• Israel conducted pre-emptive strikes on Iranian nuclear and military targets; Iran warned that Israel and the US will pay a heavy price.
• Iran's President to speak on the subject soon; US President Trump urged Iran to "make a deal, before there is nothing left".
• Geopolitics driving all price action with crude posting significant gains & equities under pressure; ES -1.2%, Euro Stoxx 50 -1.4%
• FTQ ensued overnight, supporting fixed income and XAU; gold remains near best, but fixed has pulled back to Thursday's parameters.
• DXY on the front foot, but shy of Thursday's high, as the USD benefits from its haven status. JPY surprisingly softer vs USD. EUR and GBP both hit, antipodeans lag.
• Looking ahead, highlights include UoM Sentiment (Prelim), S&P to Review Germany's Credit Rating, Speakers including ECB's Panetta & Elderson. 
• Click for the Newsquawk Week Ahead.

TARIFFS/TRADE

• US Commerce Secretary Lutnick said the China tariff pause likely won't be extended and its best chips were never on the table and won't be regarding the China deal.
• US Commerce Department made steel derivatives products subject to additional tariffs, according to the Federal Register.
• US eyes a plan to use the Defense Production Act for rare earths, although a timeline for the Trump rare earth initiative is unclear, according to Bloomberg citing sources.
• China reportedly delayed approval of the USD 35bln merger between Synopsys (SNPS) and Ansys (ANSS) amid Trump's trade war, according to FT.
• Japanese PM Ishiba will hold talks with US President Trump on Friday, via NHK.

EUROPEAN TRADE

EQUITIES

• European bourses are in the red, Euro Stoxx 50 -1.4%, given the dour risk sentiment, which has been triggered by events in the Middle East.
• Energy (+1.0%) is the only sector in the green, given the surge in benchmark prices. Defence names also faring well, the two together causing the FTSE 100 -0.3% to be the relative outperformer. Conversely, energy strength is weighing on Travel & Leisure (-2.5%) while Auto (-2.2%) names have been hit by Trump's comments on tariffs potentially going up.
• Stateside, futures are in the red with the ES -1.2%, given the geopolitically driven risk narrative. Stock specifics include Boeing (-1.3%), see below, and Tesla (-2.4%) after the Co. increased the price of various models within the US.
• Investigation into the Air India Boeing (BA) 787-8 crash is reportedly focussing on whether a loss or reduction in engine thrust occurred, and if that factored into the incident, via WSJ citing sources. GE Aerospace (GE) makes the engines for the craft.. More recently, Indian government is reportedly considering grounding the Boeing (BA) 787 fleet, via NDTV.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news
• Click for a detailed summary

FX

• DXY on the front foot with USD benefiting from its status as a safe-haven currency. Ventured as high as 98.39 but has stopped shy of yesterday's best @ 98.51.
• GBP pressured against the USD but flat vs the EUR. Action dictated by the USD, hence why EUR/GBP is near-enough unchanged, while Cable itself has pulled back from the overnight multi-year high at 1.3632, as low as 1.3522.
• EUR under similar pressure against the USD. The single currency down to a 1.1513 base, though someway clear of Thursday's 1.1487 base. As above, price action dictated by geopols and the USD, remains to be seen if the energy moves move the inflation outlook and provide some ammo for the ECB's hawkish contingent.
• JPY is, somewhat surprisingly, softer against the USD despite the risk-aversion seen across global markets. Overnight, USD/JPY trickled lower and briefly dipped beneath the 143.00 level owing to the haven flows into yen but later rebounded above 144.00 to a current 144.16 high.
• Antipodeans trade in-line with the risk tone and have been hit hard, residing at the trough of the G10 leaderboard. AUD/USD at a 0.6457 base and NZD/USD down to a test of 0.60.
• Click for a detailed summary
• Click for NY OpEx Details

