EUROPEAN OPEN: Equities open lower as geopolitics dominates; crude surges, USD and gold stronger

EUROPEAN OPEN: Equities have started the week lower amid the Iran conflict (see below for our situation report). US Treasuries have pared losses to trade about flat; futures were lower amid expectations of a swift end to the Iran conflict but have since picked up. President Trump suggested that the assault on Iran will last for 4-5 weeks, while there were some weekend reports suggesting that Iran was willing to talk on its nuclear programme, though this was publicly denied by officials. The Dollar Index strengthened in APAC trade as investors sought liquidity amid escalating conflict in the Middle East. Gold is trading around USD 5,400/oz. Brent trades near USD 80/bbl on the Middle East situation; JPMorgan warned major Middle East oil producers may have to halt output if the Strait of Hormuz remains effectively closed for more than 25 days, while Goldman Sachs said European natgas prices could surge +130% to USD 25/mmbtu if shipping through the Strait is halted for one month, adding that benchmarks in Europe and Asia have barely priced in Iran-related risk. In data, German retail sales declined by -0.9% M/M in January (exp. -0.2%), with the annual rate cooling to 1.2% Y/Y (prev. 1.5%). In the UK, Nationwide reported house price growth of +0.3% M/M in February (exp. 0.3%), with the annual rate rising to +1.0% Y/Y (exp. 0.7%). Elsewhere, ahead of this week’s UK Spring Statement, Chancellor Reeves has received a GBP 22bln windfall as tax receipts outperformed forecasts, according to Bloomberg; analysis of official data showed stronger than expected self-assessed income tax and sales levy revenues, alongside lower debt-interest spending, contributing to the improvement in the public finances.

STOCK SPECIFICS: In index news, Citi noted that the FTSE 100 is tilted heavily towards commodities and defensive sectors, along with a sizable share of aerospace and defence, and thus serves as an effective ‘geopolitical hedge’ within equity portfolios. In tech, Nvidia (NVDA) announced a commitment to develop 6G wireless networks on AI-native, open and secure platforms; the initiative aims to advance AI-RAN and transform telecom networks into AI infrastructure, according to CEO Huang, and also involves Booz Allen (BAH), BT Group (BT/ LN), Cisco (CSCO), Deutsche Telekom (DTE GY), Ericsson (ERIC), Nokia (NOK), SoftBank (SFTBY) and T-Mobile (TMUS). Ericsson (ERICB SS) and Intel (INTC) will collaborate to accelerate path to commercial AI native 6G. In communications, Vodafone (VOD LN) and Amazon’s (AMZN) Leo signed an agreement to extend mobile coverage across Europe and Africa. In healthcare, FDA approved Novo Nordisk’s (NOVOB DC) Sogroya as the first and only once-weekly, long-acting growth hormone for three additional paediatric indications. Bayer (BAYN GY) announced Phase I PAnTHa study results for 225Ac-PSMA-Trillium (BAY 3563254), identifying an expansion dose with 80% of patients achieving a PSA50 response, supporting advancement to the next phase. Sanofi’s (SAN FP) rilzabrutinib earns orphan drug designation in Japan for IgG4-related disease. In industrials, and of note for freighters and energy names, seven of the 12 members of the International Group of Protection and Indemnity Clubs will automatically terminate war-risk cover for ships entering the Persian Gulf, adjacent waters or Iranian waters from midnight London time on 5th March. Delta Air Lines (DAL) ordered 34 additional Airbus (AIR FP) A321neo jets, exercising existing options as part of a fleet modernisation plan; the aircraft are scheduled for delivery from 2029. In financials, UBS (UBSG SW) plans to retain CEO Sergio Ermotti beyond April 2027 as a dispute with Swiss authorities over capital rules delays succession planning, according to NZZ. In notable broker updates, Maersk (MAERSKB DC) was upgraded at BofA; TotalEnergies (TTE FP) was upgraded at JPMorgan; Novo Nordisk (NOVOB DC) was downgraded at Goldman Sachs; Centrica (CNA LN) was downgraded at Jefferies; Unite (UTG LN) was downgraded at Panmure Gordon; Barry Callebaut (BARN SW) was downgraded at JPMorgan; Royal Unibrew (RBREW DC) was downgraded at Danske Bank.

