A US official said the US military carried out new strikes on an Iranian military site and shot down multiple Iranian drones that posed a threat to US forces and commercial maritime traffic in the Strait of Hormuz.IRGC said it targeted a US air base in response to the US aggression near Bandar Abbas Airport, while it added that any further US attacks would trigger a more decisive response.Air raid sirens sounded in Kuwait, and the Kuwaiti Army said air defences were intercepting hostile missiles and drone attacks, according to Al Hadath.European and US equity futures slip as markets digest the recent flare-up; DXY firmer, Brent Aug’26 +2.5%, with fixed income benchmarks on the backfoot.Looking ahead, highlights include US Initial Jobless Claims (May/23), US GDP 2nd Estimate (Q1), US Core PCE (Apr), US Durable Goods Orders (Apr), US Real Consumer Spending 2nd Estimate (Q1), Atlanta Fed GDP (Q2), ECB Minutes (Apr), SARB Policy Announcement (May). Speakers include Fed's Williams & Barkin, BoE's Breeden, ECB's Schnabel & SNB's Schlegel. Supply from the US, Earnings from Dell.Newsquawk in 3 steps:1. Subscribe to the free premarket movers reports2. Listen to this report in the market open podcast (available on Apple and Spotify)3. Trial Newsquawk’s premium real-time audio news squawk box for 7 daysIRAN CONFLICTReports of strikesUS official said US military carried out new strikes on an Iranian military site and shot down multiple Iranian drones that posed a threat to US forces and commercial maritime in the Strait of Hormuz.IRGC said it targeted the US air base in response to the US aggression earlier near Bandar Abbas Airport, according to Tasnim. said:. Any further US attacks would trigger a more decisive response. Washington bears responsibility for consequences.Military source tells Tasnim that hours ago, a US oil tanker intended to cross the Strait of Hormuz by turning off radar system, but IRGC Navy fired at it and forced it to turn back, while US army fired into Bandar Abbas but caused no damage. This was the cause of the earlier reported explosions. No casualties or damages were caused by the US, which fired at a scorched-earth area.Iran's Navy forced four vessels to turn back in the Strait of Hormuz by firing warning shots, according to Tasnim.Sound of three explosions heard from the east of Bandar Abbas, Iran, with exact location and source of the sounds still unclear, while air defences were activated for a few minutes, according to Fars News Agency."Hearing the sound of multiple explosions in Kuwait", ISNA reported, "Kuwait’s official news agency stated that air defense systems are currently countering missile and drone attacks" [likely referring to earlier reported].Air raid sirens sounding in Kuwait, while Kuwaiti Army said air defense intercept hostile missile and drone attacks, according to Al Hadath.CommentaryUS Treasury Secretary Bessent said Gulf Strait Authority action targets Hormuz tolls, adds the Treasury is maintaining maximum pressure on Iran.Iranian National Security Council Official Bagheri said Iran’s assets must be released unconditionally, Tasnim reported.US issues fresh Iran-related sanctions by adding Persian Gulf Strait Authority to its SDN list.US has carried out a defence operation in Bandar Abbas, Iran, according to Faytuks Network citing an official that said, “the US will act to safeguard its regional interests, and this does not affect the ceasefire”.Iran Supreme National Security Council Deputy Secretary Baqeri met with Russian Deputy Foreign Minister Ryabkov, and discuss a number of important issues on the current international agenda with focus on the situation around Iran's nuclear program. Via IRNA/Telegram.Deputy Head of Public Relations for the IRGC Aerospace Force, Ali Naderi, said on Wednesday If enemies launch military action again, the Islamic Republic's response will be different from anything seen so far. said: "...they will face a new image of Iran".Head of Iranian Parliament National Security Committee said Iran will not be pushed back by US President Trump's rhetoric from its red lines: rights to enrich uranium and its possession, authority over the Strait of Hormuz and removal of sanctions.IRIB reporter said no signs of an explosion have been seen in Bandar Abbas, while