European Market Wrap - 17th August 2026

• Global yields surge to multi-decade highs amidst geopolitical tensions and fiscal woes surrounding AI corporate issuance.
• European equity futures were mildly lower, after initially opening mixed.
• A senior Iranian official said Iran has decided to shift its policy from defensive to a 'fully offensive' one, reported Reuters.

EQUITIES

• European bourses initially traded in narrow ranges but fell as the session continued amid higher energy prices following multiple geopolitical updates. The main driver came following a Reuters report, citing a senior Iranian official, stating that Iran has decided to shift its policy from defensive to offensive. This spurred equity and fixed income downside while energy benchmarks rose.
• Sectors ended mixed. Tech topped the sector pile, followed by Energy and Health Care. On the other hand, Consumer, Products & Services was the sector laggard, with Optimised Personal Care and Retail the underperformers.
• Key stories included: Argenx (+13%), announced positive ALKIVIA Phase 3 results; AstraZeneca (+0.9%), discontinued its eVOLVE-Lung02 Phase 3 trial but announced positive DESTINY-Lung04 and SAFFRON results; SIG Group (-16.6%), appointed a new CEO.
• US cash equities opened on the softer side, with the SPX and NDX flat while RUT and DJI began lower. Top stories include: Alibaba (+1.0%), sold its gaming unit for at least USD 1.5bln; RTX (+0.2%), awarded a USD 22.9bln contract for Tomahawk missile production.

FX

• G10s were firmer against the Buck throughout the entire session. Antipodeans led; low-yielding cyclicals were also stronger.
• USD was weaker throughout the European morning, falling from around the 99.50 mark to a 99.30 trough. The move was gradual, and over the entire morning, the initial downticks were without a driver, but later weakness was seen around remarks from the Iranian Foreign Ministry which signalled commitment to the diplomatic process; remarks which also modestly weighed on Brent at the time. Since then, other updates were not as optimistic and saw a couple of upticks in DXY and the crude complex (see commodities for details). DXY -0.2% is set to complete the London session off lows; eyes on the 200DMA just below 99.20.
• Action elsewhere was very quiet; G10S mostly moved in tandem with USD weakness.
• GBP/USD +0.3%, off the back of the weaker USD with UK catalysts light, Cable trading just above 1.3560, above all significant DMAs. Over the weekend, FT reported that Jamie Dimon warned the Treasury against raising bank taxes, a report which highlights the proximity of the Autumn budget. GBP is primed for a busy week of data, Tuesday sees Jobs data, Wednesday is inflation, Friday is Retail Sales.
• Low yielders were among the best performers, likely a function of USD carry positions unwinding. USD/CHF -0.6%, testing the 50 DMA, USD/SEK -0.4% ahead of the Riksbank this week. High-beta currencies were also firmer on the back of easing Fed expectations, which has helped the risk environment; markets assigning a 30% probability of tightening in September, last week was c. 50%. Alongside this, downbeat Chinese Activity data, which printed worse-than-expected across the board and further raises the argument for more stimulus from Beijing.
• Hotter-than-expected Canadian inflation sparked little move in the Loonie; USD/CAD set to finish the session -0.1% towards 1.3850.

FIXED

• Global fixed benchmarks are set to end the European session broadly on the back foot after initially trading slightly firmer/flat. Initial action saw US paper trade in the green, attempting to clamber off recent lows; Bunds and Gilts held steady, given the lack of pertinent newsflow.
• However, the complex gradually moved into the red as energy benchmarks moved higher and in continuation of last week’s bearish action. As such, global yields headed back towards multi-decade highs; the US 30yr (5.29%) hit its highest since 2007, whilst the German 10yr (3.21%) moved to levels not seen since 2011.
• On the yield front, focus remains on geopolitical tensions, fiscal woes (related to AI issuance) and risks surrounding JPY intervention and its follow-through to USTs. Given the thin docket for the US this week, the theme of higher yields may continue to remain front of mind. Over in Europe, on a longer-term basis, Bank of America sees front-end rates in Germany to “turn more constructive” once the ECB delivers a final rate hike. The bank sees “scope” for leveraged investors to boost net purchases. Finally, in the UK, Gilts opened flat and traded within a narrow range for much of the morning. Thereafter, UK paper moved into the red, in tandem with the losses seen across the pond.
• Germany to sell EUR-denominated 2056 Bund via syndicate.
• Alphabet (GOOGL) aims to raise AUD 5bln in an Australian bond offering.
• Credit Agricole (ACA FP) to sell EUR-denominated 7yr social bonds, guidance seen MS+110-115bps.
• NatWest (NWG LN) to sell USD-denominated 5-year noted; guidance seen +115bps to SOFR.