FIXED INCOME

• Broadly, fixed benchmarks were propelled to WTD peaks overnight/this morning as Israel struck Iranian facilities. Since, the move has pared and we reside in Thursday's parameters as the intensity of geopolitical news slows slightly and we await updates from Iran.
• USTs peaked at 111-13 overnight, a new WTD high and just a tick+ shy of last week’s 111-14+ best. Since, the benchmark has pared and is near-enough unchanged, holding just below Thursday’s 111-06 peak.
• Bunds bid given the above. Hit a 131.95 peak, marking a new WTD high. A move that occurred given the risk-off action sparked by Israel striking Iran’s facilities and the associated FTQ that ensued. In-line with USTs, EGBs have pulled back markedly from the above peak and currently reside just in the red and 20 to 30 ticks below Thursday’s best; for Bunds, this has the benchmark holding around 131.20.
• The German 10yr yield fell by around 5bps to a 2.42% low when Bunds hit their WTD peak. Since, the 10yr has retraced the move and is now higher by just over a bps on the session, probing 2.50% to the upside.
• Gilts hit a 93.68 peak when trade resumed this morning, gapping higher by 37 ticks and then extending another 10 to that high and eclipsing Thursday’s 93.55 best in the process. However, this proved short-lived as fixed benchmarks generally were already paring back much of their overnight gains and this pressure began to make itself known in Gilts within minutes of the open. Now, holding a few ticks above a 92.94 trough and by extension above Thursday’s 92.80 low.
• Click for a detailed summary

COMMODITIES

• Session dominated by geopolitics; see the Geopolitics section below and/or headline feed for full details. Brent hit a USD 78.50/bbl high overnight, WTI got to USD 77.62/bbl.
• In brief, Israel’s operation, dubbed “Rising Lion”, targeted a number of nuclear and military targets. The head of IRCG, Hossein Salami, and nuclear scientist Abbasi, have been killed. Iran’s Natanz enrichment site has been impacted. In response, Iran vowed to retaliate, noting also the US would pay a heavy price "now that Israel has crossed all red lines, Iran sees no limits to respond to this crime.", a state of emergency has been declared in Israel. US said they were not involved in the action.
• Throughout the European morning, while still markedly firmer, benchmarks pulled back from highs as participants faded the initial move and awaited fresh updates. A move that took WTI and Brent as low as USD 71.00/bbl and USD 72.10/bbl.
• Thereafter, a bout of fresh upside occurred (within overnight ranges) as Tass cited remarks from the Israeli PM's office that they are prepared for the possibility of full-fledged war with Iran. This lifted the benchmarks towards current levels above USD 73.15/bbl and USD 74.50/bbl for WTI and Brent respectively.
• More recently, Trump has commented "Iran must make a deal, before there is nothing left..."; no significant move to this.
• Ahead, further potential catalysts for crude include Iranian retaliation, Strait of Hormuz activity, indications of US involvement (US Security Council meeting at 16:00 BST), and the length of the Israeli operation.
• European gas prices bolstered given the above, Dutch TTF firmer by over EUR 1.50/MWh at best; most recently, Israel's Energy Minister says they may order temporary shutdown to Natgas reservoirs; due to security situation.
• Spot gold firmer given its haven status and the FTQ. However, upside is being capped by the markedly firmer USD. Leaving XAU at a USD 3444/oz peak, with the ATH at USD 3500/oz the next point of focus.
• Base metals in the red, given the risk off tone and strong USD. 3M LME Copper lower by near-enough 1%, hit a trough at USD 9.57k/T before.
• Click for a detailed summary

NOTABLE DATA RECAP

• German HICP Final YY (May) 2.1% vs. Exp. 2.1% (Prev. 2.1%); MM (May) 0.2% vs. Exp. 0.2% (Prev. 0.2%)
• French CPI (EU Norm) Final YY (May) 0.6% vs. Exp. 0.60% (Prev. 0.60%); MM (May) -0.2% vs. Exp. -0.20% (Prev. -0.20%)
• Spanish HICP Final YY (May) 2.0% vs. Exp. 1.9% (Prev. 1.9%); Core CPI YY (May) 2.2% (Prev. 2.40%)
• Swedish CPIF Final: Excluding Energy YY (May) 2.5% vs. Exp. 2.50% (Prev. 2.50%); CPIF YY (May) 2.3% vs. Exp. 2.3% (Prev. 2.3%)

NOTABLE EUROPEAN HEADLINES

• IFS' Johnson has warned that UK Chancellor Reeves is a "gnat's whisker" away from having to raise taxes in the autumn budget despite the chancellor insisting her plans are "fully funded", according to Sky News.
• Bank of England/Ipsos Inflation Attitudes Survey, May 2025: Median expectations of the rate of inflation over the coming year were 3.2%, down from 3.4% in February 2025.

