Crude soars in market selloff

EU mid-market update: Comprehensive Israeli operation on Iran to neutralize nuclear threat risks wider escalation yet again; Crude soars in market selloff.

Notes/observations

- Risk off move into safe haven assets after Israel launched large-scale airstrikes targeting Iranian nuclear facilities and military infrastructure, codenamed Operation "Rising Lion". Strikes hit sites in Tehran, Natanz, Khondab, and Khorramabad, with explosions reported near military bases and areas housing senior commanders. Iranian state media confirmed the deaths of Revolutionary Guard commander Hossein Salami, Armed Forces Chief of Staff Major General Mohammad Bagheri, and six nuclear scientists. Iran warned of response which appears to have started in last few hours, although interceptions were noted by Israel. Strikes followed the IAEA declaring Iran non-compliant for enriching uranium to 60%. Israel accuses Iran of pursuing secret nuclear weapons programme. Futures tanked approx 2%, Crude oil surged 12%. Sentiment has reversed slightly, with futures and oil off peaks.

- Over the next 72 hors, analysts will wath for satelit signs of Kermnshah/Yazd missile bigades and, most critically, any Fordow nuclear enrichment spike above 60 % that would slash Iran’s nuclear breakout time from days to mere hours. A measured Iranian response could reset deterrence, but an enrichment dash—or an Israeli follow-up on Fordow—would push the conflict and the UN Security Council into uncharted, high-stakes territory.

- NG analyst noted ‘risks now point more definitively towards a prolonged period of tension, in contrast to recent episodes’. This was reinforced by Netanyahu, who warned Israeli’s of possible ‘extended’ time in bomb shelters.

- Across Europe, airlines are lower (from higher oil price and cancelled routes), defense names rose and oil producers benefit from higher crude price. Airlines that are unhedged or minimally hedged are being hit stronger.

- Asia closed lower with Nikkei225 underperforming -0.9%. EU indices -0.5% to -1.6%. US futures -1.1% to -1.5%. Gold +1.1%, DXY +0.4%; Commodity: Brent +6.6%, WTI +6.8%; Crypto: BTC -2.6%, ETH -8.5%.

Asia

- New Zealand May Manufacturing PMI: 47.5 v 53.3 prior (1st month of contraction in 5 months).

- BOJ is said to see inflation running stronger than expected; Able to consider rate hike once the trade picture becomes clearer.

Global Conflict/tensions

- Israel Defense Forces stated that dozens of IAF jets had completed "1st stage" strikes against Iran.

- Israel PM Netanyahu stated that strikes would last against Iran until "threat was removed" Israel was seeking to remove the ballistic missile threat in Iran; Operation could take 'as many days as it took. Attacks targeted nuclear program and ballistic missiles.

- Israel Defense chief noted that Iran would deliver response to planners and supporters of the attack.

- IAEA confirmed that Israel struck Iran’s nuclear enrichment sites.

- US confirmed it was not involved in the strikes, with Secretary of State Rubio describing the operation as “unilateral” and warning Iran not to retaliate against US.

- Pres Trump stated that he was made aware of the attacks before they happened; Hoped that Iran would still come to the negotiating table; Watching for what retaliation may arise; CENTCOM was on high alert.

- A sixth round of US-Iran nuclear talks, scheduled for Sunday in Oman, now appeared unlikely to proceed.

- Iran said to have launched over 100 drones towards Israel.

Trade

- Thailand might become the second country after the UK to conclude a US trade deal before the 90-day deadline.

- US Commerce Sec Lutnick noted China tariff pause likely won't be extended; Not releasing engine parts yet; As magnets flow, then would drop our countermeasures.

- US Treasury Sec Bessent stated that would see if the China tariff pause ended in August.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.92% at 544.80, FTSE -0.45% at 8,844.60, DAX -1.52% at 23,417.14, CAC-40 -1.04% at 7,684.64, IBEX-35 -1.69% at 13,850.83, FTSE MIB -1.62% at 39,302.00, SMI -1.24% at 12,180.28, S&P 500 Futures -1.27%].

