The U.S. is intensifying pressure on Iran and China across two fronts.

First, on the military side, The Wall Street Journal reported that President Trump told top aides to prepare for an extended U.S. naval blockade of the Strait of Hormuz, a move that would strangle Tehran’s oil revenue.

Second, on the economic side, the Treasury Department’s Office of Foreign Assets Control is warning financial institutions about sanctions exposure related to Chinese independent “teapot” refineries, particularly in Shandong Province, due to their continued purchases and refining of Iranian crude.

Taken together, the message from President Trump to Secretary of the Treasury Scott Bessent is very clear: Washington is squeezing Iran’s oil revenue at both ends of the supply chain, through a continued blockade of the Hormuz chokepoint that enables exports and the Chinese refining network.

“China purchases approximately 90 percent of Iran’s oil exports, with teapot refineries accounting for the majority of these imports. This revenue ultimately benefits the Iranian regime, its weapons programs, and its military,” Treasury explained in a press release, adding, “Some Chinese teapot refineries have used the U.S. financial system to conduct dollar-denominated transactions and procure U.S. goods.”

What OFAC is doing is urging banks to tighten controls, conduct enhanced due diligence on transactions involving China-based refineries, and communicate sanctions expectations to correspondent banks.

Treasury also imposed sanctions on 35 entities and individuals for their roles in Iran’s shadow banking sector.

The reason the Treasury singled out Shandong Province is that the area in China is a core hub for China’s independent refineries.

Efforts to end the US-Iran war, now entering the third month, have morphed from an air campaign against Tehran to an economic war with hopes that the Trump administration can economically squeeze Tehran into a favorable peace deal that includes winding down its nuclear program.

“Iran’s shadow banking system serves as a critical financial lifeline for its armed forces, enabling activities that disrupt global trade and fuel violence across the Middle East,” Bessent said in a statement, quoted by Reuters.

“Illicit funds funneled through this network support the regime’s ongoing terrorist operations, posing a direct threat to U.S. personnel, regional allies, and the global economy,” Bessent said, adding any institution that facilitated or engaged with these networks was at risk of “severe consequences.”

OFAC has already imposed about 1,000 sanctions on Iran-related individuals, ships, and aircraft as part of a campaign to exert maximum economic pressure on Iran’s shadow banking.

Brett Erickson, managing principal at Obsidian Risk Advisors, told Reuters that the Trump administration should go after Chinese banks that have supported Tehran.

“Washington keeps talking about waging a maximum pressure campaign, but it is still avoiding the one move that would actually matter,” Erickson said. “If you are not willing to target the Chinese banks propping up the regime in Tehran, you are not going for the jugular, you are running a charade.”

The U.S. economic pressure campaign on Tehran, as well as China, comes as Trump travels to Beijing next month to meet with his Chinese counterpart, Xi Jinping.

As expected, the Bank of Canada – which was the day’s first G5 central bank to hit the tape ahead of the Fed’s decision at 2pm ET – held interest rates unchanged at 2.25% as expected, saying adjustments to borrowing costs would likely be small if the economy and inflation evolve as expected, while stating that it is looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation.

“A policy rate close to current settings looks appropriate to support adjustment in the economy and return inflation to target,” BOC Governor Tif Macklem said adding that “There may still be a need to adjust the policy rate depending on how the risks evolve. But if the economy evolves broadly in line with the base case, changes in the policy rate can expected to be small.”

At the same time, officials flagged major risks to their outlook, including a review of the North American trade deal, the conflict in the Middle East and ongoing damage from the impacts of US tariffs, which could all require different responses for monetary policy.

Macklem explicitly outlined how officials may have to adjust borrowing costs more significantly in some scenarios. He noted that while additional US trade restrictions could prompt cuts to the policy rate, rising and persistently elevated energy prices would lead to tightening.

“If oil prices continue to increase, and particularly if they remain elevated, the risk that higher energy prices become generalized inflation increases,” Macklem said. “If this starts to happen, monetary policy will have more work to do — there may be a need for consecutive increases in the policy rate.”

Macklem said Canada is being buffeted by global events and geopolitical uncertainties, higher global energy prices are pushing inflation up, and monetary policy is focused on ensuring jump in energy prices does not turn into persistent inflation

The governor said the BOC has three key messages:

Canada is being buffeted by global events and geopolitical uncertainties, but our economy is growing and is expected to continue to grow.
After more than a year with inflation close to the 2% target, higher global energy prices are pushing inflation up. The surge in gasoline prices combined with still-elevated food price inflation is squeezing more Canadians.
Monetary policy is focused on ensuring the jump in energy prices does not turn into persistent inflation, while helping the economy adjust to global headwinds. We are committed to keeping inflation low and stable overtime.

Middle East

Since previous forecast in January, the war in the Middle East has sent global energy prices sharply higher, increased financial market volatility and disrupted shipping for fertilizer and other commodities. This has lowered the outlook for global growth while boosting inflation.

Growth 

Growth looks to have resumed after contracting at the end of 2025. Consumer and government spending are contributing to growth, while US tariffs and trade uncertainty are weighing on exports and business investment.
The conflict in the Middle East will affect the composition of growth, but the impact on overall growth is expected to be small because higher global oil prices increase the value of our energy exports even as they squeeze consumers and many businesses.

Policy

Our baseline forecast assumes oil prices will come down and US tariffs will remain at the current levels. If this holds true, a policy rate close to current settings looks appropriate to support adjustment in the economy and return inflation to target.
There may still be a need to adjust the policy rate depending on how the risks evolve. But if the economy evolves broadly in line with the base case, changes in the policy rate can be expected to be small.
However, uncertainty is unusually elevated, and there are many possible outcomes. Monetary policy may need to be nimble.

Outlook

We are closely monitoring the impact of the conflict in the Middle East and how the economy is responding to US tariffs and trade policy uncertainty.
Governing Council is looking through the war’s immediate impact on inflation but will not let higher energy prices become persistent inflation.
As the outlook evolves, we stand ready to respond as needed.
The Bank is committed to maintaining Canadians’ confidence in price stability through this period of global upheaval.

“While the war in Iran may alter its composition, overall GDP growth is little changed in the updated forecast,” the bank said. “Since Canada is a large net exporter of oil, higher oil prices increase national income even as consumers are squeezed by higher gasoline prices.” Previously, the bank said it could not predict the length and scale of the Iran conflict, calling the economic impact “highly uncertain.”

The monetary policy report notes that its projections for inflation and growth are highly conditional on the assumption that US tariffs remain unchanged and that oil prices gradually decline to $75 per barrel by mid-2027.

Both the Iran war and US trade policy pose both upside and downside risks to inflation, the bank said. While a prolonged conflict in Middle East could stoke inflation further, it could also have a more negative impact on global growth.

The bank also warned that businesses could face more costs adjusting to US tariffs, which would risk fueling inflation. But tariffs could also weigh on demand by more than expected and a review of the US-Mexico-Canada Agreement scheduled for July 1 could yield an outcome that is worse than assumed, dragging on growth and inflation.

The bank left its estimate of the neutral rate — the level of borrowing costs that neither restrict nor stimulate economic growth — between 2.25% and 3.25%.

In kneejerk reaction,the USDCAD rose from 1.3692 to 1.3710 as the BOC acknowledged that it will look through the war’s immediate impact on inflation. 

Thanks to the war in Iran, JetBlue Airlines is passing the cost along to us – announcing during Q1 earnings on Tuesday that while the airline had strong revenue performance, prices are going up due to rising fuel costs. 