some people have heard the sound of this explosion and none of the officials concerned about the matter have issued any official statement.Axios reported that US military had shot down 4 Iranian drones targeting ships and an Iranian drone launcher on the ground.Israeli fighter jets carry out attack on the city of Tyre in southern Lebanon, according to Mehr News Agency.Hamas spokesperson said the Gaza ceasefire agreement faces risk of collapse due to occupation's crimes and ongoing violations, Al Jazeera reported.IDF said it's striking Hezbollah infrastructure in the area of Tyre in southern Lebanon.EUROPEAN TRADEEQUITIESEuropean bourses (STOXX 600 -0.6%) are broadly lower this morning as markets digest the recent flare-up between the US and Iran. In brief, the US struck Iranian military bases, whilst the IRGC responded with its own attacks on US air bases. Furthermore, Iran’s Navy stated it forced four vessels to turn back in the Strait of Hormuz by firing warning shots. Aside from these flare-up, updates since have been lacking – with markets tentatively waiting for whether this round of strikes will lead to further escalation. As a reminder, Iran has taken the position that further strikes on its land will lead to a war outside of the region.European sectors hold a strong negative bias. Tech leads, followed closely by Energy, whilst Media and Healthcare lag. Tech appears to be rebounding from recent losses, with fundamental drivers lacking, despite the higher yield environment; action potentially driven by post-earnings strength in Snowflake, whilst Marvell’s headline metrics were strong (discussed below).US equity futures (ES -0.1% NQ -0.3% RTY -0.3%) are in the red this morning, following the action seen in APAC/European trade. The day ahead is packed with key US data, including US PCE (Apr), GDP 2nd estimate and jobless claims. Previewing PCE in brief, following hotter than expected CPI and PPI reports, analysts updated econometric models point to April core PCE inflation of between +0.3-0.4% M/M (prev. +0.3%). In terms of pre-market movers: HP (-2.2%, strong headline metrics, though downgraded its FY outlook), Marvell (-1.5%, headline metrics beat and provided upbeat outlook; though highlighted supply chain constraints), Snowflake (+35%, secures a USD 6bln Amazon deal).Click for the sessions European pre-market equity newsflowClick for the additional newsFXG10s are broadly lower against the Buck with the Dollar Index +0.1% as oil prices rebound on US and Iran exchanging fire. General sour sentiment across assets sees high-beta underperform despite central bank pricing moves re. Antipodeans on Wednesday, while cyclicals are also weaker. JPY is a touch firmer against the USD, and trades around 159.30.The Buck marks its third consecutive session of gains and marked a fresh May high amid the US-Iran flare-up (See Iranian War Day 90 analysis on headline feed). The Dollar index has moved further away from significant DMAs, which are now well below and with no sign of an immediate resolution and repricing of G10 rates, with oil far from recent highs and Waller shifting hawkish, the recent drivers. Today’s driver will be the PCE and GDP reports, alongside Fed speak from Williams, Musalem and Barkin.AUD is the weakest currency in the G10 space on the day amid the general geopolitical risk tone, lower-than-expected Aussie inflation data and the popular carry trade against NZD vulnerable to a Hawkish RBNZ this week. On Wednesday, headlines pointed out that the Antipodean cross marked the largest one-day decline since 2016. The cross found some buyers just above 1.2050, though not enough to halt its declines. AUD/NZD -0.1% on the day. MUFG writes “...with the pre-emptive nature of the RBA policy approach allowing a longer period of pause, a further extension lower in AUD/NZD seems likely.”EUR is a touch lower against a stronger Buck with firmer energy benchmarks hurting the single currency. Remains a lack of EZ-specific newsflow as focus exclusively lies on geopolitics, which drives the Greenback. 