Market focal points/key themes: European indices opened lower across the board and remained under pressure through the early part of the session; geopolitics dragging down risk appetite; energy sector the only one in the green, followed by utilities; sectors pulling to the downside include financials and consumer discretionary; spike in crude prices seen supporting oil & gas subsector; travel subsector under pressure as sever Middle East countries close airspace; Renold to be acquires by MPE; PHP improves offer for Assura; Dundee Precious Metals to acquire Adriatic Metals; reportedly Shell planning to sell its stake in WestWind; Infineon gets German regulatory approval to acquire Marvell’s Ethernet; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Lufthansa [LHA.DE] -3.5%, Ryanair [RYA.IE] -3.0% and other airlines (readacross from middle east conflict between Israel and Iran and rising oil prices).

- Energy: bp [BP.UK] +3.0% and other oil majors (following ~10% rise in crude prices from middle east conflict).

- Healthcare: GSK [GSK.UK] +0.5% (submits Arexvy for adults 18+ with EMA; Regulatory decision anticipated H1 2026).

- Industrials: Rheinmetall [RHM.DE] +0.5% and other defense names (readacross from middle east conflict between Israel and Iran), Airbus [AIR.FR] -1.0% (India mulls grounding Boeing 787 jets).

Speakers

- Germany DIW Institute updated its economic outlook which raised both 2025 and 2026 growth outlook. Raised 2025 GDP growth from 'stagnate' to 0.3% and raised 2026 GDP growth forecast from 1.1% to 1.7%.

- Poland Central Bank (NBP) Kotecki stated that saw room for 100bps cuts in 2026.

- Japan PM Ishiba reportedly to announce cash handout.

- Senior Iranian lawmaker Aladdin Boroujerdi stated that the planned 6th round of talks with the US would not be held following the Israeli attacks.

- Iran Abadan oil refining company said to be producing and providing stable services at full capacity. No disruptions.

- Israel Army stated that it was intercepting Iranian drones without US help.

Currencies/fixed income

- Session began with risk aversion over geopolitical concerns after Israel launched an attack inside Iran. Initially oil prices surged over 10% and a flight to safety, with gold, USTs, and haven currencies rallying while equities sold off.

- Some of the risk aversion wore off as the session progressed. Iran Abadan oil refining company said to be producing and providing stable services at full capacity. No disruptions. Reportedly there was no increase in radiation levels at Iran Natanz nuclear site.

- EUR/USD holding above the 1.15 handle in what could be a pivotal weekly close for additional upside momentum.

- USD/JPY at 143.81 by mid-session.

- 10-year German Bund yield at 2.48% and 10-year Gilt yield at 4.50%. 10-year Treasury yield at 4.35%.

Economic data

- (NL) Netherlands Apr Trade Balance: €9.1B v €12.9B prior; Exports Y/Y: 0.5% v 3.2% prior; Imports Y/Y: 0.5% v 2.1% prior.

- (FI) Finland May CPI M/M: -0.1% v 0.0% prior; Y/Y: 0.5% v 0.5% prior.

- (DE) Germany May Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 2.1% v 2.1% prelim.

- (DE) Germany May Final CPI EU Harmonized M/M: 0.2% v 0.2% prelim; Y/Y: 2.1% v 2.1% prelim.

- (DE) Germany May Wholesale Price Index M/M: % v -0.1% prior; Y/Y: % v 0.8% prior.

- (SE) Sweden May Final CPI M/M: 0.1% v 0.0% prelim; Y/Y: 0.2% v 0.2% prelim.

- (SE) Sweden May Final CPIF M/M: 0.1% v 0.1% prelim; Y/Y: 2.3% v 2.3% prelim.

