows. The US warned that doing so would be “economic suicide” by Iran and would elicit a US response.
Cybersecurity stocks were among the biggest gainers on Monday, with Fortinet spiking more than 3% and Palo Alto climbing over 2%. Defence stocks, including Lockheed Martin and Northrop Grumman, edged higher. Major semiconductors stocks also rose, including Nvidia, Broadcom and Advanced Micro Devices.
Despite rising tensions in the Middle East, the Fear and Greed index moved to the “Greed” zone on Monday, with a reading of 56.5.
Of the 11 major sectors on the S&P 500, 10 closed the session on a higher note, with consumer discretionary and real estate stocks leading the gains. Energy stocks bucked the overall market trend, dipping around 2.5%.
Investors also responded to broadly positive economic data releases. The S&P Global US services PMI declined to a reading of 53.1 in June, from 53.7 in the previous month but came in above market projections of 52.9. The manufacturing PMI, meanwhile, came in steady from the previous month at a reading of 52 in June. Existing home sales grew by 0.8% from the previous month to an annualised rate of 4.03 million in May, recovering from April’s 0.5% decline.
The Dow Jones index jumped 374.96 points, or 0.89%, to settle at 42,581.78 on Monday, while the S&P 500 climbed 0.96% to 6,025.17. The Nasdaq 100 jumped 1.06% to close at 21,856.33.
What to watch: Investors await the release of economic data on current account (1630 UAE Time), S&P/Case-Shiller home price index (1700 UAE Time) and CB consumer confidence (1800 UAE Time) from the US today. The US current account deficit, which shrank by 2% to $303.9 billion in the fourth quarter of 2024 from $310.3 billion in the third quarter, is expected to widen to $440 billion in the first quarter of 2025.
The S&P CoreLogic Case-Shiller Home Price Index, which climbed 4.1% year-over-year in March, is projected to rise by 4.2% year-over-year in April. Analysts expect the consumer confidence to improve to 99.8 in June, from a previous reading of 98.0.
Rising concerns in the Middle East will also remain in focus.
Context: The GBP/USD forex pair rose this morning amid weakness in the US dollar.
Details: The US dollar remained under pressure this morning, extending its decline from the previous session, after President Donald Trump announced that Iran and Israel had agreed to a ceasefire agreement.
Weakness in the US dollar lent support to the GBP/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 98.21.
Meanwhile, data released on Monday showed that the S&P Global UK manufacturing PMI rose to 47.7 in June, from 46.4 in the previous month. The figure also topped market estimates of 46.6. UK’s services PMI also climbed to 51.3 in June, from 50.9 in May.
The S&P Global’s flash composite PMI climbed to 50.7 for June, slightly topping market expectations and indicating modest growth in the private sector growth.
The GBP/USD pair gained around 0.2% to 1.3553, while the EUR/GBP forex pair edged lower to 0.8560 this morning.
London’s FTSE 100 fell 0.19% to close at 8,758.04 on Monday, while the domestically focused FTSE 250 slipped 0.13% to settle at 21,120.95.
What to watch: Investors await the release of economic data on CBI industrial trends orders (1400 UAE Time) from the UK today. The UK’s total order book balance, which fell to -30 in May from -26 in the previous month, is expected to improve slightly to a reading of -29 in June.
Other Markets: Asian indices traded higher this morning, with Japan’s Nikkei 225, Hong Kong’s Hang Seng Index and China’s SSE Composite Index up by 1.03%, 1.87% and 0.91%, respectively.
Ukraine’s military forces said they continue to hold a small area within Russia that was captured around a year ago. The news sent the RUB/USD pair lower in forex trading this morning.
South Korea’s Composite Consumer Sentiment Index jumped to 108.7 in June, from 101.8 in the previous month. The region’s consumer mood surging to its strongest level since June 2021 lent support to the KRW/USD forex pair.
Argentina’s economy expanded by 5.8% year-over-year in the first quarter of 2025, following 2.6% growth in the previous quarter, which sent the ARS/USD pair higher in forex trading this morning.
Spain’s trade deficit narrowed to €3.88 billion in April, from €4.66 billion in the year-ago period. Imports declining more than exports lent support to the EUR/USD forex pair.
Poland’s industrial output surged by 3.9% year-over-year in May, following a 1.2% gain in the previous month, which sent the PLN/USD pair higher in forex trading this morning.
Germany’s Ifo business climate (1200 UAE Time), Ifo current conditions (1200 UAE Time), Ifo expectations (1200 UAE Time) and 2-year Schatz auction (1330 UAE Time), UK’s 10-year index-linked Treasury Gilt auction (1300 UAE Time), Brazil’s FGV consumer confidence (1500 UAE Time) and BCB Copom meeting minutes (1500 UAE Time), Mexico’s mid-month core inflation rate (1600 UAE Time), Canada’s inflation rate (1630 UAE Time) and manufacturing sales (1630 UAE Time), as well as US Redbook index (1655 UAE Time), FHFA house price index (1700 UAE Time), Richmond Fed manufacturing index (1800 UAE Time), Richmond Fed manufacturing shipments index (1800 UAE Time), Richmond Fed services revenues index (1800 UAE Time), Fed Chair Powell testimony (1800 UAE Time), 2-year Note auction (2100 UAE Time) and money supply (2100 UAE Time).
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