Iran war risk premium unwinds on news of US-Iran MoU

EU mid-market update: Iran war risk premium unwinds on news of US-Iran MoU; Caveat that needs to be signed and nuclear issue unresolved; SpaceX takes another step higher in premarket; Jampacked week of rate decisions, starting with BOJ.

Notes/observations

- Dominant driver this morning is the interim US–Iran peace deal, with a signing ceremony scheduled for Fri 19th June in Switzerland. Markets are treating the MoU as a de facto end to the 107-day conflict, even though much remains unresolved. Headline terms include a Fri reopening of the Strait of Hormuz with no tolls, removal of the US naval blockade, a phased lifting of sanctions on Iranian oil exports, and the unfreezing of Iranian overseas assets (figures cited range from ~$12B to a claimed $25B). The deal also frames a 60-day negotiating window, primarily covering Iran's nuclear program. Caution is warranted: the substance lies in those 60 days, with three outcomes still live (US caves, Iran caves, or neither - leaving renewed kinetic risk open). Notably, weekend footage showed IRGC hardliners opposing any agreement as a surrender, and Trump has signaled the US would resume strikes absent a nuclear accord.

- Iran official says US commits to releasing $25 billion in frozen assets - including $12 billion in direct cash and credit lines upfront, while US official keeps denying this and Trump retains a public strike threat if talks fail later. The funds issue appears to be the most secret and unclear element of the deal, with significant discrepancies between Iranian claims of substantial upfront releases and other reporting that frames relief as more conditional or phased, making it the key ambiguity and potential “lie detector” ahead of the June 19 signing.

- Ahead of the MOU signing in Switzerland, the still-secret memorandum seems to prioritize immediate geopolitical de-escalation - reopening the Strait of Hormuz, lifting the U.S. blockade within 30 days, temporary sanctions waivers, partial frozen asset releases, and a 60-day extension for deeper nuclear talks—while deferring the hard technical architecture (down-blending of near-weapons-grade 60% uranium stockpiles, centrifuge controls, Fordow restrictions, and verification sequencing) to a later phase. This may reverse the JCPOA's logic of nuclear rollback first, sanctions relief later; it effectively hands Iran early economic and optical wins (including U.S. force adjustments and exclusion of missiles/proxies) while leaving the near-breakout enriched uranium threat intact, creating a politically theatrical but strategically incomplete arrangement whose ultimate value hinges entirely on whether the second phase converts leverage into verified, irreversible nuclear concessions.

- Despite a 93% Polymarket probability of a US-Iran permanent peace deal by June 30, the market now prices only a 30% chance (down from 60% in mid-May) that Strait of Hormuz traffic normalizes by end-June because by some estimates ~150 million barrels of crude remain trapped behind a fleet of ~95 tankers (many VLCCs, many dark for weeks) that have been baking in the hottest waters on Earth, potentially creating a severe “Barnacle Squeeze.” Reopening the strait is not a political light switch that instantly restores flows; it set to trigger a complex, multi-month mechanical reactivation event involving hull/propeller fouling, seawater cooling system blockages, heat exchanger degradation, and documentation bottlenecks.

- Markets are largely shrugging off the weekend news that the US government suspended foreign-national access to Anthropic's Fable 5 / Mythos model, effectively forcing Anthropic to disable its top models for all customers - possibly on doubts the ban holds, or simply swamped by the Iran risk-on flows. Nonetheless, China's Zhipu AI (Knowledge Atlas Technology) swiftly launched its new open-source model GLM-5.2, and early independent tests show GLM-5.2 outperforming or closely matching the now-restricted Fable 5 on several agentic coding and reasoning benchmarks (including topping BridgeBench), while delivering a 1 million token context window on domestic Huawei Ascend hardware. Zhipu expecting a surge in API usage as Western developers increasingly turn to Chinese models — which now dominate global token consumption thanks to prices often 10-30x cheaper than U.S. frontier offerings.

