US–Iran Ceasefire at Risk

For the week ending 10 July 2026

As of midday Friday, global equities were higher on the week, led by a rebound in energy and semiconductor stocks. The yield on the US 10-year Treasury note rose to 4.54% from 4.47% last Thursday, while the price of a barrel of West Texas Intermediate crude oil rose $4.50 to $72.00 as tensions resumed between the US and Iran over control of the Strait of Hormuz. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), edged down to 17.4 from 17.9 last week.

MACRO NEWS

Trump declares Iran ceasefire over

The fragile ceasefire between the US and Iran broke down this week after Iran’s Islamic Revolutionary Guard Corps attacked and significantly damaged multiple ships in the Strait of Hormuz, prompting the Joint Maritime Information Center to raise the maritime threat level to “severe.” US President Donald Trump declared the ceasefire over and called further talks “a waste of time." The US military then conducted two rounds of strikes along Iran’s coast near the strait, including Kharg Island, and destroyed a bridge it says Iran uses to move armaments. Iran responded by launching drones and ballistic missiles at Bahrain and Kuwait, both of which host US military bases. President Trump indicated he would still prefer a deal but also suggested the US could “finish the job.” He then floated the possibility of reimposing a naval blockade. In a related move, the US Treasury Department has revoked Iran’s waver to sell crude and petroleum products on international markets. President Trump said Friday morning that while the ceasefire is over, talks with Iran will continue.

Fed minutes shed little new light

Wednesday’s release of the June FOMC meeting minutes was highly anticipated by investors, but as with last month’s FOMC statement, the readout was short and sweet and mirrored the tone of Chairman Kevin Warsh’s inaugural press conference. The minutes reflect elevated concern about inflation and confirm that the Committee sees the decision to hold rates steady or hike later this year as a close call that will rely on incoming inflation data. With oil prices having firmed in response to the resumption of hostilities in the Strait of Hormuz, the odds of a quarter-point hike in late July have crept to about 25%.

Separately, the Fed announced Thursday afternoon the formation of the five tasks forces outlined by Warsh at June’s meeting. Each group will consider whether policymakers' means and methods, analytical tools, and policy approaches can be improved upon, Warsh said in a statement. Supported by Fed staff, the task forces will operate independently, with a mandate to provide candid feedback and produce rigorous findings for the FOMC.

NATO summit tests transatlantic ties

This week, President Trump attended the NATO summit in Turkey, where transatlantic tensions were on full display. Reports surfaced that Trump is considering cutting US forces in Europe by roughly one-third after NATO declined to become involved in the Iran conflict, and he repeatedly reiterated his interest in US control of Greenland. In a welcome sign of European self-reliance, the UK, France, and Germany launched a $50 billion initiative to develop long-range strike weapons capable of hitting targets more than 2,000 kilometers away. Trump signaled openness to selling F-35 fighter jets to Turkey and lifting related sanctions tied to Turkey’s purchase of Russian S-400 air defense systems. Amid a pronounced shortage of missile interceptors, Trump announced that the US will issue a license to Ukraine to build Patriot missiles domestically. He also urged cutting trade with Spain over its refusal to fully fund its NATO commitments, as well as its decision to close airspace to US planes during the Iran conflict, and the administration began drawing up a list of Spanish goods for a potential import embargo. During his flight home to the US, however, Trump suggested that Spain had adjusted its NATO commitments, and he ended the threat of embargo.

QUICK HITS

Global PMIs inched up in June, with the US lagging modestly.

The International Monetary Fund lowered its 2026 global growth forecast to 3.0% from 3.1% in April, held the US steady at 2.3%, cut its European forecast to 0.9% from 1.0%, and boosted China’s outlook to 4.6% from 4.4%.

Heading into second-quarter earnings season, expectations are elevated. According to FactSet, analysts increased Q2 bottom-up EPS estimates by 3.4% during the quarter (to $81.54 from $78.84), the largest in-quarter increase since Q2 2021 (+7.7%), raising the risk of disappointment.

Bloomberg reported on Wednesday that roughly 63 million barrels of Iranian crude are currently in transit or in floating storage — volumes that will be very difficult to sell given both European and British restrictions that complicate insurance and the risk of US sanctions.

According to the Stock Trader’s Almanac, following a down first quarter and a Q2 gain of 10% or more, the S&P 500 has finished the balance of the year higher in all six prior instances since 1950. The index fell 4.6% in Q1 and gained 14.9% in Q2.

South Korea’s KOSPI index entered a technical bear market this week after falling more than 20% from its record high in June. Even so, the KOSPI remains the world’s top-performing major stock index this year, up more than 70% in local currency terms.

OPEC+ agreed to add 188,000 barrels per day to next month’s output target, bringing cumulative additions to 940,000 barrels per day since the war began, as the group completes a reversal of prior output curbs.

Beijing is considering tightening controls on domestic AI technology — which is demonstrably cheaper than frontier US models — including stricter regulatory reviews, deferred public releases, and foreign investment restrictions, to prevent proprietary technology from reaching adversaries.

The US May trade deficit widened sharply to $77.6 billion from $54.6 billion, largely on AI component imports. A wider trade deficit is a drag on GDP accounting.

The Reserve Bank of New Zealand this week raised its official cash rate 25 basis points to 2.5%.

A French court cleared Marine Le Pen to run for president in 2027 after reducing her election ban to 15 months. Le Pen had been previously convicted of misusing EU funds to pay aides working on domestic political matters rather than European issues. She announced her candidacy shortly after the ruling.

The UK Office for Budget Responsibility’s annual report warned that urgent action is needed to cut spending, cautioning that the longer debt is allowed to rise, the greater the risk of higher interest rates or a sudden adverse investor reaction.

Toyota announced it will invest $3.6 billion in a small-truck plant in Texas, shifting production from Mexico.

Amid repeated Ukrainian attacks on Russian energy infrastructure, Moscow has banned exports of diesel fuel through the end of July. Russian President Vladimir Putin rejected calls to negotiate peace, saying Ukraine’s strikes have hardened Russia’s resolve to win the war.

US existing home sales fell 2.4% in June but the median sale price rose 1.8% to a record $440,600.

South Korean memory chip maker SK Hynix’s $26.5 billion US ADR issue is reportedly seven times oversubscribed. Part of the proceeds will be used to fund production facilities in the US. It is the largest ever US listing by a foreign company.

On Friday, Japanese Finance Minister Satsuki Katayama called for the nation’s massive pension funds to increase investments in domestic assets. The remarks caused a surge in the yen and a drop in domestic bond yields.

Canada added 18,200 jobs in June as the unemployment rate fell from 6.6% to 6.5%.

THE WEEK AHEAD

Monday: US federal budget balance

Tuesday: Japan industrial production; US CPI

Wednesday: China GDP, retail sales; eurozone industrial production; US PPI; Bank of Canada meeting

Thursday: UK GDP, industrial production; US retail sales, pending home sales

Friday: Eurozone CPI; US housing starts

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.