A JetBlue Embraer 190 taxis on the tarmac at Ronald Reagan Washington National Airport in Arlington, Va., on June 29, 2021. Daniel Slim/AFP via Getty Images

“While the macro environment, particularly fuel, has become more volatile, we are taking decisive actions to manage what is within our control, including adjusting capacity, optimizing revenue, and maintaining disciplined cost control,” said CEO Joanna Geraghty. 

“At the same time, we are seeing clear evidence that JetForward is on track and working, and we remain confident it is the right plan to transform our business and get us closer to our financial priorities.“

As the Epoch Times notes further, JetForward is the airline’s turnaround strategy introduced in 2024, concentrating flights between the Northeast and leisure destinations such as Florida and the Caribbean.

This announcement follows last month’s notice that the airline would increase checked baggage fees by at least $10.

Going forward, JetBlue named specific actions it will take to deal with increased fuel costs, including 30 percent to 40 percent “fuel recapture” pricing during the second quarter, rising to 100 percent by early 2027. Using this strategy, the airline plans to offset the escalating costs by recovering those expenses through higher ticket prices, fees, and other adjustments.

The airline also intends to cut its flight capacity, with the reductions focused on off-peak travel periods, and implement additional cost-saving measures.

It revealed that the average fuel price during the first quarter was $2.96 per gallon—an increase of $0.39 per gallon year over year, or a 15.2 percent increase. Its first quarter 2026 system capacity also decreased by 1.7 percent year over year.

Still, the company’s operating revenue increased by 4.7 percent year over year to $2.2 billion during the first quarter, while its operating revenue per available seat mile grew 6.5 percent year over year.

The airline’s operating expense per available seat mile also increased during the first quarter by 8.3 percent year over year.

As a result, the company reported a net loss of $319 million, or $0.86 per share, for the quarter, compared with a loss of $208 million, or $0.59 per share, in the first quarter of 2025.

Some positive highlights of the first quarter include $500 million in committed aircraft financing, with the option of increasing that by an additional $250 million, and the repayment of $325 million of 2021 convertible notes. JetBlue ended the first quarter with $2.4 billion in liquidity.

“As we look ahead, we are seeing continued strength across the booking curve, with momentum carrying into the second quarter supporting our unit revenue outlook,” JetBlue’s president, Marty St. George, said in the report.

After a recent string of ‘soft’ survey data, this morning we get some ‘hard’ data and it was far stronger than expected.

Preliminary headline durable goods orders for March rose 0.8% MoM (better than the 0.5% MoM exp), and the first increase after a three month decline to start the year (which was the first 3-month decline since Nov 2019).

The increase took place despite continued weakness in aircraft orders manifesting as a 21.1% drop in nondefense aircraft and parts in March. 

Meanwhile, core durable goods orders (prelim for March ) rose even more, up by 0.9% MoM (and stronger than the 0.4% expected.

That was 12 straight months of gains, pulling core orders up 7.62% YoY – the most since July 2022.

Bookings for non-defense capital goods orders excluding aircraft, a proxy for investment in equipment, surged by 3.3% MoM after an upward revised 1.6% increase a month earlier.

Finally, shipments figures (which plug into GDP) were also comfortably stronger than expected (+1.2% in March versus +0.6% forecast), which suggests upside risks to Q1 forecasts.

It remains to be seen, however, how the war impacted demand for capital goods. 

Bond yields rose after the better-than-expected housing and capital goods data. The war is an ongoing risk that can belatedly sour hard economic data, but soft data is more up to date. On that front, we have yet to see the manufacturing ISM turn down. As Bloomberg’s Simon White notes (in the chart below) the ISM leads durable goods new orders by about three months.

Meanwhile, as reported earlier, housing data for March also held up well, largely thanks to housing starts, driven by one-unit structures, even as multi-unit ones fall. Building permits, on the other hand, were ugly, but that is a very forward looking leading indicator, and was likely driven by the spike in rates. 

The US economy is overall in remarkably good shape given the age of the cycle. That should keep yields supported. However, the longer energy prices remain elevated, that will become more in question.

Glass bottle and jar company O-I Glass plunged the most in premarket trading in more than six years after it slashed its full-year adjusted EPS outlook, blaming higher energy costs tied to the Gulf-related energy shock.

The major glass-container manufacturer, producing bottles and jars for the beer, wine, spirits, beverage, and food-packaging markets, now expects adjusted EPS of $1.00 to $1.50, down sharply from its prior forecast of $1.65 to $1.90 and well below the $1.67 Bloomberg Consensus estimate. 

Slide 8 detailed O-I Glass’ Full Year 2026 Outlook impacted by the energy shock in the Middle East:

The chart on the right is O-I Glass reassuring investors that it has hedged or mitigated a large portion of its European natural gas exposure. It says 75% to 80% of its 2026 year-to-go EU natural gas exposure is covered at rates better than current index prices, and more than 50% is already mitigated for 2027.

First-quarter results were also weak (courtesy of Bloomberg):

Adjusted EPS 5c vs. 40c y/y, estimate 11c

Net sales $1.54 billion, -1.7% y/y, estimate $1.47 billion

Americas net sales $871 million, -0.2% y/y, estimate $826.3 million

Europe net sales $655 million, -1.8% y/y

Americas oper. profit $142 million, +0.7% y/y

Europe operating profit $0 vs. $68 million y/y

From early February through Tuesday’s close, O-I Glass shares had already fallen roughly 40% as investors priced in the Gulf energy shock now working its way through the company’s cost structure. Shares are down another roughly 18% in premarket trading. If losses hold, it would mark the stock’s largest one-day drop since March 9, 2020. 

O-I Glass’ deteriorating outlook highlights how quickly the energy shock spread worldwide (read Goldman). 

With mortgage rates still relatively low, despite a recent jump in interest rates, and a top-down push for affordability, Housing Starts for March soared while the more forward-looking Building Permits disappointed, unexpectedly plunged.

Housing starts soared 10.8% MoM in March (far more than the -0.4% expected drop) while Permits plunged 10.8% MoM (and worse than the -0.4% decline expected)…

This pushed the SAAR totals for Starts to 1.502 million, far above the 1.390 million expected, and the highest since Dec 2024, but Building Permits fell to their lowest since Aug 2025

Under the hood, Single-Family Starts jumped 9.7%, the most since Feb 2025, and Multi-Family Starts soared 9.6% MoM, while Permits did a mirror image, plunging 23.5% MoM (biggest drop since June 2023) and Single-Family permits plunged 3.8%

The lowest mortgage rate since Aug 2022 (aside for the modest Iran war jump) likely helped spark homebuilder appetite to start building, even if it did precisely the reverse with permits. 

Overall, the report was a mixed bag overall, and tough to project given the impact of surging oil which translated into even higher yields on the mortgage rates for the foreseeable future. 

Wingstop shares fell the most in six months in premarket trading after the company cut its full-year outlook and reported weaker-than-expected first-quarter sales, citing a pullback in traffic as management pointed to “continued pressure on consumer spending.”

The chicken chain, with 2,653 locations across the US, now expects 2026 domestic same-store sales to decline at a low single-digit rate, down from its prior forecast of flat to low single-digit growth. Analysts tracked by Bloomberg forecast a .4% contraction this year, after lowering their forecast from about 1.3% in mid-February when Wingstop last reported earnings.

