US Market Wrap: Oil gains, stocks see losses as US-Iran tensions escalate

• SNAPSHOT: Equities down/mixed, Treasuries steepen, Crude up, Dollar down, Gold flat
• REAR VIEW: US-Iran strikes resume over the weekend; US rejects IRGC claim a supertanker was hit by mines in Strait of Hormuz; Trump said US will respond to Iran's attacks; Senior Iranian source remarked recent hostilities between Iran and US remain a “limited and contained confrontation"; Bessent believes Japanese government and BoJ are to do things that lead to JPY rise; Chinese NBS PMIs disappoint; NVDA to invest $3.5B in MediaTek.
• COMING UP: Data: Chinese RatingDog Manufacturing PMI (Aug), German Retail Sales (Jul), Global S&P Manufacturing PMI Final (Aug), EZ CPI Prelim (Aug), US ISM Manufacturing PMI (Aug), JOLTS Job Openings (Jul), Atlanta Fed GDP (Q3). Events: US Midterm Primary Elections: Massachusetts. Speakers: Fed’s Barr; ECB’s Vujcic. Supply: Australia, Japan, Germany. Earnings: Dell, Palo Alto.
• WEEK IN FOCUS: Highlights include RBNZ, BoC, US NFP, ISM Manufacturing/Services, EZ CPI Prelim. Click here for the full report.
• WEEKLY US EARNINGS ESTIMATES: Highlights include AVGO, DELL, PANW. Click here for the full report.

MARKET WRAP

Stocks started the week predominantly lower as resumed US-Iran strikes over the weekend increased geopolitical and growth risk for the market. The Nasdaq 100, rallied into the close to settle with marginal gains. Higher oil prices accompanied the move, which added further upward pressure to the belly and long-end yields, with the 10yr yield at its highest since January 2025. Sectors were mostly in the red, except Energy, which benefited from higher oil prices, and Tech, which eked out marginal strength, with Nvidia holding onto post-earnings gains from last week. Utilities underperformed after bearish sentiment built from Friday's news that California lawmakers blocked proposed wildfire liability reforms; PG&E (PCG -20%) received multiple downgrades.

Monday's tape was filled with geopolitical developments following the preemptive US strike on Iranian missile launches over concerns of the placement of sea mines in the Strait of Hormuz. Iran responded via attacks on US bases in the region, to which Trump said the US will respond. Meanwhile, Treasury Secretary Bessent and Fed Chair Warsh spoke today at the G20 finance meeting, yet little new was offered.

Despite the move higher in oil and long-end yields, US 2- and US 3yr yields settled slightly lower as markets still fall short of confidently forecasting a September rate hike. In FX, the dollar seemingly tracked the move lower in short-end yields, with Barclays month rebalancing model indicating a moderate dollar selling signal against all majors. This week, we may gain more insight on the policy path, with Fed's Barr and Waller set to speak. Additionally, US data will be in focus: ISM PMIs, NFP, JOLTS, and ADP are all due. Spot gold and silver were little changed on the day.

FIXED INCOME

T-NOTE FUTURES (Z6) SETTLED 7 TICKS LOWER AT 107-21

Short-end yields pause after Friday rally on hawkish Fed Chair Warsh speech, belly and long-end yields creep higher. At settlement, 2-year -1.0bps at 4.350%, 3-year -0.2bps at 4.410%, 5-year +1.6bps at 4.507%, 7-year +2.3bps at 4.623%, 10-year +2.8bps at 4.758%, 20-year +3.6bps at 5.248%, 30-year +3.6bps at 5.249%.

THE DAY: The Treasury curve steepened to start the week amid a sold long end. US 2yr yields saw a slight unwind of the hawkish reaction seen towards Fed Warsh's speech on Friday. Perhaps this comes as money markets are still lacking conviction behind a September rate hike, with many on Wall St. remaining in the 2026 hold camp. With inflation currently the main concern for Fed officials and only one CPI report due before the Sept meeting, the bar is high for Warsh and others to join their three fellow hawkish dissenters at the July meeting (Hammack, Kashkari, Logan).

Geopolitical newsflow dominated the tape on Monday, with US-Iran relations continuing to deteriorate with no end in sight. Inflationary concerns will once again increase as US-Iran strikes resumed over the weekend due to a preemptive US strike on Iranian missile launchers over concerns of the placement of sea mines in the Strait of Hormuz. Tensions in the short term are likely to continue, as suggested by Trump saying the US will respond to the Iranian attacks on US bases in the region.

Ahead, focus will stick on the Fed with Barr due on Tuesday and the influential Waller on Thursday. Key data this week includes NFP, ISM Manufacturing PMI, JOLTS, ADP.