1.16 remains supported for now, where it found buyers below overnight. ING highlights risks “in our view, should the US-Iran stalemate continue. We still see some risks of a 1.150 test before a rebound, but intraday trading remains highly headline-dependent.”FIXED INCOMEA softer start to the day for fixed benchmarks, as the energy space reacts to renewed strikes from both the US and Iran. Bunds and USTs hit lows overnight, with downside of c. 45 and 12 ticks respectively. Since, the space has lifted off worst levels as the intensity of newsflow slows and energy eases from best. However, the space remains in the red heading into a relatively busy session, particularly in the US.Bunds hit a 125.53 low overnight, reacting to the US and Iran action, and also as the language from US President Trump regarding Oman got greater attention. The intensity of newsflow has since slowed, and Bunds have managed to lift off lows but remain in the red by a handful of ticks.Today's European docket has several ECB officials and the April Minutes. From the officials, any remarks which decrease/increase the odds of a June move will, of course, be eyed. Similarly, from the Minutes, insight into how broad the discussion was around tightening and while the decision was unanimous for a hold, did any member(s) initially express a preference for taking action at that point.Gilts gapped lower by 35 ticks, taking out the trough from Tuesday at 87.99 and as such notching a new WTD low. Though, one that remains comfortably clear of last week's 84.96 contract base. For the UK newsflow remains relatively light as we count down to the mid-June by-election, after which the Labour leadership contest will step up a gear, irrespective of the result.USTs in-fitting with Bunds. Notched a 109-17+ base overnight, and has lifted a 109-29 high, to unchanged on the session. The US docket ahead is packed with multiple Fed officials, whose remarks will continue to be scrutinised for insight into what the outcome of the first meeting under Warsh will be. Additionally, April's PCE is seen ticking higher to 3.8% Y/Y (prev. 3.5%), but moderating to 0.5% M/M (prev. 0.7%).UK sells GBP 1bln 0.375% 2030 Gilt via tender: b/c 4.19x (prev. 2.97x), average yield 4.277% (prev. 3.796%).Italy sells EUR 7.25bln vs exp. EUR 6-7.25bln 3.15% 2031, 3.80% 2036, 2.25% 2036 BTP and EUR 3.75bln vs exp. EUR 2.5-3.75bln 3.237% 2036, 3.237% 2035 CCTeu.COMMODITIESOvernight, the main geopolitical update has been the US-Iran flare-up. The US carried out new strikes near Bandar Abbas after accusing Iran of threatening maritime traffic in the Strait of Hormuz. Meanwhile, Iran responded with strikes on a US air base and claimed it forced vessels, including a US-linked tanker, to turn back in Hormuz. Air raid sirens sounded in Kuwait as Kuwaiti air defences intercepted hostile missiles and drones.Despite this, efforts for negotiations are seemingly continuing. As a reminder, the US rebuffed the unofficial MoU released by Iranian State Media (which suggested Iran and Oman are to manage the Strait of Hormuz).Russia's Transneft plans to expand capacity of Espo oil pipeline, RIA reported; oil shipments for export via the Transneft system in 2026 will be comparable to the 2025 level.WTI Jul and Brent Aug futures rose to highs of around USD 92.50/bbl and USD 96.00/bbl, respectively, amid the skirmish. Prices have since waned off highs back to around USD 90.75/bbl and USD 94.50/bbl respectively amid a lack of further attacks and with nothing to suggest negotiations are not still intact. Dutch TTF similarly rose above EUR 48/MWh before settling around EUR 47.50/MWh at the time of writing, +2.5% intraday.Spot gold and silver are softer but off lows, in tandem with price action across energy. Spot gold briefly dipped under its 200 DMA (USD 4,394/oz) and trades towards the lower end of a USD 4,366-4,462.58/oz range. Traders may be looking ahead to the US PCE metrics as a source of impetus. Following hotter-than-expected CPI and PPI reports, analysts’ updated econometric models now point to April core PCE inflation of +0.3-0.4% M/M, up from the prior +0.3%. That being said, a major geopolitical update could overshadow the data in this fluid environment.Base metals are mostly softer, and to varying degrees, with price action somewhat muted given the lack of macro newsflow. Overnight, copper extended declines amid the downbeat mood in Asia following reports of the US and Iran's retaliatory strikes, but clambered off its worst levels since. 