First-quarter domestic same-store sales fell 8.7%, exceeding the 5.4% decline expected by analysts. Adjusted EPS of $1.18 topped estimates, helped by lower-than-expected costs, including chicken wing costs.

Here’s a snapshot of first-quarter results (courtesy of Bloomberg):

Total domestic stores comp sales growth -8.7%, estimate -5.43% (Bloomberg Consensus)

Adjusted EPS $1.18 vs. 99c y/y, estimate $1.03

Revenue $183.7 million, +7.4% y/y, estimate $188.4 million

Adjusted Ebitda $65.4 million, +9.9% y/y, estimate $63.4 million

Total location count 3,153, +3.2% q/q, estimate 3,154

Domestic franchise restaurants 2,596, +15% y/y, estimate 2,599 
International franchise restaurants 500, +29% y/y, estimate 497

Cost of sales $24.7 million, +8.2% y/y, estimate $26.1 millions

SG&A expense $34.4 million, +9.6% y/y, estimate $35.7 million

Net addition of stores 97, -23% y/y, estimate 90

Important to note: Wingstop’s core customer base appears to skew younger, making it highly exposed to lower-income consumer pressures, such as the national average gasoline price topping $4 per gallon.

Wingstop bust-cycle… 

We have highlighted what has happened in convenience stores and gas stations when gas topped the politically sensitive line of $4 last month.

Read:

Here’s What Happened Inside Gas Stations When Gas Hit $4

Here’s What Happened Inside Convenience Stores When Gas Hit $4

Related:

Goldman: Fast Food’s ‘Bang For The Buck’ Gains As Casual Dining Appeal Craters

Perhaps Wingstop needs to run promotions or offer ‘BNPL’ loans for their chicken orders to bring back younger customers.

Authored by Jack Phillips via The Epoch Times (emphasis ours),

The average price for a gallon of gasoline hit its highest level in four years on Tuesday as the cost of a barrel of oil remains elevated amid the conflict with Iran, according to a prominent analyst.

Customers pump gas at a gas station in Miami on April 13, 2026. Joe Raedle/Getty Images

The national average price for a gallon of gas was $4.17, “the highest level since 2022,” and surpassed the $4.16 price reported earlier this month, said GasBuddy analyst Patrick de Haan in an X post on April 28.

“We’ll continue to head higher for now,” he added.

The American Automobile Association (AAA) also said the price for a gallon of regular gas reached just above $4.17, showing a 6-cent increase from Monday.

The price of gas and oil surged after the United States and Israel launched strikes on Iran on Feb. 28, prompting the country to respond by attacking ships in the Strait of Hormuz and launching its own strikes on neighboring countries in the Middle East.

Diesel was significantly higher on Tuesday, with AAA showing the price for a gallon at $5.46, an increase of 2 cents over Monday’s average.

According to an AAA report in March, the nationwide average price for a gallon of gas stood at around $2.98 on Feb. 26, two days before the U.S. military launched the strikes.

A federal Energy Information Administration (EIA) graph shows that gas prices reached $4.21 per gallon in April 2022, several weeks after Russia invaded Ukraine in February 2022.

Prices may have been impacted by the United Arab Emirates’ announcement on Tuesday that the oil-rich country was quitting the Organization of the Petroleum Exporting Countries (OPEC), dealing a blow to the oil producers’ group. The exit of the UAE weakens ‌OPEC’s control over global oil supplies and will widen a rift between the UAE and neighboring Saudi Arabia.

UAE Energy Minister Suhail Mohamed al-Mazrouei told Reuters in ​a telephone interview that the decision was taken after examining the country’s energy strategies. He said the UAE had not discussed the issue with any other country.

“This ​is a policy decision, it has been done after a careful look at current and future policies related to level of production,” ⁠al-Mazrouei said.

OPEC Gulf producers have been struggling to ship exports through the Strait of Hormuz, a chokepoint between Iran and Oman through which roughly a fifth of the world’s crude oil and liquefied natural gas normally passes, due to Iranian threats and attacks on vessels. The Trump administration has pushed for Iran to reopen the strait while maintaining a U.S. naval blockade on Iran’s ports.

President Donald Trump on Tuesday provided an update on the U.S.–Iran conflict, writing in a Truth Social post that Iran informed the administration that it is in a “state of collapse” and wants to reopen the Strait of Hormuz. He did not provide other details.

Earlier on April 28, an Iranian military official told the semi-official IRNA news agency that Tehran considers itself still at war with the United States amid the blockade and ceasefire.

Trump and administration officials have said that gas prices will likely go down after the war ends. “I think they’ll be much lower. Before midterms? Much lower,” he told Fox Business in mid-April.

S&P futures are flat with Nasdaq outperforming ahead of a huge day for tech. Alphabet, Amazon, Meta and Microsoft, representing nearly 20% of S&P market cap, report after the close, with traders focused on capex. The group has a combined options implied move of more than $750 billion of market cap in either direction. As of 8:00am ET, S&P futures are unchanged; Nasdaq futures rise 0.3% amid dip buying following strong results from Seagate, after the index slipped more than 1% in the previous session, and the sector outperformed in Europe and Asia. In premarket trading, semis are again seeing a strong bid post-earnings, Mag7 names are flat to down, Cyclicals are leading Defensives driven by Energy / Industrials / Materials. Treasury yields rose along with the dollar ahead of the Fed’s latest interest-rate announcement at what is likely Jerome Powell’s final meeting as chair and where the Fed will keep rates unchanged. WTI crude rose $103  while Brent jumped above $114 a barrel – approaching the highest since the start of the Iran war – after the US signaled it would stick with a naval blockade of Iranian ports, leaving the Strait of Hormuz impassable. The key overnight news came from Trump’s threat of extending the US blockade, which is boosting oil, pushing Brent to the highest in a month, but for now Equities are blissfully interpreting this as an “escalate to de-escalate” situation. Bond yields are near session highs, above 4.36% ahead of today’s Fed decision with no changes expected in an 11-1 vote, though there will likely be multiple questions probing Powell’s intent to leave the Board or to finishing his term which runs into 2028, or perhaps stay on until all investigations are concluded. US economic data calendar slate includes March readings for wholesale inventories, durable goods and housing starts are due at 8:30 a.m. ET. FOMC rate decision is at 2 p.m., followed by a press conference at 2.30 p.m. Bank of Canada rate decision is due at 9:45 a.m.

In premarket trading, Mag 7 stocks are mostly lower: Alphabet -0.5%, Amazon -0.1%, Apple -0.7%, Nvidia +0.4%, Meta -0.1%, Microsoft -0.6%, Tesla +0.2%

