US strikes on Iranian missile sites and mine-laying boats overnight risk derailing ceasefire talks. Brent at $98, Fed's Waller opens door to hike. Next: PCE, eurozone inflation.
Alpha Score of 45 reflects weak overall profile with moderate momentum, poor value, weak quality, weak sentiment.
The US conducted strikes on Iranian missile launch sites and mine-laying boats in southern Iran overnight, with Centcom citing self-defence. The attacks put the fragile ceasefire from April under pressure, following a weekend in which President Trump signalled the two sides were close to a deal. Brent crude rose to 98.1 USD/bbl, though this remains well below Friday's close of 103.5.
The market's initial read is that the strikes are defensive and limited in scope. Oil traded around the same level most of Monday after the initial drop, suggesting traders are not pricing a full-blown escalation. The risk of disruption to the Strait of Hormuz remains real, and the ceasefire framework is now in doubt. This is the macro signal that will transmit through rates, the dollar, and risk appetite in the sessions ahead.
Secretary of State Rubio tempered expectations early Tuesday, saying a deal could “take a few days” and warning that the Strait of Hormuz would be opened “one way or the other” after the overnight strikes. The weekend had seen optimism. Trump posted that talks were “proceeding nicely”, and a three-stage framework was reported by Reuters:
Iran’s foreign minister Araghchi travelled to Doha for talks with Qatar’s prime minister on Monday. The overnight strikes now test whether those diplomatic channels remain open. For traders, the key question is whether oil prices can hold below the 100 USD/bbl psychological level. A further supply shock would force a repricing of inflation expectations.
Practical rule: Oil at $98 is a level where the market is pricing a limited risk premium. A break above $100 on a new catalyst would signal that traders expect sustained disruption, which would then feed into central bank rate paths via higher inflation forecasts.
The Oil Elliott Wave Structure Suggests Further Losses Below $76.73 article from AlphaScala noted a bearish technical setup before the recent spike. That structure is now challenged by the geopolitical premium. A diplomatic resolution could send oil sharply lower, the underlying demand picture remains weak enough for that outcome.
A separate macro signal came from the Fed. Governor Waller made a significant shift in his first public remarks since April, arguing the Fed should drop its “easing bias” and open the door to a possible rate hike. Waller’s views have often reflected the consensus within the Fed better than known hawks like Hammack and Logan, who have also advocated for removing the easing bias. Markets are now pricing a full hike by December, in line with AlphaScala’s Fed call.
US yields ticked higher on Waller’s remarks on Monday. Overnight yields are trading lower, catching up with the European moves from yesterday. The dollar is mixed. EUR/USD has stabilised around 1.1640, despite the sense of optimism in the energy market. The pair is caught between a hawkish Fed repricing and a euro area that is seeing wage pressures ease.
Kevin Warsh was sworn in as new Fed chair on Friday, officially replacing Powell. Warsh’s first policy decision will be in June. Waller’s comments may signal the direction the new board is leaning. For forex traders, the dollar’s next move depends on whether the rate hike narrative gains traction alongside the oil story. Use the EUR/USD profile for key levels on the pair.
The ECB’s negotiated wage indicator for Q1 2026 came in at 2.5% y/y, down from 2.9% in Q4 2025. The indicator clearly shows that wage pressures are easing in the euro area economy. The ECB’s separate wage tracker points to a continued easing in wage growth based on actual contracts for 2026. This should keep a disinflationary pressure on services inflation, partly countering higher transport services costs from the energy shock.
AlphaScala believes this supports a more muted reaction by the ECB than is currently priced by markets. If the ECB stays dovish while the Fed turns hawkish, the rate differential widens in favour of the dollar, putting downside pressure on EUR/USD. The euro has held 1.1640 so far, suggesting the market is waiting for the next data points.
German Ifo for May improved slightly more than expected, following the large decline in April. It offers a modestly more positive picture than Thursday’s PMI suggested. The indicator remains well below pre-war levels. Business expectations have taken a large hit following the Iran war. The assessment of the current business situation is only marginally down, likely as companies work through order backlogs which keeps activity up temporarily.
The SEK was supported yesterday by the positive risk sentiment, with EUR/SEK moving toward the 10.80 level. Over the past months, the SEK gains in risk-on have been more contained than the losses in risk-off. This asymmetry is a key observation for traders. The krona is more sensitive to bad news than to good news. A renewed escalation in the Iran conflict could send EUR/SEK sharply higher.
Sweden’s own data calendar is light this week. April PPI and the NIER survey on Thursday will be key inputs for the Riksbank’s assessment of whether firms have started to feel the impact of rising global price pressures. The Riksdag Committee on Finance also holds its annual open hearing with the full Riksbank executive board to evaluate the previous year’s monetary policy.
The calendar picks up towards the end of the week. On Thursday, the key releases are:
On Friday, May flash inflation figures from Spain, Italy, Germany and France will set the tone for the euro area. If eurozone inflation prints soft while US PCE remains sticky, the rate differential story strengthens. If oil stays elevated and pushes headline inflation higher, the ECB may face pressure to adjust its stance despite the wage data.
For forex traders, the current setup is a tug-of-war between geopolitical risk (supporting the dollar as a safe haven) and the Fed’s hawkish repricing (also supporting the dollar). The euro is holding 1.1640 for now. A break below that level on a hawkish Fed or a renewed oil spike would open the door to a test of the 1.1500 area. A diplomatic breakthrough that sends oil below $90 could relieve inflation fears and allow the euro to recover.
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Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.