COMMODITIES

• Crude futures were choppy but ultimately firmer as conflicting US-Iran developments drove price action. Initial focus remained on the effective expiry of the 60-day Islamabad MoU, before Al Arabiya sources said the 60-day period had been extended, while Iran later said the agreement had not collapsed and the possibility of returning to it remained. However, tensions subsequently increased after a senior Iranian official said Iran had decided to shift from a defensive to a "fully offensive" policy, while Trump threatened further military action and Iran's IRGC denied his claim of back-channel talks. On the constructive side, Iran said an Oman agreement over shipping through the Strait of Hormuz was nearly final. Brent traded within a USD 88.01-89.68/bbl range and recovered to around USD 88.87/bbl.
• Dutch TTF remained firmer as European storage-refilling demand continued to support the contract. TTF rose to a EUR 63.08/MWh high from a EUR 60.71/MWh low before paring gains to around EUR 61.90/MWh.
• Precious Metals remained firmer but came off earlier highs. Spot gold rose from a USD 4,367/oz low to USD 4,416/oz before paring to around USD 4,384/oz, remaining above its 100 DMA at USD 4,386/oz for much of the session. Spot silver similarly rose to USD 66.22/oz before reversing to a USD 64.65/oz low and subsequently recovering to around USD 65.13/oz.
• Base Metals reversed earlier strength despite the weaker-than-expected Chinese activity data supporting expectations for further Beijing stimulus. 3M LME copper earlier surged to a record USD 14,387.60/t high from USD 14,116/t.
• Wells Fargo cuts its year-end 2026 gold forecast to 4,900-5,100 (prev. 5,300-5,500) and year-end 2027 forecast to 5,400-5,600 (prev. 5,800-6,000).
• Iranian Vice President said they are compelled to take measures to gradually raise gasoline prices, Al Arabiya reported.
• Iraq PM Ali Faleh al-Zaidi chairs an expanded meeting of the Ministry of Oil, reported INA. The meeting discussed the reality of the oil sector and production and export levels in light of the closure of the Strait of Hormuz and the significant decline in Iraqi oil export rates.
• China's 15th Five-Year Plan for oil and gas development called for accelerating the large-scale and efficient development of deep and ultra-deep oil and gas reservoirs.
• At least 2 Asian refiners have asked Saudi Aramco if they can take their oil cargoes from Egypt's Sidi Kerir port, instead of through Yanbu, Bloomberg reported.
• Ukraine's Naftogaz said production has been lost following Russian attacks.

CENTRAL BANKS

• ECB's Lane publishes a slide deck focused on defence spending, and its potential impact on GDP.
• SNB’s New Chief Economist Martin Brown to Start on October 1st, Bloomberg reported.
• SNB Sight Deposits w/e Aug 14th (CHF): Domestic 433.52bln (prev. 432.64bln), Total 458.75bln (prev. 462.4bln).

GEOPOLITICS

RUSSIA-UKRAINE

• Russia's Black Sea port of Novorossiysk resumed crude loading operations on Sunday after they were halted following a drone strike on Friday, sources say.
• Ukraine's Naftogaz said production has been lost following Russian attacks.