TODAY’S AGENDA:

DAY AHEAD: Geopolitics remains the focus, as traders assesses the impact from the Iran conflict; analysts said that the duration of the campaign, impact on energy infrastructure, and any willingness to engage in diplomacy will shape the outlook, though warned that it was difficult to predict the geopolitically fluid situation. Final manufacturing PMI data are out today, although the results may be easy to look through given how the Iran conflict will change the dynamics in the weeks and months ahead. UK money supply and credit data is published in the morning. The US ISM manufacturing survey for February is expected to be little changed at 52.3 (from 52.6). The Atlanta Fed will update its GDPnow tracking estimate, which is currently modelling growth of 3.0% in Q1. In later trade, the Fed will publish its Senior Loan Officer Survey. On the speakers’ front, BoE’s Taylor (dove) will speak on “getting the right directions”, BoE’s Ramsden will give remarks at the BoE’s Public Accounts Committee hearing, ECB President Lagarde will speak on financial literacy, BoC's Macklem to speak at a fireside chat, BoC’s Kozicki will speak on policy. Notable earnings due today include Norwegian Cruise Line (NCLH).
WEEK AHEAD: This week’s data highlights include US NFP, retail sales, ISM PMIs, EZ flash inflation data, ECB minutes, Australian GDP. The intensity of US earnings season will ease; this week’s highlights including TGT, CRWD, AVGO, COST.
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IRAN SITUATION REPORT:

IRAN: The US-Israeli war with Iran has entered its third day, with all sides conducting large-scale airstrikes. The conflict is seemingly also spreading into Europe, amid reports that a UK RAF base in Cyprus was targeted by a suspected drone strike on Sunday night.
ENERGY: Oil rallied amid reports that three ships were targeted in the Strait of Hormuz, which handles around 20% of global oil and gas flows. Brent rose over 10% in early Asia, but pared gains to beneath USD 78/bbl in early Europe trading. Analysts noted that no broad and primary targeting of oil infrastructure has been seen thus far; that said, this morning, there were reports that Iranian drones struck an ARAMCO oil refinery in Tas Tannoura, forcing the refinery to shut. Iran has warned ships against transiting the Strait. ING said “it would be difficult to enforce a closure [of the Strait], and any attempts to do so would likely see a strong response from the US,” adding that “vessels are becoming increasingly reluctant to navigate the strait given the risks and the longer this reluctance persists, the more of an impact it will have on oil and gas markets.”
BALANCING ENERGY MARKETS: ING suggests that if markets perceive significant oil supply disruptions, the most immediate response from governments would likely be a coordinated release of crude from SPR. “There will be plenty of focus on the US SPR, which is about 35% smaller than what it was at the start of 2021, given it was used heavily following Russia’s invasion of Ukraine in 2022,” the bank writes, “however, at roughly 415mln barrels, there is room for further emergency releases to take some pressure off the market,” though adds that “clearly, releases from reserves can only offer temporary relief.” OPEC+ over the weekend agreed to raise output by 206k BPD in April (exp. 137k), as the conflict disrupted Gulf flows and shut the Strait of Hormuz. However, some analysts noted that limited spare capacity beyond Saudi Arabia and the UAE may curb market impact.
DIPLOMATIC CHANNELS: Weekend reports suggest that Iran’s Supreme National Security Council Secretary, Ali Larijani, is seeking to reopen nuclear talks with the US via Oman following joint US-Israel strikes, despite publicly vowing retaliation for Khamenei’s death. President Trump said Iran wants talks and that he has agreed, adding they “should have done it sooner” and “waited too long”. On Monday, Larijani publicly denied any negotiations, stating Iran will not negotiate with the US.
AIR TRAVEL: Iran has also struck regional airports; flights at Doha’s Hamad International airport have been halted, disrupting cargo flows. Airline equities in APAC trade saw sharp downside.
US CASUALTIES: Reports over the weekend said three US service members have been killed and five seriously wounded. A Reuters/Ipsos poll conducted ahead of these reports showed 27% approval for the strikes, with 56% viewing Trump as too willing to use military force. Recent reports suggested a US F-15 fighter jet has been shot down in Kuwait.
OUTLOOK: Traders will focus on the duration of the conflict, whether energy infrastructure is targeted, and the progress of diplomatic engagements. Trump suggested US combat operations could last weeks. Analysts at HSBC said the USD is likely to hold an upper hand near term, contrasting with June 2025 during the war with Iran, when initial strength was short-lived due to US policy uncertainty. Its analysts wrote that this did not signal a loss of safe-haven status, noting geopolitical events can send mixed currency signals depending on surrounding conditions. However, the bank added that “we can have no conviction on how the situation in Iran may evolve,” writing that “the impact is contingent on the duration of any conflict and how it extends to the broader region.”