3M LME copper resides towards the top end of a USD 13,465.80- 13,595.97/t range.Iran has restored production at the South Pars industrial hub to its pre-war capacity following an intensive repair operation, according to PressTV.US Private Inventory Data (bbls): Crude -2.8mln (exp. -4.4mln), Distillates +11.0mln (exp. -2.0mln), Gasoline -3.2mln (exp. -2.9mln), Cushing -2.9mln.TRADE/TARIFFSChina's MOFCOM said it is negotiating with the EU within the WTO over EU steel curbs; adds China-EU economic relations are mutually beneficial.EU is to broaden import quotas and tariffs against China, according to the bloc's industry commissioner, cited by FT.NOTABLE EUROPEAN DATA RECAPItalian Consumer Confidence (May) 93.4 (Prev. 90.8).Italian Business Confidence (May) 87.9 (Prev. 87.9).Swedish Economic Tendency Indicator (May) 99.3 (Prev. 99.0).Swedish Consumer Inflation Expectations (May) 5.9% (Prev. 6.8%).Swedish Consumer Confidence (May) 92.4 (Prev. 91.5).Swedish Business Confidence (May) 103.3 (Prev. 103.3).Swedish Balance of Trade (Apr) -7.30B (Prev. 9.3B).Spanish Retail Sales MoM (Apr) M/M -1.5% (Prev. 1.2%).Spanish Retail Sales YoY (Apr) Y/Y 0.8% (Prev. 4.1%).French PPI YoY (Apr) Y/Y 2.10% (Prev. 0.2%).French PPI MoM (Apr) M/M -2.1% (Prev. 2%).Swiss Non Farm Payrolls (Q1) 5.537 (Prev. 5.544).Norwegian GDP Growth Rate YoY (Q1) Y/Y 0.5% (Prev. 2.2%).Norwegian GDP Growth Rate QoQ (Q1) Q/Q 0.4% (Prev. -0.3%).CENTRAL BANKSFed's Goolsbee (2027 voter) said energy inflation has been more persistent than expected and warns that Asia faced an old-style stagflation shock.Fed Vice Chair Jefferson (voter) said focus remains on 2% inflation target and noted US labour market is very resilient to the energy shock.Fed's Kashkari (2026 voter) said labour market is in decent shape, consumer prices remain too high, and inflation remains the top priority.Fed Vice Chair Jefferson (voter) said has not prejudged outcome of June FOMC meeting and monetary policy is well positioned to respond to the economy. said:. Is firmly committed to getting inflation back to 2%. Risks around inflation outlook are tilted to upside. Expects inflation to wane later this year on fading tariff, energy hits. Energy shock downside risk to growth, upside risk to inflation. Recent US economic activity has been solid. Labour market stable with risks tilted toward downside. US is not immune to oil-related energy shocks.Fed's Cook (voter) said she is atuned to inflation expectations, also watching oil. Would be problematic if oil prices move in the wrong direction.Japanese Finance Minister Katayama said expects the BoJ to closely coordinate with the government, adds cabinet is in agreement specific monetary policy means are left to the BoJ. said:. Hope the BoJ will conduct appropriate monetary policy to achieve 2% price targets stably, sustainably and rising wages. There is nothing she can add regarding the PM's meeting with BoJ Governor Ueda beyond what Governor Ueda revealed after the meeting.BoJ Governor Ueda said we have seen supply shocks in food and energy, which even if temporary, can lift the overall inflation rate because of their cumulative impact.ECB President Lagarde speaks on "When It Matters Most: Upholding Independence in Challenging Times".ECB's Lane said even if initial energy shock starts to reverse, the second round will be with us for a while. said: Even if there is some kind of resolution to the Iran war, conflict has gone on for so long, there may be repositioning in terms of optimal diversification strategy.RBNZ Governor Breman said the board considers that inflation pressures will intensify in the future and the cash rate needs to be raised further.RBNZ Governor Breman said the weak labour market will suppress wage growth, adds certain parts of the New Zealand economy remain in good shape including agriculture and parts of manufacturing. said it will take some time to see the full effect of higher oil prices across wider sectors.China's PBoC is to reportedly guide banks to boost May lending amid weak credit issuance, sources suggest.BoK keeps 7-day Repo Rate unchanged at 2.50%, as expected.BoK Governor Shin said we will act decisively to stem any herd-like behaviours in the FX market, adds there may be technical differences within board