Iran ceasefire is over – Trump 'lets loose' during press conf at NATO summit

EU mid-market update: Iran ceasefire is over"; Trump 'lets loose' during press conf at NATO summit.

Notes/observations

- Decisive catalyst for risk aversion was Trump declaring at the Ankara NATO summit that the Iran ceasefire is over - "Iran ceasefire is over, I think" - dismissing the mid-June ceasefire and MOU as effectively dead and calling further dealings with Iran a waste of time. He also asked to cancel all trade with Spain. Markets turned sharply on those comments: Brent and WTI jumped to roughly +5%, US dollar reversed earlier losses on safe-haven and net-oil-exporter flows, equities and futures sold off (Nasdaq100 fut at 4-week low), and 10-year Treasury, Bund and gilt yields hit four-week highs. The overnight military escalation had already set a negative environment but was not itself the trigger. Overnight, US forces struck more than 80 targets in what CENTCOM called an "immediate response" to Iranian attacks on three commercial vessels in the Strait of Hormuz - hitting air defenses, command and control, coastal radar, anti-ship missile capabilities and over 60 IRGC small boats. Iran retaliated against roughly 85 US military sites in Kuwait and Bahrain, triggering air defense sirens in both. The original spark was the strike on three merchant ships in the strait - a Qatari LNG tanker (which caught fire), a Saudi-flagged crude carrier and a third vessel - alongside the Treasury's revocation of the June 21st license permitting Iranian oil sales. Key watch-point is any move to reinstate a naval blockade of Iranian ports and the strait.

- Traders should closely monitor signals from the Trump administration on reinstating a naval blockade of Iranian ports and the Strait of Hormuz. Trump's latest comments dismissing the mid-June ceasefire and MOU as over, combined with the revocation of key sanctions waivers, heighten the risk of rapid supply disruption just as shipping giants like Maersk have only recently begun restarting routes.

- Trump also used the Ankara summit to air grievances across the alliance- anger over Greenland, NATO burden-sharing, and Italy and the UK declining to let the US use their bases. Most notably, he instructed Treasury Secretary Bessent to cut off all trade with Spain, reportedly stemming from Madrid's refusal to allow jointly operated bases for Iran-related strikes and its resistance to NATO's higher defence-spending target. The IBEX 35 was the sharpest-falling European index, down ~2.2%, though Spain's government publicly played the threat down as "business as usual." Worth noting a genuine bilateral cutoff would collide with EU-level trade competence and require broader legal steps; 2025 US-Spain goods trade ran around $48B with a US surplus. Separately, NATO is reportedly considering skipping the 2027 summit to avoid friction with Trump, and Defense Secretary Hegseth is planning a first visit to Israel on Wednesday.

- Marine Le Pen confirmed she will run in next year’s French presidential election after an appeals court narrowed her office ban to the 15 months she has already served, clearing her path to candidacy despite a conviction for misusing European Parliament funds. The court sentenced her to a three-year prison term (two years suspended), with the remaining year potentially served under electronic bracelet surveillance, though her appeal to France’s high court will suspend that requirement until a ruling expected in January. Le Pen now leading Polymarket bets to become next French president in 2027.

- For AI, two notable developments. The Trump administration lifted restrictions on OpenAI's GPT-5.6, and OpenAI confirmed GPT-5.6 "Sol" will launch publicly this Thursday (9 July), relevant given the OpenAI IPO backdrop. SpaceX is reportedly set to launch a new AI model with Cursor as soon as today and Grok 4.5 tomorrow. On the geopolitical-tech front, China warned of "severe" security risk tied to Claude Code, alleging a built-in monitoring mechanism, per its cybersecurity ministry - one to watch for broader US-China tech friction.

- Note that RBNZ raised its OCR 25bps to 2.50% as expected and signaled more tightening likely.

- On the UK, OBR reportedly warned that Burnham needs to raise taxes by £120B to avoid a crisis. Markets were pricing a 96% chance of a BOE hike in December (up from 80%), but important to note this was just before Trump comments this morning.

- Asia closed lower with KOSPI underperforming -5.4%. EU indices -1.5% to -2.6%. US futures -0.8% to -1.2%. Gold -1.3%, DXY +0.1%; Commodity: Brent +6.1%, WTI +6.3%; Crypto: BTC -1.9%, ETH -2.4%.

Asia

- Japan May Current Account Balance: ¥3.968T v ¥4.111Te; Trade Balance (BoP Basis): ¥6.9B v ¥221.9Be.

- Japan Jun Bank Lending Y/Y: 5.7% v 5.7% prior.

- South Korea May Current Account Balance: $38.6B v $28.3B prior (record surplus).

- New Zealand Central Bank (RBNZ) raised Official Cash Rate (OCR) by 25bps to 2.50%; as expected. Agreed that while further OCR increases appeared likely at upcoming meetings, their timing was highly uncertain.