Bloom Energy (BE) jumps 20% after the fuel cell maker boosted its revenue guidance for the full year, beating Wall Street guidance expectations.
Booking Holdings (BKNG) falls 3% after the online travel agent said the Middle East conflict impacted its first-quarter results to varying degrees. Its second-quarter and full-year forecasts missed estimates.
Brown-Forman (BF/B) falls 5% after the alcoholic beverage maker and Pernod Ricard agreed to terminate discussions regarding a potential business combination.
Humana (HUM) slips 1% after the health insurer reaffirmed its adjusted earnings per share forecast for the full year, even as its first-quarter profit came ahead of expectations.
KalVista Pharmaceuticals (KALV) shares are halted after Chiesi Farmaceutici SpA agreed to acquire the US-listed company for about $1.9 billion, expanding the Italian company’s rare immunology portfolio.
NXP Semiconductors (NXPI) jumps 18% after the chipmaker reported first-quarter results that beat expectations and gave a second-quarter forecast that is above the analyst consensus.
O-I Glass (OI) sinks 21% after the glass bottle maker cut its adjusted earnings per share guidance for the full year, citing higher global energy costs as a result of the conflict in the Middle East.
Robinhood (HOOD) falls 10% after the firm said expenses jumped 18% in the first quarter and warned that its “Trump account” push would require an additional $100 million investment.
Rush Street (RSI) surges 17% after the gaming company reported revenue for the first quarter that beat the average analyst estimate and raised its outlook for the full year.
Seagate Technology (STX) rises 17% after the computer hardware and storage company gave a fourth-quarter forecast that was much stronger than expected. It also reported third-quarter results that beat expectations, fueled by AI-related demand.
Starbucks (SBUX) climbs 4% after reporting better-than-expected quarterly results and saying it now sees comparable sales rising at least 5% this year, up from its previous view of 3% or more.
Teradyne (TER) falls 6% after the semiconductor manufacturing company gave an outlook that wasn’t seen as strong enough to justify the stock’s recent strength.
Visa (V) rises 5% after the credit card company reported second-quarter adjusted earnings per share and net revenue that both topped average analyst estimates.
Vita Coco (COCO) climbs 15% after after the beverage firm boosted its net sales guidance for the full year.

In deals, Jack Daniel’s owner Brown-Forman and Jameson whiskey maker Pernod Ricard terminated their merger talks, marking an abrupt end to a potential deal. Finland’s Kone agreed to acquire TK Elevator for €29.4 billion ($34.4 billion) including debt, in what will be one of Europe’s biggest-ever PE exits.

There’s a relentless few days ahead, with companies representing around 42% of the S&P 500’s market cap reporting this week. A lot of that is due to the four hypercalers coming after the close, which represent more than 15% of the index’s value. “I can’t remember a time where you had this many names in one shot,” said Michael O’Rourke, chief market strategist at Jonestrading. “It’s going to be hectic.”

The results will have widespread implications for a market that’s largely looked past the impact of war in the Middle East and ridden the AI trade to new highs. Comments on capex will be crucial for chipmakers and memory storage stocks on a record run. Strong results from Seagate Technology Holdings Plc and NXP Semiconductors NV, manufacturers of memory and analog chips, respectively, fueled Wednesday’s US rebound. Both stocks surged around 18% in premarket trading and lifted peers. The Magnificent Seven were weaker for the most part.

“Buy-the-dip has been a profitable trade for some time now,” said Roger Lee, head of equity strategy at Cavendish. “Any new news around the monetization of the AI capex already invested will be key, and what level of incremental capex is required in the AI arms race.”

“US companies are really good at quarterly earnings. They understand how to under-promise and over-deliver,” said Russ Mould, investment director at AJ Bell. “The absence of bad news elsewhere, the still-powerful competitive positions of the Mag7 and their own powerful earnings forecast profile may be emboldening bulls to take a view ahead of their earnings.”

It’s also Fed day. The central bank is poised to hold its benchmark rate in a range of 3.5% to 3.75%. Investors will be looking for clues about how long the Fed is willing to maintain its patient posture, as well as what Powell says about his future, in what’s likely to be his final press conference as Fed chair. Traders in the Treasury options market are bracing for long-dated bond yields to surge past 5% as a rally in oil prices continues. A jump in energy prices has raised the possibility of stronger inflation and weaker economic growth, leaving markets to look out for tweaks to policymakers’ March statement.

The “base case is that the Fed will wait until June for meaningful changes in guidance, but the risk is that communications skew hawkish,” wrote Jim Reid, head of macro research and thematic strategy at Deutsche Bank.

In politics, key congressional Republicans are poised to break with Trump on his proposed 44% budget raise for the Pentagon in a rare act of defiance. Trump and Xi Jinping are headed toward a summit next month with a shared desire to stabilize ties, as tensions rise over Iranian oil and AI. A Bloomberg Economics analysis found that around 4% of US GDP is derived from industries that use rare earths.

Higher energy prices are exerting some pressure on European stocks, with the Stoxx 600 down 0.2% in what has been a busy morning of earnings reports. UBS jumped after traders helped drive profit in the first quarter, while Deutsche Bank shares dropped after the lender increased its credit provisions for commercial real estate. Here are the biggest movers Wednesday:

UBS shares advance as much as 5.9% after the Swiss lender reported what analysts say was a strong set of results. With an earnings beat driven by the investment bank, the lender also signaled it could expand an existing $3b buyback
Adidas shares soar as much as 8.3%, supported by 1Q revenue and operating profit beat that offered encouraging start to the year, with analysts waiting for details how events such as the soccer World Cup can contribute to sales growth
Glanbia shares rally as much as 12% on the Irish stock exchange, hitting a record high, after the food and nutritional products company said it expects adjusted EPS growth this year to hit the high-end of its guided range
Nexi shares gain as much as 7.8%, the most in more than a year, after the Financial Times reported that CVC is weighing a €9 billion bid to take the payment services provider private
Amundi shares rise as much as 6.5% as the investment manager’s first-quarter earnings, assets under management and flows prove better than expected
Fuchs shares rise as much as 10%, the most since October, after the German specialty chemicals company raised its sales guidance to reflect its intention to hike prices to offset raw material inflation caused by the conflict in the Middle East
Airbus shares advance as much as 3.5% despite the planemaker missing analyst expectations on adjusted Ebit and free cash flow in the first quarter, alongside a low handover rate for deliveries
Kambi gains as much as 22% after the Swedish sports betting company reported its latest earnings. Jefferies says the report shows progress across revenues and Ebita “despite customer migration and regulatory headwinds”
GSK shares drop as much as 3.5%, underperforming the Stoxx 600 Health Care Index, after the British drugmaker reported results for the first quarter which Intron Health analysts said were “mixed”
Deutsche Bank shares drop as much as 3.6% after the German lender reported what analysts say are mixed results, with Morgan Stanley analyst pointing to capital miss and provisions as the key negatives
AstraZeneca falls despite reporting better-than-expected sales and earnings for the first quarter, with Hargreaves Lansdown noting the results probably won’t provide a major catalyst for the stock
Iberdrola shares fall as much as 2.2% after the Spanish power company reported net income for the first quarter that matched the average analyst estimate. Analysts at Morgan Stanley note quality of earnings concerns
Hexatronic falls as much as 17%, the most since July, after the Swedish maker of fiber-optic cables reported that sales  fell more than some analyhsts forecast

Asian stocks fluctuate as traders await a series of upcoming central bank rate decisions in major economies, along with earnings from big artificial intelligence players. The MSCI Asia Pacific Index swung between a gain of as much as 0.3% and a drop of up to 0.5%. Key stock benchmarks in South Korea, Hong Kong, India and mainland China rose, while Australia’s declined. Japan’s markets are shut for a public holiday. Elsewhere in the region, Victory Giant Technology Huizhou Co., a supplier to Nvidia Corp., rose after reporting a 28% year-on-year increase in its first-quarter sales, driven by stronger demand for printed circuit boards used in AI servers. Other tech earnings in focus include Luxshare Precision and Foxconn Industrial.

In FX, the Bloomberg Dollar Spot index is up around 0.1%. The Aussie dollar is near the bottom of the G-10 leaderboard after core inflation metrics fell short of expectations.

