Markets Overview

  • ASX SPI 200 futures down 0.3% to 8,494.00
  • Dow Average down 0.1% to 42,171.66
  • Aussie down 0.4% to 0.6480 per US$
  • US 10-year yield little changed at 4.3909%
  • Australia 3-year bond yield fell 1.3 bps to 3.35%
  • Australia 10-year bond yield fell 3.5 bps to 4.22%
  • Gold spot little changed at $3,371.20
  • Brent futures up 2.8% to $78.85/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$800 Million 1% 2030 Bonds

Oil sank and US stock-index futures climbed after President Donald Trump announced a tentative ceasefire between Israel and Iran, raising hopes that the worst of the Middle East conflict has passed.

West Texas Intermediate crude fell more than 5% after Trump’s comments on his Truth Social platform. The statement followed Iran’s strikes on a US base in Qatar, which were seen as largely symbolic and unlikely to trigger broader economic fallout, pushing the S&P 500’s gain to 1% on Monday and sending oil below $70.

S&P 500 futures rose 0.6% in early trading, while equity contracts also pointed to gains in Tokyo, Hong Kong and Sydney. The dollar edged lower against major currencies.

“The prospect of a prolonged conflict with US involvement has been repriced, giving the green light to add risk,” said Chris Weston, head of research at Pepperstone Group Ltd. “As Trump himself has signaled, it’s time for markets to refocus on the key themes: economics, inflation, tariffs, and the passing of the “One Big, Beautiful Bill.”

Trump, who made the truce announcement days after ordering airstrikes on Iran’s nuclear facilities, said the accord had been agreed upon by both countries. There was no immediate comment from Iran or Israel. The US leader had earlier raised hopes of de-escalating the Middle East conflict, saying the Iranian attack was “very weak” and telegraphed by Tehran.

Iran fired missiles at a US air base in Qatar earlier Monday after promising it would respond “proportionately and decisively” to the weekend bombing by American forces of three nuclear facilities. Qatar said the missile barrage was intercepted and the base had been evacuated in advance.

Treasury yields also slid on Monday as worries about an imminent threat to inflation abated and a Federal Reserve official said rates could drop as soon as July.

In Asia, geopolitical concerns also dominate. China moved to tighten controls over two chemicals that can be used to make fentanyl, in an apparent olive branch to the US that may help maintain their fragile trade truce. Still, Beijing criticized the strike on Iranian nuclear facilities and reiterated that it’s willing to join international efforts to restore peace in the Middle East.

The Middle East accounts for about a third of global crude production and there haven’t yet been any signs of disruption to physical oil flows, including for cargoes going through the Strait of Hormuz. Since Israel’s attacks began earlier this month, there have been signs that Iranian oil shipments out of the Gulf have risen rather than declined.

“The Iranian response today seems manageable and perhaps a clearing event,” said Michael Bailey at FBB Capital Partners. “Lower oil prices are providing a release valve for stress that built up over the weekend, also allowing the bull case of steady global growth to continue.”

Oil prices traded in a $10-a-barrel range on Monday, first rising by more than 6% only to drop even more, underscoring just how on edge traders are and how critical every development in the region is to global energy markets.

While the conflict in the Middle East is dominating headlines, selloffs caused by geopolitical events tend to be brief, according to Morgan Stanley strategists.

“History suggests most geopolitically-led selloffs are short-lived/modest,” strategists led by Michael Wilson wrote in a note on Monday. “Oil prices will determine whether volatility persists.”

According to the Morgan Stanley team, prior geopolitical risk events have led to some volatility for equities in the short term, but one, three and 12 months after the events, the S&P 500 has been up 2%, 3%, and 9%, on average, respectively.

Meantime, bond investors watching the latest geopolitical developments are on alert for hints on when the Fed will deliver the two 2025 rate cuts officials projected at their latest policy meeting.

Fed Chair Jerome Powell will have two chances this week to explain to lawmakers why he and most of his fellow policymakers seem resolved to continue holding interest rates steady at least until September, ignoring Trump’s persistent calls to lower borrowing costs.

He will testify before the House Financial Services Committee on Tuesday, and again on Wednesday before the Senate Banking Committee.