Why the calm? Investors have grown used to geopolitical tremors. From Ukraine to Taiwan, from Gaza to the Red Sea, the playbook is familiar: a flash of fear, a surge in safe-haven assets, then business as usual. This time, defense stocks like Lockheed Martin and Northrop Grumman climbed predictably. Oil majors followed suit. But the wider market, with the S&P 500 just 3% off record highs, stood steady.
 
It's not that the stakes aren't high. A blockade of the Strait of Hormuz could send Brent crude soaring past $100, fueling inflation and squeezing households. Yet Wall Street appears confident that Tehran's response will be measured - or that the Pentagon has gamed this out. Either way, capital is betting on continuity.

By launching a strike on Iran just two days after declaring a two-week period of reflection, the United States has effectively put its doctrine of "peace through strength" into practice. Tehran lacks the military capability to launch a direct response, but may retaliate through other disruptive means, such as obstructing the Strait of Hormuz.

Following the strikes this weekend, everyone has suddenly become an expert in interpreting satellite imagery, as well as in identifying all manner of warplanes and munitions. Television channels, influencers, commentators, and newspapers alike were saturated with coverage - it was almost impossible to avoid the news.

Mr “I'll give myself two weeks” ultimately allowed himself just 48 hours before ordering strikes on Iran. In a meticulously planned operation, the United States launched a large-scale assault on three key sites linked to Iran's nuclear programme, deploying a combination of air strikes and cruise missiles. The damage appears to be substantial, though the condition of the deeply buried underground facilities remains unclear. Washington employed enormous bunker-buster bombs - designed to pierce unprecedented layers of reinforced protection - which have been the subject of extensive media coverage in recent days.

Donald Trump has suggested that the United States will not go beyond destroying Iran's nuclear capabilities. He revived his favorite slogan, transforming MAGA into MIGA: Make Iran Great Again. While claiming that it is not politically correct to advocate regime change, he suggested that the current regime is incapable of making the country prosper. This is a clever, if elementary, way of pushing the Iranian people to increase pressure on a ruling class already weakened by its inability to prevent its historic rival Israel and its ally from doing as they please within the country's borders.

Tehran is all the more isolated given that the US has built up a fairly solid network of alliances among Arab countries in recent years and that Russia does not seem inclined to support its ally. Moscow has "strongly condemned" the US attack, but clearly has no intention, nor the means, to provide Iran with outright and massive support.

Tehran's most obvious response is through oil and the Strait of Hormuz, a transit point for some of the oil and gas used around the world. So far, access to the Persian Gulf has not been significantly impeded, but two supertankers decided to turn back this weekend while waiting for a better overview of the situation.

The situation in Iran is dominating global headlines at the start of this week, but we must not forget that the deadline for Donald Trump's ultimatum to dozens of countries regarding tariffs is approaching. On the weekly agenda are June PMI activity indicators for the major economies today and US PCE inflation on Friday. In between, Fed Chairman Jerome Powell will face Congress on Tuesday and Wednesday for his mid-year testimony. The corporate calendar includes a few companies with unconventional reporting dates, such as Prosus, Fedex, Micron, and Nike.

In Asia Pacific, markets are down at the start of the week. Taiwan (-1.1%) and India (-0.8%) are the two worst-hit markets. Declines are limited to 0.1%/0.3% in Australia, South Korea, and Japan. In Hong Kong, the Hang Seng is up 0.1%. In Europe, indices are bearish, with the Stoxx Europe 600 down 0.5%.

Today's economic highlights:

On today's agenda: Japan's PMIs, followed by those from France, Germany, the Eurozone, and the United Kingdom; In the United States, the PMIs will be accompanied by existing home sales. See the full calendar here.

  • Dollar index: 99,310
  • Gold: $3,368
  • Crude Oil (BRENT): $77.40 (WTI) $74.05
  • United States 10 years: 4.36%
  • BITCOIN: $101,235

In corporate news:

  • Tesla launched a limited robotaxi service in Austin, Texas, emphasizing safety and facing regulatory challenges.
  • News Corp extended CEO Robert Thomson's contract until June 2030.
  • Bank of New York Mellon approached Northern Trust for potential merger discussions.
  • Wolfspeed is set to file for bankruptcy following a restructuring agreement.
  • Apple executives have discussed a takeover of Perplexity, according to Bloomberg News. Apple is also being sued by shareholders for allegedly exaggerating its progress in artificial intelligence.
  • The founder and executive chairman of FedEx, Frederick Smith, has died.
  • Blackstone is finalizing a C$7 billion equity investment in Rogers Communications.

Analyst Recommendations:

  • Boston Properties, Inc.: JP Morgan upgrades to neutral from underweight with a target price raised from USD 72 to USD 78.
  • Bright Horizons Family Solutions Inc.: Jefferies downgrades to hold from buy with a target price reduced from USD 146 to USD 135.
  • Caesars Entertainment, Inc.: JP Morgan upgrades to overweight from dropped coverage with a price target reduced from USD 96 to USD 47.
  • Dow Inc.: BMO Capital Markets downgrades to underperform from market perform with a target price reduced from USD 29 to USD 22.
  • Draftkings Inc.: JP Morgan upgrades to overweight from dropped coverage with a target price reduced from USD 58 to USD 50.
  • Estee Lauder: Deutsche Bank upgrades to buy from hold with a price target raised from USD 71 to USD 95.
  • Evercore Inc.: Morgan Stanley upgrades to overweight from equalwt with a target price raised from USD 175 to USD 312.
  • Fmc Corporation: Wells Fargo upgrades to overweight from equalweight with a target price raised from USD 41 to USD 50.
  • Howard Hughes Holdings Inc.: JP Morgan downgrades to neutral from overweight with a target price reduced from USD 82 to USD 76.
  • Jefferies Financial Group Inc.: Morgan Stanley maintains equalwt rating with a price target raised from USD 41 to USD 55.
  • Kbr, Inc.: KeyBanc Capital Markets downgrades to sector weight from overweight.
  • Lazard: Morgan Stanley maintains underweight rating with a target price raised from USD 33 to USD 45.
  • Oracle Corporation: CITIC Securities Co Ltd upgrades to hold from buy with a price target raised from USD 186 to USD 200.
  • Exelixis, Inc.: Truist Securities maintains its buy recommendation and raises the target price from USD 43 to USD 55.
  • Stellantis N.v.: Evercore ISI maintains its in-line recommendation and raises the target price from 9 to EUR 13.