US Strikes Iran amid Potential Deal

In focus today

Today in Sweden, April PPI figures are released. Together with the NIER survey on Thursday, the print will be a key input in the Riksbank’s assessment of whether firms have started to feel the impact of rising global price pressures. Recent months’ have seen an uptick in the PPIs globally, as well as in Sweden, and we expect these tendencies to continue in today’s print.
Additionally, the Riksdag Committee on Finance holds its annual open hearing with the full Riksbank executive board to evaluate the previous year’s monetary policy, live streamed on the Riksdag website (in Swedish only).

In Hungary, the Central Bank of Hungary is expected to keep rates steady at 6.25% today.
Overnight, we receive New Zealand’s cash rate decision, where we and markets expect them to stay on hold at 2.25%.

For the remainder of the week, the calendar is relatively light on the first days, with activity picking up towards the end of the week. On Thursday, the key releases are Norway’s Q1 2026 GDP, the ECB minutes from the March meeting and the US PCE reading for April, followed on Friday by May flash inflation figures from Spain, Italy, Germany and France.

Economic and market news

What happened overnight

In the US-Iran war, the US conducted strikes on Iranian missile launch sites and mine-laying boats in southern Iran overnight, with Centcom citing self-defence. The attacks once again put the fragile ceasefire from April under pressure. This follows a weekend in which President Trump signalled the two sides were close to a deal, posting that talks were “proceeding nicely”. The strikes have pushed Brent crude up to 98.1 USD/bbl, although this remains well below Friday’s close of 103.5.

What happened over the weekend

In the US, Kevin Warsh was sworn in as new Fed chair on Friday, stepping into the four-year role and officially replacing Powell. Separately, Fed Governor Waller made a significant shift on the rates outlook in his first public remarks since April, arguing the Fed should drop its “easing bias” and open the door to a possible rate hike. Notably, Waller’s views have often better reflected the consensus within the Fed than known hawks like Hammack and Logan, who have also advocated for removing the easing bias. US yields ticked higher on the remarks, and markets are now pricing in a full hike by December, in line with our Fed call.

Hopes of a US-Iran agreement grew over the weekend after President Trump stated that the “final aspects and details” were being discussed, with the proposed framework unfolding in three stages, according to Reuters: formally ending the war, reopening the Strait of Hormuz and opening an extendable 30-day window for broader negotiations on nuclear issues and sanctions relief. Efforts to finalise details continued into Monday, with Iran’s foreign minister Araghchi travelling to Doha for talks with Qatar’s prime minister. However, Secretary of State Rubio tempered expectations early on Tuesday, saying a deal could “take a few days”, and warned that the Strait of Hormuz would be opened “one way or the other” following overnight US strikes on Iranian mine-laying boats and missile launch sites.

In the euro area, the ECB’s negotiated wage indicator for Q1 2026 came in slightly below expectations, falling to 2.5% y/y from 2.9% y/y in Q4 2025. The indicator clearly shows that wage pressures are easing in the euro area economy, a finding supported by the ECB’s separate wage tracker, which points to a continued easing in wage growth based on actual contracts for 2026. This should keep a disinflationary pressure on services inflation, partly countering higher transport services costs from the energy shock. We believe this supports a more muted reaction by the ECB than is currently priced by markets.

In Germany, the Ifo indicator for May improved slightly more than expected, following the large decline in April, offering a modestly more positive picture than Thursday’s PMI suggested. Yet, the indicator remains well below pre-war levels. Business expectations have taken a large hit following the Iran war, while the assessment of the current business situation is only marginally down, likely as companies work through order backlogs which keeps activity up temporarily.

Equities were higher on Monday in thin trading, as US and many other markets were closed for holiday. European equities closed a full 1.1% higher. It was a risk-on session in every angle; cyclicals beat defensives. Small caps beat large caps. Growth beat value. Peace talks and oil prices were some of the catalysts. However, it those were not the only factors driving equities higher. It is also the reversal in long end yields that begun already last week. US futures indicate an opening around 0.7% and Asia is generally higher. Kospi is the standout, with SK Hynix and Samsung rebounding 7% and 3%, respectively following last week’s brief pause to the semi trade.

FI and FX: US conducted strikes on Iranian vessels in the Strait of Hormuz and on launch sites in Iran overnight. The strikes are said to be defensive in nature, according to a US spokesperson, and the market seemingly agrees with Brent oil trading around USD 98/bbl, the same level at which it traded most of yesterday after the initial drop. US yields are trading lower overnight, catching up with the European moves yesterday. EUR/USD has stabilized around 1.1640, despite the sense of optimism in energy market. The SEK was supported yesterday by the positive risk sentiment, with EUR/SEK moving toward the 10.80 level, but over the past months the SEK gains in risk-on has been more contained than the losses in risk-off.