MIDDLE EAST

• Sources say Hezbollah has not yet received a "green light" from Iran to launch operations against Israel, Al Hadath reported.
• Senior Iranian official said Iran has decided to shift its policy from defensive to a 'fully offensive' one, reported Reuters. Pressuring US or relying on mediators to reach a lasting peace is not realistic. Iran has set a deadline of a few weeks for implementation of MoU by US. All Iranian entities will be prepared to escalate tensions in Hormuz Strait and the region if diplomacy fails. Timeframe set by Iran will be conveyed to US and regional countries via mediators. Iran will not wait for US to continue the naval blockade indefinitely.
• Iran said a deal with Oman over shipping through Strait of Hormuz is nearly final, Associated Press reported.
• Hamas welcomes US President Trump's commitment to the ceasefire in Gaza.
• Houthi spokesperson say they targeted a Saudi military landing ship and four accompanying military boats in the Red Sea off Al-Makha with ballistic missiles. Closely monitoring the actions of military movements by Saudi forces and they will strike those actions and movements whether on land or at sea.
• US President Trump said Israel should not launch attacks on Gaza at this time, Iran must raise the white flag; Iranian side is a good gambler, but it's breathing its last. I'm not in a hurry regarding Iran and I don't have a specific timetable. There is positive progress on the issue of disarming Hamas, and we have our own special relationship with the movement. The midterm elections have absolutely no effect on my thinking regarding Iran.
• Al-Arabiya sources say that Israeli PM Netanyahu told US Envoy Kushner and Mladenov that withdrawal from Gaza is contingent on Hamas removing its weapons from Gaza.
• US President Trump said there is a back channel with IRGC officials, reported Fox News; in no hurry with Iran and threatens to bomb Oman if it gets in US way. Israelis should not be striking in Gaza.
• Al-Arabiya sources said the 60-day period between Iran and the US has been extended [details light].
• US President Trump posted "The number one Goal is, and always will be, that Iran cannot have, in any way, shape, or form, a Nuclear Weapon. Thank you for your attention to this matter! President DONALD J. TRUMP".
• Iranian Foreign Ministry reiterates that Washington has not adhered to the memorandum of understanding. Adds that the announcement of maritime routes for transit through the Strait of Hormuz will be a joint announcement between Tehran and Oman. said Iran maintains a high level of military and defense readiness, while keeping the door open for diplomacy.
• Iranian Foreign Ministry said that there are ongoing contacts with Qatar, which is playing an influential role in de-escalation efforts, Al Arabiya reported; Iran did not submit any letter to parliament to halt the Strait of Hormuz management plan. MoU. MoU signed with the US does not stipulate a 60-day deadline. no talks have begun due to Washington's violation of the memorandum of understanding. No other mediator other than Pakistan and Qatar. Oman:. We are working to find a mechanism that preserves the sovereignty of coastal states and ensures safe navigation in the Strait of Hormuz. said talks with Oman are long due to the complexity of the subject, multiple actors involved and countries seeking to undermine the process. Talks are ongoing.
• Yemeni government forces say Houthi militias launched a new attack with two missiles in Bab al-Mandab, Al Hadath reported.
• IRGC Spokesman said that Trump's claim about behind-the-scenes talks with the IRGC "is illusions stemming from defeat". "There is no conversation between IRGC officials and the Americans, and this lie of Trump's is merely a fantasy that has afflicted him due to illusions and nightmares stemming from defeat and despair in the war.".
• Iranian Foreign Ministry said that the "Islamabad agreement has not collapsed and the possibility of returning to it remains", Al Arabiya reported.
• IRGC reiterates that the Strait of Hormuz will reopen when US honours its commitments under Islamabad MoU, Press TV reported.

NORTH AMERICAN DATA

• US NY Empire State Manufacturing Index (Aug) 20.60 vs. Exp. 11 (Prev. 15.60).
• Canadian CPI Average of Common, Median and Trimmed (July, Y/Y): 2.2% (prev. 2.1%).
• Canadian CPI Common (Jul YY) 2.7% vs. Exp. 2.5% (Prev. 2.6%).
• Canadian CPI (Jul MM) 0.5% vs. Exp. 0.4% (Prev. -0.4%).
• Canadian Foreign Securities Purchases (Jun) 40.83 vs. Exp. 15 (Prev. 8.80).
• Canadian New Motor Vehicle Sales (Jun) 190.2 (Prev. 190.6).
• Canadian Core CPI (Jul MM) 0.2% (Prev. 0.1%).
• Canadian CPI (Jul YY) 3.0% vs. Exp. 2.9% (Prev. 2.8%).
• Canadian CPI Median (Jul YY) 2.0% vs. Exp. 1.9% (Prev. 1.9%).
• Canadian CPI Trimmed-Mean (Jul YY) 1.9% vs. Exp. 1.8% (Prev. 1.9%).
• Canadian Core CPI (Jul YY) 2.3% (Prev. 2.1%).