- (SE) Sweden May Final CPIF (ex-energy) M/M: 0.2% v 0.2% prelim; Y/Y: 2.5% v 2.5% prelim; CPI Level: 416.95 v 416.69 prior.

- (FR) France May Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 0.7% v 0.7% prelim.

- (FR) France May Final CPI EU Harmonized M/M: -0.2% v -0.2% prelim; Y/Y: 0.6% v 0.6% prelim; CPI Index (ex-tobacco): 119.77 v 119.76e.

- (ES) Spain May Final CPI M/M: 0.1% v 0.0% prelim; Y/Y: 2.0% v 1.9% prelim.

- (ES) Spain May Final CPI EU Harmonized M/M: 0.0% v -0.1% prelim; Y/Y: 2.0% v 1.9% prelim.

- (ES) Spain May CPI Core M/M: 0.1% v 1.0% prior; Y/Y (final): 2.2% v 2.1% prelim.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 101.9K v 107.4K tons prior.

- (TH) Thailand May Foreign Reserves w/e June 6th: $257.7B v $257.6B prior.

- (IT) Italy Apr Trade Balance: €2.5B v €4.7B prior; EU Trade Balance: +€0.1B v -€1.4B prior.

- (PL) Poland May Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 4.0% v 4.1% prelim.

- (CZ) Czech Apr Current Account Balance (CZK): 14.4B v 31.0Be.

- (CN) China May YTD New Yuan Loans (CNY): 10.680T v 10.960Te.

- (CN) China May YTD Aggregate Financing (CNY): 18.6T v 18.7Te.

- (CN) China May M2 Money Supply Y/Y: 7.9% v 8.1%e; M1 Money Supply Y/Y: 2.3% v 1.7%e; M0 Money Supply Y/Y: 12.1% v 12.0% prior.

- (UK) May BoE/Ipsos Inflation Next 12 Months: 3.2% v 3.4% prior.

- (EU) Euro Zone Apr Trade Balance: €B v €18.3Be; Trade Balance NSA (unad): €B v €36.8B prior.

- (EU) Euro Zone Apr Industrial Production M/M: % v -1.7%e; Y/Y: % v 1.3%e.

Fixed income issuance

- (IN) India sold total INR250B vs. INR300B indicated in 2039 and 2065 bonds.

Looking ahead

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2031, 2033 and 2058 Bonds.

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £3.0B respectively).

- 07:30 (IN) India Forex Reserve w/e June 6th: No est v $691.5B prior.

- 08:00 (BR) Brazil Apr IBGE Services Volume M/M: 0.2%e v 0.3% prior; Y/Y: 1.7%e v 1.9% prior.

- 08:00 (PL) Poland Apr Current Account Balance: -€0.8Be v -€1.4B prior; Trade Balance: -€1.3Be v -€1.9B prior; Exports: €28.3Be v €29.2B prior; Imports: €29.6Be v €31.1B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance.

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (CA) Canada Apr Manufacturing Sales M/M: -2.0%e v -1.4% prior; Wholesale Sales (ex-petroleum) M/M: -0.9%e v 0.2% prior.

- 08:30 (CA) Canada Q1 Capacity Utilization Rate: 79.8%e v 79.8% prior.

- 10:00 (US) Jun Preliminary University of Michigan Confidence: 53.6e v 52.2 prior.

- 11:00 (CO) Colombia Apr Retail Sales Y/Y: 8.4%e v 12.7% prior.

- 11:00 (CO) Colombia Apr Manufacturing Production Y/Y: -0.8%e v +4.9% prior; Industrial Production Y/Y: -3.2%e v +1.6% prior.

- 11:00 (EU) Potential sovereign ratings after European close (S&P on Germany); Moody’s on Finland; Fitch on Belgium, Norway).

- 11:00 (NL) ECB’s Elderson (Netherlands).

- 13:00 (US) Weekly Baker Hughes Rig Count data.