members about when to hike, but board members agree the direction should be tightening.BoK Governor Shin said Middle East war uncertainty persists and oil stability is to take time to return, adds local growth expansion driven by semiconductor boom.BoK said board members Ryoo and Chang dissented to Thursday's rate decision and called for a rate hike.NOTABLE US HEADLINESNew Zealand sees 2025/26 operating balance before gains and losses at NZD -15.06bln (HYEFU -16.93B).GEOPOLITICSRUSSIA-UKRAINERussia's Transneft plans to expand capacity of Espo oil pipeline, RIA reported; oil shipments for export via the Transneft system in 2026 will be comparable to the 2025 level.Russian intelligence chief said NATO is making preparations for a large-scale conflict on the eastern border, Sky News Arabia reported.Ukrainian military said it has attacked Russia's Tuapse oil refinery (240k BPD).EU Foreign Affairs Policy Chief Kallas said Russia is on the back foot on the battle field, adds should not walk in Russia's trap concerning discussions who should be at the negotiating table and it should be about substance.Ukraine President Zelensky submits a draft law on ratification of loan agreement between the Ukraine and EU, according to the Ukraine Parliament website.OTHERSNorth Korea's Foreign Ministry states that the country will never denuclearise, while it accused US-led Quad of maintaining hostile stance towards Pyongyang and other regional nations, according to KCNA.CRYPTOUS President Trump posted that he saved the American crypto industry and "...will codify a FUTURE-PROOF Digital Asset Market Structure that cannot be undone by the Crypto Haters". Full post "Gary Gensler and the “Anti-Crypto Army” nearly DESTROYED the American Crypto Industry by driving Bitcoin, Crypto Perpetuals, and INNOVATION offshore, but “TRUMP” SAVED IT. America is now the CRYPTO CAPITAL of the WORLD, and Builders and Entrepreneurs are coming BACK to the United States where they belong. Under my Leadership, we will codify a FUTURE-PROOF Digital Asset Market Structure that cannot be undone by the Crypto Haters. The new Frontier of Finance is being Built in America, and “TRUMP” will NEVER let Crypto down! President DONALD J. TRUMP".APAC TRADEAPAC stocks were pressured amid a flare-up of geopolitical tensions in the Middle East after the US conducted another defensive operation in which it attacked a launch site and shot down drones after they posed a threat to US forces and commercial maritime in the Strait of Hormuz, while the IRGC said it responded by attacking the US base where the US aggression originated from.ASX 200 retreated amid the geopolitical escalation and with sentiment not helped by mixed data in which capex topped estimates, but household spending disappointed.Nikkei 225 was initially choppy but ultimately retreated amid the rebound in oil prices and increased geopolitical tensions between the US and Iran.Hang Seng and Shanghai Comp were negative but to varying degrees, with the Hong Kong benchmark underperforming following recent earnings and mixed tech fortunes.NOTABLE ASIA-PAC HEADLINESS&P affirms Hong Kong at AA+, outlook stable.Japan's ruling party proposes allowing the government to issue bridging bonds to fund certain expenditures, which can be excluded from debt-to-GDP ratio and primary balance calculations.Australia's APRA maintained current macroprudential policy setting following a review.Japan considers bridging bonds for growth investments, according to Nikkei.Korea's NPS has lifted its domestic stock weight target to 20.8% (prev. 14.9%), Bloomberg reportsNOTABLE APAC DATA RECAPAustralian Building Capital Expenditure QoQ (Q1) Q/Q -3.8% (Prev. 2.3%).Australian Household Spending YY (Apr) 4.9% vs Exp. 5.8% (Prev. 6.3%).Australian Household Spending MM (Apr) -1.1% vs Exp. -0.5% (Prev. 1.6%).Australian Private Capital Expenditure for 2025-26 (AUD)(Estimate 6) 207.6B (Prev. 199.3B).Australian Private Capital Expenditure for 2026-27 (AUD)(Estimate 2) 173.4B (Prev. 158.4B).Australian Plant Machinery Capital Expenditure QoQ (Q1) Q/Q 18.1% (Prev. -1.7%).Australian Private Capital Expenditure QoQ (Q1) Q/Q 6.5% vs. Exp. 1% (Prev. 0.4%).Japanese Foreign Bond Investment (May/23) 10.3.Japanese Stock Investment by Foreigners (May/23) 1080.4.Loading...