- BOJ New Board Member Asada noted that a rate hike could slow the economy. Not opposed to rate hikes; The BOJ should respond flexibly to changes in economic, price and financial conditions.

- Japan’s government said to be considering revising its annual policy agenda to avoid appearing to pressure the Bank of Japan.

Global conflict/tensions

- US CENTCOM: Confirms a series of strikes on Iran in response to Iranian attacks on three commercial vessels transiting the Strait of Hormuz; Iran's aggression was a violation of the ceasefire.

Europe

- President Trump warned he could withdraw all US troops from Europe during the NATO summit, while renewing calls for U.S. control of Greenland

- UK OBR noted that Burnham needed to raise taxes by £120B in order to avoid a crisis.

- Marine Le Pen said she planned to run in France’s next presidential election after an appeals court reduced her ban on seeking office, clearing the way for her candidacy. Ordered her to wear an electronic ankle tag for one year, making a presidential campaign politically and logistically difficult.

- Nigel Farage stepping down as a UK lawmaker amid scrutiny over his financial disclosures.

Energy

- Weekly API Crude Oil Inventories: -0.4M v -6.1M prior.

- Joint Maritime Information Center raised the threat level in the Strait of Hormuz to “severe” after renewed Iranian attacks on ships using a U.S.-protected route near Oman’s coast.

- US Treasury amended and revoked the June 21st Iran-related general license that allowed sales of Iranian oil; US negotiators would continue to work in good faith toward a final deal with Iran.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.75%, FTSE -1.53% at 10502.56, DAX -2.35% at 24891.19, CAC-40 -2.13% at 8256.20, IBEX-35 -2.60% at 19129.73, FTSE MIB -1.63% at 51602.50, SMI -1.61% at 14128.90, S&P 500 Futures -0.85%].

Market focal points/key themes: European shares declined on Wednesday as renewed US-Iran tensions intensified after President Trump declared the Iran ceasefire and MOU “over,” calling further negotiations a waste of time and describing the Iranians as “sick people.” These comments sharply increased market volatility, pushing Brent crude up another 2% to $75.60 a barrel and fueling concerns over persistent war-induced inflation. The pan-European STOXX 600 fell 0.6% in early trade, with the DAX down 1%, CAC 40 losing 0.9%, and FTSE 100 and FTSE MIB each dropping 0.7%, while energy stocks such as Shell and BP rose on the oil spike. On corporate front, Jet2 provided positive update on its travel bookings and still trades higher over 10% in London. Investor caution was compounded by the upcoming release of Federal Reserve minutes under new Chair Kevin Warsh, adding to broader uncertainty over interest rate paths.

Equities

- Consumer discretionary: Jet2 [JET2.UK] +9.5% (earnings; bookings update).

- Energy: Shell [SHEL.UK] +2.0% (Trump comments than Iran ceasefire likely over).

- Financials: BNP Paribas [BNP.FR] -3.5% (French yields rise after Trump comments on Iran and Le Pen confirming she is to particpate in 2027 elections), BBVA [BBVA.ES] -3.0% (Trump asked Bessent to cut off "all" trade with Spain).

- Telecom: Vivendi [VIV.FR] -12.5% (Bolloré wins Paris court ruling over Vivendi).

Speakers

- Iran Foreign Ministry stated that key parts of ceasefire agreement were ineffective. US was responsible for consequences of escalation. Violations of Iranian arrangements in Strait of Hormuz and continued Israeli strikes in Lebanon were making the interim deal ineffective. Reiterated warning to regional States not to allow their territory to be used by the US for strikes against Iran.

- Pres Trump spoke from the NATO Summit. Believed that the ceasefire was over and stressed that Iran leaders were dirty players and 'scum'; US attacked Iran very powerfully last night and hit them back after they shot rockets at ships in Strait. We have wasted a lot of time with Iran as it did not know what it was doing, they’re are incompetent.

- Taiwan Central Bank: Imported inflationary pressure remained manageable.

Currencies/fixed income

- Risk sentiment soured as the US-Iran truce experienced its harshest test yet of the 3-week-old US-Iran MOU. US CentCom began a series of strikes (approx. 80) on Iran in retaliation for attacks on three commercial vessels in the Strait of Hormuz. US Treasury amended and revoked the June 21st Iran-related general license that allowed sales of Iranian oil.
Risk aversion flows gained momentum after Pres Trump spoke from the NATO Summit and noted that he believed that the ceasefire was over.

- EUR/USD moved lower to retest the 1.14 level as safe-haven flows picked up following Trump’s belief the US-Iran ceasefire agreement was over.

- USD/JPY back above the 162 level.

- Higher oil prices fanned the flames of inflation and pushed global bond yield higher. 10-year German Bund yield last at 3.04%, France 10-year Oat at 3.87% and 10-year Gilt yield at 4.92% 10-year Treasury yield: 4.56%; 10-year JGB: 2.85%.