- A packed week calendar with RBA and BOJ tomorrow, followed by the Fed (Wed), BoE, SNB, Norges, Riksbank and several EM banks. The lower oil/inflation backdrop is already repricing expectations - investors trimmed BoE hike pricing to ~26bp for 2026 (down 11bp), and the ECB is increasingly seen as done hiking. The Fed meeting carries extra weight as Kevin Warsh's first as chair; markets expect removal of the easing bias, with Warsh needing to sound hawkish on inflation to protect the long end. For the BOJ, focus is on whether it delivers the expected 25bp hike (first since Dec 2025) and on guidance - Dep Gov Uchida hosts the presser given Gov Ueda's temporary medical leave, a notable wildcard given his market-moving history.

- For the UK politically, Thursday's Makerfield by-election is the key event - a Burnham win is expected to trigger an immediate, possibly uncontested, leadership challenge against PM Starmer, seen as more potent after last week's defense secretary resignation. Rightmove showed June asking prices falling, and a sizeable UK-Japan deal was also signed.

- The record ~$1.8T SpaceX IPO (priced Friday) is providing a liquidity tailwind, drawing strong Asian participation; the stock added another ~6% in premarket to around $170. CEO Musk said overnight: “I think SpaceX might be able to reach approximately $1T revenue in 2030, and I would be surprised if revenue is not greater than $1T in 2031”. In coming days and weeks SpaceX may experience some momentum due to fast-track Nasdaq 100 inclusion roughly 15 trading days after the June 12, 2026 IPO (around early July), which will trigger automatic buying from passive funds and ETFs.

- Asia closed higher with Nikkei225 outperforming +5.3%. EU indices +0.2-1.4%. US futures +0.9-2.1%. Gold +2.9%, DXY -0.3%; Commodity: Brent -5.3%, WTI -5.7%; Crypto: BTC +1.7%, ETH +2.6%.

Asia

- New Zealand May Performance Services Index: 47.5 v 48.78 prior.

- New Zealand May Total Card Spending M/M: +2.2% v -1.9% prior; Retail Card Spending M/M:+1.7% v -1.2% prior.

Global conflict/tensions

- Oil at 2-month lows as President Trump proclaimed a "complete" deal with Iran, pledging to halt the fighting for 60 days. US to remove that naval blockade and restore toll-free transit through the Strait of Hormuz.

- Washington and Tehran both declared an end to hostilities, despite keeping the text of their memorandum under wraps.

- Iran's deputy foreign minister said a deal had been reached to end the US-Israel war with Iran, including an immediate ceasefire in Lebanon and the start of a 60-day negotiation period,

- Israel did launch attacks on Beirut’s southern suburbs on Sunday.

- UK, France, Germany, and Italy said they were prepared to lift sanctions on Iran if it took steps to curb its nuclear program.
Details of U.S.–Iran framework agreement said to include a phased reopening of the Strait of Hormuz over 30 days, temporary suspension of tolls, and a 60-day oil sales waiver for Iran, alongside commitments for nuclear restrictions under IAEA supervision, phased sanctions relief, and future negotiations over uranium stockpiles, while also calling for a halt to Israeli strikes in Lebanon during the ceasefire period.

- Report that US VP Vance to meet Iran’s Qalibaf in Geneva on Fri to sign Iran agreement; no frozen funds will be released until Iran meets its obligations.

- President Trump stated that US would resume strikes on Iran if a nuclear agreement could not ultimately be secured.

Europe

- UK Jun Rightmove House Prices M/M: -0.6% v +1.2% prior; Y/Y: -0.5% v -0.3% prior.

- Swiss voters rejected a 10 million population cap.

Trade

- Pres Trump reportedly again threatened France with 100% wine tariffs over tech tax.

Energy

- U.S.-Iran agreement to reopen the Strait of Hormuz to clear the roughly 500 merchant vessels backlog in the Gulf could take weeks.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.76% at 638.02, FTSE +0.22% at 10,494.84, DAX +1.34% at 24,941.70, CAC-40 +1.14% at 8,446.26, IBEX-35 +1.24% at 18,996.95, FTSE MIB +0.77% at 51,895.50, SMI +0.60% at 13,790.90, S&P 500 Futures +2.12%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; risk appetite supported after news of a deal between US and Iran; among stocks leading the way higher are industrials and materials; energy and utilities sectors underperforming; oil & gas subsector under pressure after Brent falls below $83/bbl; Bharti Airtel to consolidate stake in Airtel Africa; Saint-Gobain sells its Scandinavian Dahl business to Kesko; focus on Eurozone Industrial Production data coming out later in the day; Frasers confirms offer for Accent; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Lufthansa [LHA.DE] +5.5% (oil prices lower as Trump announced finalized MOU with Iran to be signed on June 19th), Kesko [KESKOB.FI] -9.5% (acquisition).