NOTABLE US HEADLINES

• US judge temporarily restricted the military's law enforcement activities in Los Angeles and temporarily barred President Trump from deploying the California National Guard in Los Angeles, although the US Appeals Court later paused the lower court's order and allowed President Trump to deploy the National Guard to LA for now.

MIDDLE EAST

OVERNIGHT:

• Israel's military struck nuclear and military targets in Iran as well as dozens of sites and said the Iranian nuclear programme is an existential threat to Israel, while it said the Iranian regime is advancing a secret program to build a nuclear weapon and Iran has enough fusion material to make 15 nuclear bombs within days.
• Israeli PM Netanyahu said their pilots were striking many targets in Iran and that the operation would continue for as many days as it takes which will hurt Iran's nuclear infrastructure, ballistic missile factories and military capabilities. Netanyahu also said they struck at the heart of Iran's nuclear enrichment programme and nuclear weaponisation programme, as well as Iran's main enrichment facility in Natanz. Furthermore, he said they targeted Iran's leading nuclear scientists working on the Iranian bomb and he later declared that they delivered a successful opening strike.
• Israeli Defence Minister Katz declared a special state of emergency on the home front throughout the entire state of Israel and said following Israel's pre-emptive strike against Iran, that a missile and drone attack against Israel is expected in the immediate future. It was separately reported that two Israeli officials said Israel is bracing for an Iranian response in the coming hours and the Iranian response could include the launch of hundreds of ballistic missiles.
• Iran's Supreme Leader Khamenei said Israel will receive a harsh punishment and that Israel "unleashed its wicked and bloody" hand in a crime against Iran, while he added that several commanders and several scientists were "martyred" and with this attack, Israel has prepared a bitter fate for itself, which it will surely receive.
• Iran Revolutionary Guards said Israel will pay a heavy price for the killing of IRGC Chief Commander Salami and that the attack was carried out with full knowledge and support of 'wicked rulers in the White House and terrorist US regime', while it was also reported that supreme leader advisor and IRGC commander Shamkhani was critically injured and that the head of Iran's armed force Bagheri was killed in the Israeli attack.
• Iran's Foreign Ministry said responding to Israel is its right under international law, and the US as Israel's main supporter will be responsible for the consequences of Israel's adventurism, while Iran's armed forces spokesman earlier warned that Israel and the US will pay a heavy price for the Israeli attack.
• US Secretary of State Rubio said Israel took unilateral action against Iran and the US is not involved in strikes against Iran, while he added the top priority is protecting American forces in the region and that Iran should not target US interests or personnel.
• US officials said they still intend to have talks on Sunday between US and Iran envoys.
• US reportedly told Israel it won't be directly involved in any strike on Iran, according to Axios.
• UN General Assembly demanded an immediate, unconditional and permanent ceasefire in Gaza, while it adopted the Gaza resolution with 149 votes in favour.
• National Iranian Oil Refining and Distribution Company says refining facilities and oil storage did not sustain damage in the Israeli attack.