In rates, global bonds are mostly lower, with US yields up around 1bps across the curve. Treasury yields are 1bp-1.5bp higher on the day with curve spread little changed; 10-year is near 4.36%. German and UK front-end yields are 3bp-4bp higher following German regional CPI data, with national print at 8am coming at 2.9%,  below the 3.1% expected.  Wednesday’s US session features Fed rate decision, likely the last of Chair Powell’s tenure, and news conference at 2pm and 2:30pm respectively. No change is expected, leaving investors focused on any comments about the impact of energy prices and supply-chain disruptions on inflation. Into the Fed policy decision, there has been a wave of flows in Treasury options targeting an increase in long-end yields to 5% or higher; front-end swaps price in just 3bp of easing by year end

In commodities, WTI crude oil futures are up more than 3% at highest level since April 13; Brent crude futures briefly made their way back above $115 amid concern over a prolonged blockade in the Strait of Hormuz and US President Trump telling Iran it “better get smart soon.”  Spot gold and silver are showing respective losses of 0.6% and 0.1%. Bitcoin adds 1.6%. 

US economic data calendar slate includes March housing starts and trade balance and March preliminary durable goods orders and wholesale inventories (8:30am)

Market Snapshot

S&P 500 mini little changed
Nasdaq 100 mini +0.3%
Russell 2000 mini +0.1%
Stoxx Europe 600 -0.3%
DAX -0.1%, CAC 40 -0.6%
10-year Treasury yield +1 basis point at 4.36%
VIX +0.1 points at 17.97
Bloomberg Dollar Index little changed at 1198.89
euro little changed at $1.1703
WTI crude +3.5% at $103.42/barrel

Top Overnight News

President Trump has instructed aides to prepare for an extended blockade of Iran, U.S. officials said, targeting the regime’s coffers in a high-risk bid to compel a nuclear capitulation Tehran has long refused. WSJ
War has imposed a heavy cost on Iran’s economy: more than a million people out of work, soaring food prices and a prolonged internet shutdown that has slammed online businesses. The question is how much more pain Iran’s leaders are willing to tolerate as they try to negotiate a favorable end to the war. WSJ
The Fed’s widely expected to hold rates today, probably Jerome Powell’s final decision as chair. Instead, uncertainty over the outlook and his own future will dominate. BBG
The UAE’s shock decision to quit OPEC blindsided its partners and will weaken the cartel’s grip on prices. Once oil starts flowing again, the move may set the stage for future price wars. BBG
US gasoline inventories slumped by 8.5 million barrels last week, a month before driving season, the API is said to have reported. That would be the 11th straight decline and cut holdings to the lowest since November if confirmed by the EIA. BBG
Demand for Huawei’s Ascend 950 AI chips has surged following the release of DeepSeek’s V4 artificial intelligence model that runs on the Shenzhen-based tech firm’s chips, with major Chinese internet firms rushing to secure orders. China’s biggest internet firms including ByteDance, Tencent, and Alibaba are reaching ‌out to Huawei about new chip orders, said the sources, who are familiar with the procurement discussions. RTRS
China is poised to resume exporting jet fuel, gasoline and diesel from May, in a move that could significantly ease the worldwide shortages caused by the Iran conflict. FT
The U.S. Department of Commerce last week ordered multiple chip equipment companies to halt certain tool shipments to China’s second-largest chipmaker, Hua Hong, its latest action to slow the country’s development of advanced chips, according to ‌two people familiar with the matter. RTRS
Australian consumer prices surged in the first quarter as war in the Middle East drove up energy costs, while core inflation stayed uncomfortably high for policymakers, keeping pressure on for a rate hike next week. RTRS
Republicans are exploring cutting capital gains taxes to appeal to voters ahead of midterms. A proposal to index gains for inflation may feature in a tax package later this year, though passage before November looks unlikely. BBG
KPMG has closed its US government audit practice following the loss of an army contract: FT
US President Trump’s budget office sent a memo urging House Republicans to agree to partly reopen DHS, even without new cash for immigration enforcement: CNN 
The White House is developing guidance to allow agencies to get around Anthropic’s supply chain risk designation and onboard Mythos: Axios 
US Senate votes 51-47 to block Cuba military action resolution.

Iran News

US President Trump tells officials to prepare for an extended blockade of Iran, WSJ reported citing sources; Trump has opted to continue squeezing Iran’s economy, as other options would carry more risk than maintaining the blockade.
US President Trump posted “Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon! President DJT”. Post also includes an image of President Trump holding a rifle, with explosions behind him; caption reads “NO MORE MR. NICE GUY!”.
US President Trump said we are doing very well in the Middle East, King Charles agrees that Iran cannot have a nuclear bomb.
Iran’s Vice Chairman of the National Security Council Boroujerdi said, on negotiations, that Ghalibaf “personally manages” them.
Iran has pushed back on statements from the US regarding pipeline explosions, ISNA reports.
Senior Pakistani official said mediation continues, working to narrow the gap between the US and Iran.
US Treasury Secretary Bessent said the US Treasury has targeted Iran’s financial infrastructure, disrupting tens of billions of dollars in Iranian revenue; Kharg Island is approaching maximum storage capacity, forcing Iran to reduce oil production.
The Israeli army carries out a massive bombing operation east of Gaza City.
IRGC said that new means of power ready against any new US attack, Press TV reported.
Israel’s Hayom newspaper estimates that Israel may accept a limited ceasefire with Lebanon, with the stipulation of the disbandment of Hezbollah, Al Hadath reported.
An Israeli army commander said that we are not talking about destroying terrorist infrastructure in southern Lebanon, but rather destroying everything, according to Haaretz.
A political aide to the IRGC said that we will respond to any new aggression with surprises and new capabilities, will burn America’s giant ships at sea if they miscalculate again, Al Jazeera Mubasher reported.
Japanese PM Takaichi said Japan will engage with Iran for safe passage of ships.
US Treasury has frozen USD 344mln in crypto linked to Iran, according to Fox Business citing officials.

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks initially opened with a slight negative bias, amid the tech-led selloff stateside and the lack of progress between US and Iran. Sentiment improved throughout the APAC session, despite light newsflow. ASX 200 underperformed, with Health Care and Miners weighing on the index. Woodside Energy reported Q1 revenue that rose annually and maintained its FY guidance, helping support shares just shy of 2% gains. KOSPI reversed earlier losses, as the index shrugged off the tech-led selloff in US equities. Hang Seng and Shanghai Comp. outperformed, following a flurry of earnings and updates. For BYD, the Co. reported revenue that beat estimates, however net income fell annually. On the other hand, Hua Hong Semiconductor slipped after the US reportedly ordered numerous chip equipment companies to halt tool shipments to two of the co.’s facilities

Top Asian News

Australian Quarterly Inflation Rate QoQ (Q1) Q/Q 1.4% vs. Exp. 1.4% (Prev. 0.6%, Low. 1.1%, High. 1.6%).
Australian RBA Weighted Median CPI YoY (Mar) Y/Y 3.5% (Prev. 3.5%).
Australian RBA Trimmed Mean CPI YoY (Mar) Y/Y 3.3% (Prev. 3.3%).
Australian RBA Weighted Median CPI MoM (Mar) M/M 0.8% (Prev. 0.2%).
Australian Quarterly RBA Trimmed Mean CPI QoQ (Q1) Q/Q 0.8% (Prev. 0.9%).
Australian Quarterly RBA Trimmed Mean CPI YoY (Q1) Y/Y 3.5% (Prev. 3.4%).
Australian Quarterly Inflation Rate YoY (Q1) Y/Y 4.1% vs. Exp. 4.1% (Prev. 3.6%).
Australian Inflation Rate MoM (Mar) M/M 1.1% vs. Exp. 1.3% (Prev. 0.0%, Low. 0.9%, High. 1.6%).
Australian Inflation Rate YoY (Mar) Y/Y 4.6% vs. Exp. 4.7% (Prev. 3.7%).