- Energy: Shell [SHEL.UK] -4.5% ( (oil prices lower as Trump announced finalized MOU with Iran to be signed on June 19th)).

- Financials: Unicredit [UCG.IT] +1.5% (asks Bafin to review Commerzbank statements over bid).

- Healthcare: UCB [UCB.DE] -3.5% (analyst cut).

- Technology: IQE [IQE.UK] +19.0% (supply deal), Austria Technologie & Systemtechnik [ATS.AT] +26.5% (analyst upgrade).

Speakers

- ECB's Nagel (Germany) noted that if the Strait of Hormuz were to become navigable again soon, it would take months for oil supply to return to normal; ECB was keeping all options open for July meeting.

- Norway Statistics Office (SSB) updated its quarterly economic outlook which cut 2026 Mainland GDP from 2.0 to 1.7% and raised 2026 Underlying CPI from 3.1% to 3.2%. Saw Norges central bank raising the Deposit Rate by Sept at the latest.

- Ukraine Pres Zelenskiy stated that G7 needed to increase pressure on Russia and step up its help on Ukraine air defenses (**Note: G7 leaders were meeting in Évian, France from June 15–17, 2026, with Iran, Ukraine, trade, energy security and AI on the agenda).

- Israel Defense Min Katz stated that IDF opposed withdrawal of IDF forces from Lebanon.

- Iran to allow free Hormuz transit for 60 days under pact - Fars.

- Japan PM Takaichi: US-Iran agreement was a big step towards lasting calm; Must also see agreement on Iran nuclear issue.

- Fitch affirmed China sovereign rating at 'A'; Outlook stable.

Currencies/fixed income

- USD was softer against the major as risk appetite found some tailwinds on word of a US-Iran framework peace agreement. Lower oil prices and bond yields helped to soften inflationary expectations. The Iran deal to halt the US blockade of Iran and reopen the Strait of Hormuz.

- Lots of key rate decisions during the week with BOJ, RBA, Fed, BOE among them.

- EUR/USD at 1.1610 area by mid-session. EUR able to maintain the lower end of the 1.15-1.20 trading range in recent weeks. The recent ECB rate hike aiding the Euro currency for support of the pivotal support.

- USD/JPY holding around the 160 area with focus on the BOJ rate decision on Tuesday. Dealers noted that a Jun rate hike was fuly priced in; focus to be on communication around the future policy path (looking for signal on any faster pace of hikes).

- 10-year German Bund yield last at 2.96%, France 10-year Oat at 3.70% and 10-year Gilt yield at 4.79% 10-year Treasury yield: 4.44%; 10-year JGB: 2.57%.

Economic data

- (NL) Netherlands Apr Trade Balance: €8.0B v $10.7B prior.

- (FI) Finland May CPI M/M: 0.5% v 0.1% prior; Y/Y: 2.1% v 1.5% prior.

- (DE) Germany May Wholesale Price Index M/M: -0.6% v +2.0% prior; Y/Y: 5.9% v 6.3% prior.

- (SE) Sweden May Unemployment Rate: 9.4% v 8.7% prior; Unemployment rate (seasonally adj): 8.8% v 8.7%e.

- (NO) Norway May Trade Balance (NOK): 62.6B v 83.6B prior.

- (CH) Swiss May Producer & Import Prices M/M: -0.4% v 0.8% prior; Y/Y: -1.8% v -2.0% prior.

- (IN) India May Wholesale Prices (WPI) Y/Y: 9.7% v 9.5%e.

- (CH) Swiss May Seco Consumer Confidence: -38.1 v -38.0e.

- (TR) Turkey Apr Industrial Production M/M: +3.7% v -0.8% prior; Y/Y: 6.0% v -1.1% prior.