EUROPEAN HOURS:

ISRAEL UPDATES

• Israel's Ambassador to France says the operation against Iran can continue for a few days, not months. Have already destroyed parts of the Iranian nuclear programme.
• Israeli officials report "The assumption is that additional senior officials in Iran have been eliminated, whose deaths have not yet been publicly disclosed.", via journalist Stein.
• Israel's air force has begun to intercept drones over the "skies of Saudi Arabia", via Channel 12.
• Mossad and the Israeli military led a series of covert operations against the Iranian strategic missile array, according to Reuters citing an Israeli security source; Israel deployed precision guided weapons in open areas near Iranian surface-to-air missile systems sites. Thereafter, Israeli Military says it completed a large-scale strike against the aerial defense array of Iran, according to Reuters.
• Israel is prepared for the possibility of a full-fledged war with Iran, according to PM Netanyahu's office via Tass.
• Israel Defence Minister Katz says the assessment is that most leadership of the Iranian IRGC Air Force were eliminated in a strike.
• Israeli Military says it is prepared for this (i.e. action against Iran) to keep going on for days; depends partly on Iranian response. Already achieved a lot, assessments continue. Still trying to determine how things went. Iran has sent over 100 drones to Israel, many already intercepted.

IRANIAN UPDATES

• Iran's Abadan oil refinery Co. says they are producing and providing services at full capacity, no disruption.
• Iran's Armed Forces reportedly says "now that Israel has crossed all red lines, Iran sees no limits to respond to this crime.", via journalist Aslani.
• Iran's Atomic Energy Organisation says damage occurred at the Natanz enrichment facility; no chemical or radioactive contamination shown.
• IAEA Statement: "the competent Iranian authorities have confirmed that the Natanz enrichment site has been impacted and that there are no elevated radiation levels.".
• IAEA says, as it stands, the Fordow fuel enrichment plant has not been impacted; Isfahan nuclear site has not been impacted.
• Iranian Supreme Leader Khamenei appoints Mohammad Pakpour as the new IRGC Commander, after Salami was killed by an Israeli strike; Pakpour directed to "enhance the IRGC’s capabilities, readiness, and internal cohesion.".
• Iran's Fars News reports renewed strike by Israel on north-western city of Tabriz.
• Iranian President will deliver a speech soon, according to an X post. [posted around 10:15BST/05:15ET]
• Iran has requested a special session of the (IAEA) "board of governors" on Monday, via Jerusalem Post citing sources.

OTHER

• The sixth round of (Nuclear) negotiations will not be held due to Israeli attacks, according to the Tehran Times.
• Frontline is "far more hesitant" about offering its craft to move cargo from the Persian Gulf after the Israeli strikes on Iran, via Bloomberg.
• Iraq's gas supply from Iran not affected by the Israeli attack, according to Iraqi state news.
• Lebanon's Hezbollah says the group will not initiate an attack on Israel in response to strikes on Iran.
• US President Trump posts on Truth "I gave Iran chance after chance to make a deal" and "Iran must make a deal, before there is nothing left, and save what was once known as the Iranian Empire".

OTHER GEOPOLITICS

• North Korea leader Kim said there are plans to build two more 5,000-ton destroyers next year and US provocation has become dangerous, while he added that North Korean battleships will soon roam the Pacific Ocean, according to KCNA.

CRYPTO

• In the red, tracking the broader risk tone and also hampered by USD strength. Bitcoin down to a USD 102k base.
• Walmart (WMT) and Amazon (AMZN) are exploring issuing their own stablecoins, via WSJ sources.

APAC TRADE

• APAC stocks traded lower and US equity futures were pressured amid the worsening geopolitical situation in the Middle East after Israel conducted pre-emptive strikes on Iranian nuclear and military targets, with the Israeli military said to have struck dozens of sites across Iran, while Israeli PM Netanyahu said the operation will last for as many days as it takes and Iran has warned that Israel and the US will pay a heavy price for the Israeli attack.
• ASX 200 was dragged lower by losses in cyclicals but with the downside stemmed as energy and gold miners benefitted from the geopolitical-fuelled upside in the respective underlying commodity prices.
• Nikkei 225 slipped beneath the 38,000 level after recent currency strength and heightened geopolitical tensions.
• Hang Seng and Shanghai Comp conformed to the negative mood as Israel's numerous strikes and Iran's retaliation threats dominated the headlines.

NOTABLE ASIA-PAC HEADLINES

• BoJ officials see prices rising a little stronger than they expected earlier in the year and expect the interest rate to be maintained at 0.5% next week, according to Bloomberg.