SUPPLY

• US sold 3-mnth bills at high-rate 3.770%, B/C 2.77x; sold 6-mnth bills at high-rate 3.885%, B/C 2.63x

STIRS / OPERATIONS

• Fed Hike Pricing via CME FedWatch: Sept 16.5bps (prev. 14.4bps), Dec 37.4bps (prev. 37.8bps).
• EFFR at 3.63% (prev. 3.63%), volumes at USD 123bln (prev. USD 111bln) on August 28th
• SOFR at 3.65% (prev. 3.64%), volumes at USD 2.808tln (prev. USD 2.836tln) on August 28th
• NY Fed RRP op demand at 6.726bln (prev. 0.175bln) across 4 counterparties (prev. 1) on August 31st

CRUDE

WTI (V6) SETTLED USD 2.36 HIGHER AT 85.76/BBL; BRENT (X6) SETTLED USD 2.39 HIGHER AT 90.49/BBL

The crude complex saw gains to start the week as US/Iran tensions continue to bubble over. Over the weekend, the US attacked two missile launchers of the IRGC on Larak Island, while the IRGC later said that they retaliated with missiles and drones against two US bases in Jordan and warned that any attack against them will be met with a more devastating response. Today, Trump remarked that the US will respond to Iran attacks, and separate Iranian sources said Tehran’s retaliation for US strikes on Larak showed “no target in the region is beyond Iran’s reach". In most recent reports, Axios reported that Trump is weighing limited strikes against Iran to prevent them from reconstituting their radar and missile capabilities to attack ships.

Supply developments included Russia’s Yaroslavl oil refinery reportedly shutting two of three crude distillation units after August 28th drone attacks. Meanwhile, the Trump administration is expected to approve an expanded volume of biofuel waivers for US oil refiners on Monday, covering more than 1.8 billion renewable fuel credits, Reuters reported, citing sources. On Tuesday, Trump will meet with US refiners and fuel distributors as his administration looks for ways to expand domestic refining capacity and bring down gasoline prices.

WTI traded between USD 84.11-86.79/bbl, while Brent rose from a low of USD 89.03/bbl to a high of USD 91.52/bbl.

EQUITIES

CLOSES: SPX -0.33% at 7,686, NDX +0.08% at 29,457, DJI -0.70% at 53,191, RUT -0.54% at 2,956

SECTORS: Communication services -1.63%, Utilities -1.18%, Industrials -1.16%, Materials -0.85%, Real estate -0.77%, Consumer discretionary -0.72%, Financials -0.71%, Health -0.41%, Consumer staples -0.33%, Technology +0.3%, Energy +2.1%

EUROPEAN CLOSES: Euro Stoxx 50 -1.07% at 6,416, Dax 40 -1.09% at 26,281, CAC 40 -0.79% at 8,335, FTSE MIB -0.01% at 52,613, IBEX 35 -0.27% at 19,988, PSI +0.07% at 9,437, SMI -0.79% at 14,286, AEX -0.59% at 1,106

STOCK SPECIFICS:

• Pinterest (PINS) CFO Julia Brau Donnelly resigned to pursue another opportunity.
• PG&E (PCG) received multiple downgrades after California lawmakers blocked proposed wildfire liability reforms.
• GameStop (GME) Q2 prelim sales topped expectations.
• Coinbase (COIN) and WeBull (BULL) expand partnership.
• SAIC (SAIC) beat on top and bottom line, with FY guidance better than anticipated.
• Engine Capital is pushing for EPAM Systems (EPAM) to boost share buybacks or consider putting itself up for sale, reports FT.
• Nvidia (NVDA) CEO Huang confirmed USD 3.5bln investment in MediaTek (2454 TT); Vera Rubin platform gives Nvidia USD 40bln+ of revenue per GW.
• Apple's (AAPL) Phil Schiller steps down from running App Store and Events, reported Bloomberg TV.
• FTC to file lawsuit alleging Amazon (AMZN) deceived advertisers, WSJ reports.
• Meta (META) launches monthly paid subscription plans for Muse code.

FX

The Dollar Index was on the backfoot on Monday, albeit in very thin newsflow, as currency-specific newsflow was sparse. The highlight was the ever-escalating US/Iran tensions as they exchanged strikes over the weekend, but there was no tier 1 data or Fed speak; Chair Warsh spoke next to Treasury Secretary Bessent at the G20 meeting but didn't say anything Federal Reserve relevant. In terms of the week ahead, the highlights are ISM Mfg. PMI, JOLTS (Tues), Beige Book (Wed), Waller, ISM Svcs. PMI (Thurs), and NFP (Fri). The Buck also noticed some selling amid month-end, whereby Barclays month-end rebalancing model indicates a moderate dollar selling signal against all majors by month.

G10 FX firmed against the Dollar to varying degrees, albeit all pretty contained, as headline catalysts were light, as previously mentioned. The Loonie was supported by rising oil prices despite the ongoing US/Canada trade war. While data was thin across Europe, prelim German CPI Y/Y for August was marginally cooler than anticipated, albeit still accelerating.

Overnight, there were weak Chinese PMI metrics, raising hopes of possible Chinese stimulus. Elsewhere for EMs, Brazil's VP Alckmin said Brazil must work to improve the debt-to-GDP ratio, and the key is to raise GDP while keeping spending under control, and he believes there is room to do so. Alckmin added he is well aware that interest rates need to fall further.