European bourses (STOXX 600 -0.4%) began the session on a weaker footing as geopolitical headlines dictate the tape with WSJ reporting “Trump told officials to prepare for an extended blockade of Iran” and the US President posting this morning, “Iran can’t get their act together. They don’t know how to sign a non-nuclear deal. They better get smart soon! President DJT”. European sectors opened mixed, though they now show a negative bias as the index dipped lower. Energy tops the pile, and Tech also does well after NXP Semi’s Q1 beat-and-raise after hours; Insurance and Retail lag. In terms of key movers: Adidas (+7%, Strong Q1, raised guidance) and UBS (+4%, NII, Top and bottom line beat, share buyback).

Top European News

NIESR lowers the UK’s 2026 growth forecast to 0.9% (prev. 1.4%) and raises its inflation forecast to 4.7% (prev. 3.3%) at the start of 2027; the BoE may have to respond with big rate hikes if energy disruption is prolonged. The UK would face recession and inflation of 5% in a more adverse scenario in which oil prices spike to around USD 140/bbl and Hormuz remains closed. The Middle East shock will also worsen the UK’s public finances. Relative to the OBR’s outlook, debt-servicing costs are likely to be higher, growth weaker, and pressure greater for additional support to compensate vulnerable households.
UK Chancellor Reeves said the Government needs to make targeted interventions that will not have a lasting impact on interest rates.
AstraZeneca (AZN LN) Q1 2026 (USD): Revenue 15.3bln (exp. 14.9bln), adj. EPS 2.58 (exp. 2.55). Confirms guidance for FY26. “…remain on track to achieve our ambition for 2030 and beyond.”.
GSK (GSK LN) Q1 2026 (GBP) Adj. EPS 46.5p (exp. 43.2p), Turnover 7.63bln (prev. 7.51bln Y/Y), Gross Profit 1.87bln (prev. 1.93bln Y/Y); reaffirms 2026 guidance.
Santander (SAN SM) – Q1 2026 (EUR): NII 5.46bln (exp. 4.97bln), EPS 0.36 (exp. 0.26), Total income 15.1bln (exp. 15bln), Net income 5.5bln (exp. 5.0bln), reaffirms 2026-28 targets. Net Loan provisions 3.23bln (exp. 3.17bln).
UBS (UBSG SW) – Q1 2026 (USD): Revenue 14.2bln (exp. 13.2bln), Net income 3.04bln (exp. 2.42bln), confident in 2026 financial targets. Announces share buyback of up to USD 3bln by its Q2 results, aiming to do more by year-end.

FX

DXY continues to outperform most G10 peers as the preferred hedge against higher oil prices. Many catalysts will dictate the path forward for the Greenback, FOMC and BoC today, then the BoE and ECB on Thursday.
DXY remains supported by both the 100 and 200 DMAs at the 98.50 mark as crude benchmarks rise into a packed session. In addition to the Fed meeting, the Senate Banking Committee is expected to advance Kevin Warsh’s nomination as Fed Chair; the vote is set for 10:00EDT/15:00BST.
A quick preview into the Fed, the Bank is widely expected to leave rates unchanged, with focus squarely on Chair Powell’s guidance as policymakers assess the inflationary impact of the ongoing US-Iran conflict. The recent surge in oil prices has pushed back rate cut expectations, with a Reuters poll showing a majority of economists now see easing delayed until at least September. Traders also seek details about Powell’s future, with this meeting expected to be his last as Fed Chair, providing Kevin Warsh is approved in time.
EUR is also lower against the Buck but fares better than peers despite German state CPIs being indicative of a cooler mainland series. EUR remains supported by the 1.17 mark, and ING writes this morning, “Tomorrow’s ECB meeting should, in our view, largely meet market expectations.”, aside from geopols, the next catalyst for the EUR will be the Fed meeting today.
Antipodeans are the worst performers in the G10 space by a large margin after Aussie inflation for March was softer than expected and trimmed bets for hikes in Next week’s RBA meeting. ING writes “The pullback in AUD looks mostly a function of stretched positioning rather than a real rethink of RBA expectations.

Central Banks

RBNZ Governor Breman said the global environment continues to present headwinds, Q1 core inflation have remained stable within the 1-3% target band.
PBoC set USD/CNY mid-point at 6.8608 vs exp. 6.8347 (prev. 6.8589).
Banxico Governor Rodriguez said the Bank is close to finishing its rate cutting cycle that began in 2024.

Trade/Tariffs

European lawmakers failed to reach a deal on watered-down landmark AI rules after 12 hours of negotiations, talks to resume next month.
US Secretary of State Rubio expresses deep concerned by China’s targeted economic pressure after the Barboa and Cristobal terminals decision.

Fixed Income

A modestly bearish start in fixed benchmarks, given continued upside in the energy complex. Gains for energy occurring in recent trade despite a lack of fresh driver, and potentially as participants take another look at the WSJ reporting around a prolonged Hormuz closure, as while this is less risky than strikes, it does suggest a further extension of the ongoing supply disruption.
Amidst this, fixed benchmarks are at lows. USTs to a 110-24+ base, but with downside of just a few ticks as we await the FOMC. The Fed is expected to maintain its rate in a 3.50-3.75% band, with focus on the guidance from Chair Powell in what may be his last meeting as Chair. As a reminder, the Senate Banking Committee is today expected to advance the nomination of Warsh to the broader Senate.
Bunds are also at lows, down to 110-24+ with downside of a few ticks at most. Fleeting upside seen in EGBs as the initial German State CPIs are indicative of a cooler mainland series than the consensus for the 13:00BST mainland series suggests. Bunds spiked higher from 124.95 to 125.07, shy of the earlier 125.16 high. Albeit, the move swiftly pared and Bunds are back at lows.
Gilts gapped lower by nine ticks, and have since slipped another 14 to an 86.54 trough. Action a function of the above, with Gilts trading broadly in-line with peers this morning. On the UK specifically, PM Starmer was not referred to the Privileges Committee. However, the number of Labour MPs who defied the whip and those who abstained without a clear reason is indicative of a moderate rebellion, not one sufficient to yet hit the threshold to trigger a leadership contest, but nonetheless an ominous sign into the May 7th local elections and further Mandelson-related communication releases in the weeks ahead.
Italy sold EUR 5.5bln vs exp. EUR 4.5-5.5bln 3.15% 2031, 3.35% 2035 BTP and EUR 3.5bln vs exp. EUR 3.0-3.5bln 2036 CCTeu.
Germany sold EUR 3.8bln vs exp. EUR 5bln 2.90% 2036 Bund: b/c 1.15x (prev. 1.24x), average yield 3.08% (prev. 2.92%), retention 23.3% (prev. 23.66%)