- (PL) Poland May Final CPI M/M: -0.3% v -0.3% prelim; Y/Y: 3.1% v 3.1% prelim.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 468.5B v 469.6B prior; Domestic Sight Deposits: 434.0B v 433.2B prior.

- (IT) Italy Apr Total Trade Balance: €4.3B v €4.7B prior; EU Trade Balance: +€0.3B v -€1.0B prior.

- (TR) Turkey May Central Gov't Budget Balance (TRY): -298.2B v -338.7B prior.

- (IT) Italy Apr General Government Debt: €3.155T v €3.158T prior.

- (EU) Euro Zone Apr Industrial Production M/M: 0.1% v 0.2%e; Y/Y: 0.3% v 0.4%e.

- (EU) Euro Zone Apr Trade Balance: €1.3B v €0.6B prior; Trade Balance NSA (unadj): -€1.0B v +€7.8B prior.

Fixed income issuance

- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month bills.

Looking ahead

- G7 leader Summit in Evian, France (Jun 15-17th).

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

- 05:30 (DE) Germany to sell combined €5.0B in 6-month and 12-month BuBills.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IL) Israel May Unemployment Rate: No est v 2.9% prior; Broad Unemployment Rate: No est v 6.4% prior.

- 06:00 (IL) Israel Q1 Current Account Balance: $1.6Be v $3.4B prior.

- 06:00 (PT) ECB’s Pereira (Portugal).

- 07:00 (IL) Israel to sell bonds.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

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

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

- 08:15 (CA) Canada May Annualized Housing Starts: 255.2Ke v 279.3K prior.

- 08:30 (US) Jun Empire Manufacturing: 13.5e v 19.6 prior.

- 08:30 (CA) Canada Apr Wholesale Sales (ex-petroleum) M/M: 0.2%e v 1.9% prior; Manufacturing Sales M/M: 4.5%e v 3.0% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €B in 3-month, 6-month and 12-month bills.

- 09:15 (US) May Industrial Production M/M: 0.3%e v 0.7% prior; Manufacturing Production: 0.3%e v 0.6% prior; Capacity Utilization: 76.2%e v 76.1% prior.

- 10:00 (US) Jun NAHB Housing Market Index: 37e v 37 prior.

- 10:00 (AT) ECB's Kocher (Austria) in Vienna.

- 11:00 (PE) Peru May Unemployment Rate: 5.4%e v 5.3% prior.

- 11:00 (PE) Peru Apr Economic Activity Index (Monthly GDP) Y/Y: 3.6%e v 3.2% prior.

- 11:30 (IL) Israel May CPI M/M: -0.1%e v +1.2% prior; Y/Y: 2.2%e v 1.9% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea May Export Price Index M/M: No est v 7.1% prior; Y/Y: No est v 40.8% prior.

- 17:00 (KR) South Korea May Import Price Index M/M: No est v -2.3% prior; Y/Y: No est v 20.2% prior.

- 18:45 (NZ) New Zealand May Food Prices M/M: No est v 0.0% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v # prior.

- 21:30 (CN) China May New Home Prices M/M: No est v -0.2% prior; Used Home Prices M/M: No est v -0.2% prior.

- 22:00 (CN) China May Retail Sales Y/Y: -0.2%e v +0.2% prior; Retail Sales YTD Y/Y: No est v 1.9% prior.

- 22:00 (CN) China May Industrial Production Y/Y: 4.3%e v 4.1% prior; Industrial Production YTD Y/Y: No est v 5.6% prior.

- 22:00 (CN) China May YTD Fixed Urban Assets Y/Y:: -2.3%e v -1.6% prior.

- 22:00 (CN) China May Surveyed Jobless Rate: 5.2%e v 5.2% prior.

- 22:00 (CN) China May YTD Property Investment Y/Y: -14.0%e v -13.7% prior; Residential Property Sales Y/Y: No est v -15.7% prior.

- 23:00 (KR) South Korea Apr M2 Money Supply M/M: No est v 0.4% prior; L Money Supply M/M: No est v -0.4% prior.

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to raise Target Rate by 25bps to 1.00%.