Economic data

- (SE) Sweden Jun Maklarstatistik Housing Prices: 2.9% v 2.2% prior.

- (NL) Netherlands May Consumer Spending Y/Y: 1.8% v 1.0% prior.

- (SE) Sweden May GDP Indicator M/M: 0.9% v 0.2%e; Y/Y: 3.9% v 2.6% prior.

- SE) Sweden Jun Preliminary CPI M/M: 0.4% v 0.2%e; Y/Y: 0.7% v 0.7%e.

- (SE) Sweden Jun Preliminary CPIF M/M: 0.3% v 0.2%e; Y/Y: 1.3% v 1.2%e.

- (SE) Sweden Jun Preliminary CPIF (ex-energy) M/M: 0.6% v 0.5%e; Y/Y: 0.4% v 0.3%e.

- (SE) Sweden May Private Sector Production M/M: 0.6% v 1.5% prior; Y/Y: 5.2% v 4.0% prior.

- (SE) Sweden May Industrial Orders M/M: -3.2% v +3.9% prior; Y/Y: 1.3% v 4.8% prior.

- (SE) Sweden May Industry Production Value Y/Y: 6.9% v 6.9% prior; Service Production Value Y/Y: 5.4 % v 3.6% prior.

- (CZ) Czech Jun International Reserves: $179.6B v $182.1B prior.

- (HU) Hungary Jun YTD Budget Balance: -3.382TT v -3.806T prior.

Fixed income issuance

- (IN) India sold total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK3.105B in 2028 and 2035 DGB Bonds.

- (UK) DMO sold £750M in 0.125% Jan 2028 Gilts via tender; Avg Yield: % v 4.219% prior; bid-to-cover: x v 4.28x prior; Tail: bps v 0.3bps prior.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 0.75% 2028 SGB Bonds.

- (GR) Greece Debt Agency (PDMA) sold €500M vs. €400M indicated in 3-month Bills.

Looking ahead

- (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to o leave the Base Rate unchanged at 3.75%.

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.50%.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:25 (CH) Switzerland to sell 2.25% Jun 2031 bond.

- 05:30 (DE) Germany to sell €6.0B in new Aug 2036 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.25-1.5B in 2036 and 2042 OT bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays.

- 06:00 (IE) Ireland Jun Live Register Monthly Change: No est v +0.6K prior; Live Register Level: No est v 171.8K prior.

- 06:30 (UK) DMO to sell £750M in 4.75% 2030 Dec Gilts via tender.

- 07:00 (US) MBA Mortgage Applications w/e July 3rd: No est v 0.0% prior.

- 07:30 (DE) ECB’s Nagel (Germany).

- 08:00 (HU) Hungary Central Bank (MNB) Jun Minutes.

- 08:00 (CL) Chile Jun CPI M/M: -0.2%e v +0.2% prior; Y/Y: 4.1%e v 3.9% prior.

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

- 09:00 (FR) ECB’s Moulin (France).

- 09:00 (PL) Poland Central Bank (NBP) post rate decision statement.

- 10:00 (US) May Final Wholesale Inventories M/M: 0.3%e v 0.3% prelim; Wholesale Trade Sales M/M: 0.8%e v 2.0% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (CO) Colombia May Exports: $4.9Be v $4.6B prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (AT) ECB’s Kocher (Austria).

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 14:00 (US) FOMC Jun Minutes.

- 15:00 (US) May Consumer Credit: $17.5Be v $20.7B prior.

- 15:00 (AR) Argentina May Industrial Production Y/Y: -1.8%e v -2.8% prior; Construction Activity Y/Y: No est v -2.8% prior.

- 18:30 (NZ) New Zealand Jun Manufacturing PMI: No est v 49.9 prior.

- 19:01 (UK) Jun RICS House Price Balance: -30.0%e v -35.0% prior.

- 19:50 (JP) Japan Jun M3 Money Supply Y/Y: No est v 1.7% prior; M2 Money Supply Y/Y: No est v 2.5% prior.

- 21:30 (CN) China Jun CPI Y/Y: 1.1%e v 1.2% prior; CPI Core Y/Y: 1.1%e v 1.1% prior; PPI Y/Y: 4.1%e v 3.9% prior.

- 22:00 (JP) Japan Jun Tokyo Avg Office Vacancies: No est v 2.1% prior.

- 22:00 (NZ) New Zealand to sell combined NZ$450M in 2031 and 2035 bonds.

- 23:00 (KR) South Korea Jun Total Bank Lending To Household (KRW): No est v 1,182T prior.

- 23:30 (TH) Thailand Jun Consumer Confidence: No est v 49.5 prior; Economic Confidence: No est v 43.1 prior.

- 23:35 (JP) Japan to sell 5-year JGB Bonds.