Commodities

WTI and Brent began the European morning with very mild gains, and have continued to extend higher. WTI Jun’26 topped the USD 102/bbl mark, to make a peak at USD 102.78/bbl (vs trough of USD 98.42/bbl); Brent Jul’26 resides near peaks at USD 106.16/bbl, which also marks the WTD high.
Focus remains on the US-Iran situation, which, as it stands, does not appear to be moving towards peace. A WSJ article overnight, citing sources, suggested that President Trump told officials to prepare for an extended blockade of Iran, attempting to squeeze Iran’s economy. This will ultimately guide traders to price in the possibility of long-term disruptions to energy, and hence explains the strength in energy this morning.
Most recently, President Trump posted on Truth Social that “Iran can’t get their act together. They don’t know how to sign a non-nuclear deal. They better get smart soon!”. Alongside this, an AI image of himself holding a rifle, with explosions behind him, the accompanying caption read “NO MORE MR. NICE GUY!”. A post which spurred about a bucks worth of upside in the complex.
Spot gold is a touch lower this morning and currently resides towards the lower end of a USD 4,568-4,610/oz range. As has been the case, the yellow metal has been subdued by the stronger USD and inflationary implications of the war in Iran. Today’s focus will be on the Fed Policy Announcement, which is widely expected to leave rates unchanged at 3.50-3.75%, with focus squarely on Chair Powellʼs guidance, as policymakers assess the inflationary impact of the ongoing US-Iran conflict.
Base metals are mixed; 3M LME Aluminium is a touch firmer this morning, alongside strength in 3M LME Copper, whilst Palladium and Nickel move lower. 3M LME Copper holds above the USD 13k/t mark, within a USD 13,026-13,155.93/t range. Copper has advanced as Chinese fabs replenished stockpiles ahead of the Labor Day holiday, with restocking supporting prices and some buyers viewing recent declines on global growth concerns as an opportunity.

Geopolitics

Ukraine is facing risk of tougher terms to get some EU loan payouts, Bloomberg reported citing sources; payouts would be dependent on the introduction of a tax change for businesses.

US Event Calendar

8:30 am: United States Mar Housing Starts, est. 1380k
8:30 am: United States Mar P Building Permits, est. 1390k
8:30 am: United States Mar P Wholesale Inventories MoM, est. 0.37%, prior 0.8%
8:30 am: United States Mar P Durable Goods Orders, est. 0.5%, prior -1.3%
8:30 am: United States Mar P Durables Ex Transportation, est. 0.4%, prior 0.9%
2:00 pm: United States Apr 29 FOMC Rate Decision (Upper Bound), est. 3.75%, prior 3.75%

DB’s Jim Reid concludes the overnight wrap

Morning from a very sunny Frankfurt where summer has truly arrived. It’s now been a week since I started wearing a WHOOP and Oura Ring to go alongside my trusty Apple Watch. With all these wearables I feel like the banking version of Mr T. Apologies to those not old enough to remember the A-team. Quick results are that I sleep very well for 4-5 hours and then it’s pot luck what the last 2 hours bring! Lots of awake time and restless sleep. I’ve done various AI searches as to why that’s the case. Maybe it’s searching AI that causes it.

Anyway, hopefully you’re a bit fresher than me as we enter FOMC decision day. Markets are entering it slightly on the back foot as oil prices have continued to grind higher over the last 24 hours while tech sentiment slipped after a report that OpenAI had missed internal targets. However even on the latter point Nasdaq futures have recovered more than half yesterday’s losses overnight.  

Starting with the Middle East, the US and Iran seem to be no closer to resolution over the closure of the Strait of Hormuz. The WSJ reported last night that President Trump had instructed aides to prepare for an extended blockage of Iran, while Trump himself posted earlier yesterday that Iran “want us to “Open the Hormuz Strait” as soon as possible”. CNN reported that Iranian officials were expected to submit a revised peace proposal in the next few days. This uncertain backdrop saw Brent crude rise +2.80% to $111.26/bbl yesterday, its highest level in four weeks (flat overnight). So concerns about a more prolonged stagflationary shock have risen, not least as slightly further out the oil futures curve, the 3- to 6-month Brent futures are now trading within a dollar of the highs reached in late March.  

While higher oil prices and stagflation fears added to the risk-off sentiment, it was AI worries that were the bigger factor in driving yesterday’s equity losses. The major catalyst was a WSJ report that OpenAI had missed its internal revenue and user targets for the end of 2025. While OpenAI pushed back on the concerns, saying its consumer and enterprise businesses are “firing on all cylinders”, the news revived previous fears about whether the huge spending commitments will eventually pay off. So after reaching record highs on Monday, the S&P 500 (-0.49%), the NASDAQ (-0.90%) and the Mag 7 (-0.29%) all fell back, whilst the Philly semiconductor index (-3.58%) saw its biggest loss in four weeks. Moreover, given the integration of OpenAI’s in the AI-ecosystem, those concerns spread from software and cloud companies like Oracle (-4.05%) and Coreweave (-5.83%), to semiconductor equipment firms like Qnity Electronics (-4.35%) and Applied Materials (-5.87%). So that’s rather dampened the mood into this week’s earnings, particularly with four of the Magnificent 7 set to report their earnings tonight after the close. As mentioned at the top Nasdaq futures (+0.49%) have recovered more than half yesterday’s losses this morning with S&P 500 (+0.19%) futures also edging higher.  

Asian markets are generally higher with the Hang Seng (+1.29%) leading the gains, followed by the KOSPI (+0.72%), the CSI (+0.64%) and the Shanghai Composite (+0.40%). The S&P/ASX 200 (-0.23%) is lower even after slightly softer inflation.  

Australian CPI rose by +4.6% year-on-year in March, marginally below the anticipated +4.8%, but it increased significantly from the 3.7% recorded in the previous quarter. Core inflation, as indicated by the trimmed mean CPI, rose by +3.3% in March, remaining steady from the previous month while still surpassing the Reserve Bank of Australia’s (RBA) annual target of 2% to 3%. Q1 trimmed mean came in at 0.81% qoq around a tenth softer than expectations but Q2 so far has continued to see oil prices high so there won’t be too much comfort with that print. For now, yields on the 3-year policy-sensitive Australian government bonds are down by -4.5 basis points, currently standing at 4.68% as we go to print. The probability of a hike next week based on futures are down 15pp to 68%. Elsewhere in the region, Japanese markets are closed today due to a public holiday.

While yesterday was relatively quiet in terms of Iran newsflow, another major headline for oil markets came with the UAE’s announcement that it would leave OPEC on May 1. They’ve been a member since 1967 and are the third-biggest oil producer in the group, producing around 3.5mn barrels per day before the conflict, accounting for about 12% of OPEC’s output. The UAE had in the past pushed to increase its production quota within OPEC given its investments in new oil production capacity in recent years. While the near-term impact of the move is likely to be negligible, with closure of the Strait of Hormuz the limiting factor, longer-term this could allow the UAE to increase its oil production and reduce OPEC’s influence over the global oil market. Oil futures reacted to these potential long-term ramifications, with the 12-month ahead Brent future edging -0.34% lower to $79.87/bbl yesterday despite front-month prices surging higher.

Looking ahead to today, the main highlight will be the Federal Reserve’s latest policy decision. They’re widely expected to keep rates on hold, so the focus will be on their forward guidance for what they’re thinking about future policy. Our US economists think the key question is whether they formally adopt two-sided language about the policy outlook in the statement, and whether Chair Powell indicates a more balanced risk assessment in the press conference. Their base case is that the Fed will wait until June for meaningful changes in guidance, but the risk is that communications skew hawkish. See their full preview here for more.

Ahead of that, US Treasury yields moved higher as inflation concerns persisted, with investors dialling back the likelihood of Fed rate cuts this year. In fact, the probability of a cut by December was down to just 24% by the close, having been at 35% on Monday, so it’s seen as an increasingly unlikely prospect. The fading pricing of Fed cuts was also supported by the Conference Board’s consumer confidence print yesterday which surprised on the upside in April, rising to its highest level of 2026 so far at 92.8 (vs. 89.0 expected). So US consumers showing impressive resilience to the energy shock, though we should note that most of the survey was conducted before the latest rise in wholesale gasoline prices since mid-April, which reached a new post-2022 high yesterday. This backdrop saw the 2yr Treasury yield (+3.8bps) rise to 3.84%, though the 10yr yield (+0.6bps) was more stable at 4.35%.  

A pessimistic macro mood was clearer in Europe yesterday. Matters weren’t helped by the ECB’s latest bank lending and inflation expectation surveys, which pointed to upside inflation risks combined with downside growth risks. Notably, 1yr and 3yr inflation expectations surged from 2.5% to +4.0% and +3.0% respectively,  their highest levels since 2023. Longer-term expectations were more stable at +2.4% (up from 2.3%). Meanwhile, the Bank Lending Survey showed a clear deterioration, pointing to the tightest credit conditions since early 2024. So it was a difficult backdrop, and inflation fears saw markets fully price in an ECB rate hike by the June meeting again. And in turn, both equities and bonds fell back for a second day, with the Stoxx 600 (-0.37%), DAX (-0.27%) and CAC 40 (-0.46%) moving lower, whilst yields on 10yr bunds (+3.3bps), OATs (+3.7bps) and BTPs (+5.8bps) all rose.  

Here in the UK, yesterday saw 10yr gilt yields close above 5% for the first time since 2008, moving up +3.2bps to 5.00%. In part, that was driven by those wider inflation concerns as oil prices crept higher, but the political speculation around PM Keir Starmer kept swirling as well. Indeed, MPs voted on whether Starmer should face a parliamentary enquiry about whether he misled the House of Commons over the vetting for Peter Mandelson’s appointment as US ambassador. That vote failed to pass yesterday evening given Labour’s large majority, but the story has showed no sign of leaving the headlines, and comes as Starmer faces another important test with the local elections next week. It’s a story the gilt market has been following closely, given expectations that Starmer’s successor might loosen the fiscal rules and preside over more gilt issuance.   

Looking at the day ahead, the main events include policy decisions from the Federal Reserve and Bank of Canada. Data releases include US March durable goods orders, housing starts, Germany April CPI, Italy’s April economic sentiment, Eurozone March M3 money supply, April economic confidence. And earnings will be in strong focus, with Alphabet, Microsoft, Amazon and Meta all reporting after the close.

Summary

Trump warns Iran to “get their act together” and to “get smart” – and for the second time writes “no more Mr. Nice Guy”.

Brent Crude nears Iran war high of $115 per barrel & highest since June 2022.

Trump in 4am Truth Social post: “Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon!”

Fresh White House statement indicates communication still open with Tehran, but still says “Iran can never possess a nuclear weapon.”

Will the U.S. invade Iran before 2027?
Yes 34% · No 67%
View full market & trade on Polymarket

*  *  *

Brent Crude, Iran War High

Brent crude oil has neared $115 per barrel, which is the high of the Iran war and the highest level since June 2022, driven by the ongoing Hormuz Strait blockade and standoff, and war fears – in a seventh straight session of gains.

This latest move higher follows Tuesday night’s WSJ report that the US plans to extend its blockade of Iranian ports, intensifying fears of prolonged disruption through the strategically critical Strait of Hormuz. 

As a reminder, the president has told aides and his staff that he’s prepared to implement an extended blockade:

President Trump has instructed aides to prepare for an extended blockade of Iran, U.S. officials said, targeting the regime’s coffers in a high-risk bid to compel a nuclear capitulation Tehran has long refused.

In recent meetings, including a Monday discussion in the Situation Room, Trump opted to continue squeezing Iran’s economy and oil exports by preventing shipping to and from its ports. He assessed that his other options—resume bombing or walk away from the conflict—carried more risk than maintaining the blockade, officials said.

4am Truth Social

This isn’t exactly a ‘new’ threat, as it’s something he said on April 19 as well, but President Trump in a 4am Truth Social post warned Iran to “get smart soon” as the White House reviews military options for the Strait of Hormuz.

“Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon!” Trump wrote early Wednesday, alongside an image showing him with a weapon and the message “NO MORE MR. NICE GUY!”

Members of Trump’s national security team presented multiple options during a Situation Room meeting this week, including whether to increase or reduce the US military presence in the strait and whether to adopt a more aggressive operational posture, NBC News reported, citing an unnamed US official and a person familiar with the discussions. According to the WSJ Tuesday evening, the president has told aides and his staff that he’s prepared to implement an extended blockade.

WH still Communicating With Tehran

And yet, the White House says negotiators are still in communication with the Iranians, who are “struggling to sort out their leadership situation” amid the war. Trump on Tuesday claimed Tehran officials told him the country is in a “State of Collapse” – though obviously it’s highly dubious they would communicate that to him.

White House spokesperson Anna Kelly told media that Trump would only enter into an agreement with Iran that “puts US national security first” and that “He has been clear that Iran can never possess a nuclear weapon.” However, the Iranians themselves have made it clear they would never just transfer their enriched uranium out of the country. Their latest proposal has centered on lifting the blockade on the Strait of Hormuz first, and then leaving the nuclear issues for future negotiation after the war is resolved.

More Latest Developments

via Newsquawk

Donald Trump told officials to prepare for an extended blockade of Iran, The Wall Street Journal reported citing sources; Trump has opted to keep squeezing Iran’s economy, judging other options as higher risk than maintaining the blockade.
Trump posted, “Iran can’t get their act together. They don’t know how to sign a nonnuclear deal. They better get smart soon! President DJT,” alongside an image of himself holding a rifle with explosions behind him and the caption “NO MORE MR. NICE GUY!”.
Trump said the US is “doing very well in the Middle East,” adding that King Charles III agrees Iran cannot have a nuclear bomb.
Iran’s Vice Chairman of the National Security Council Alaeddin Boroujerdi said negotiations are being handled directly by Mohammad Bagher Ghalibaf, who “personally manages” them.
Iran pushed back on US claims regarding pipeline explosions, Islamic Republic News Agency reported.
A senior Pakistani official said mediation efforts continue, working to narrow the gap between the US and Iran.
Scott Bessent said the Treasury has targeted Iran’s financial infrastructure, disrupting tens of billions in revenue; Kharg Island is nearing maximum storage capacity, forcing Iran to cut oil production.
The Israeli army carried out a large-scale bombing operation east of Gaza City.
The Islamic Revolutionary Guard Corps said new capabilities are ready to counter any new US attack, Press TV reported.
Israel Hayom reported that Israel may accept a limited ceasefire with Lebanon contingent on Hezbollah’s disbandment, according to Al Hadath.
An Israeli army commander said, “we are not talking about destroying terrorist infrastructure in southern Lebanon, but rather destroying everything,” according to Haaretz.
A political aide to the IRGC said, “we will respond to any new aggression with surprises and new capabilities, will burn America’s giant ships at sea if they miscalculate again,” Al Jazeera Mubasher reported.
Sanae Takaichi said Japan will engage with Iran to ensure safe passage of ships.
The US Treasury has frozen $344 million in crypto linked to Iran, Fox Business reported citing officials.