Morning Economic Report 6-13-25

For most, wars are incomprehensible in the 21st century, yet as the global order is being rewritten it is becoming an acceptable method to establish one’s authority. Despite, or maybe because of, its growing international isolation, Israel has struck Iran’s nuclear capabilities and its military facilities killing two of its top commanders. No doubt, the genie was let out of the bottle after the horrifying Hamas attack on Israeli civilians in October 2023 and the latest atrocity comes at a time when Iran is at its most vulnerable as its proxies, Hamas, Hezbollah, and the Houthis are close to obliteration or under constant pressure.

It is possibly the most severe escalation of the Middle East conflict since the 1973-1974 oil embargo but this time the US claims to have no involvement in the strikes. Beyond the inevitable human tragedy, from the economic perspective, it is the last thing the world and the US need. Inflation has been contained, and the job market has proven resilient. Now with oil prices rallying overnight 13% at one point and Brent volume already over 1 million contracts at 6 am London time, the silly question is what’s next? Answering it is impossible, only a list of possible events can be drawn up. Iran pledged to retaliate but is it capable of effectively doing so and if it is, will it also target US bases? Will regional oil supply and transport routes, namely the Strait of Hormuz, which 20 million bbls of oil sails through a day, be affected? Will the US and Western powers intervene to de-escalate? Will regional Arab powers get involved? There are many questions without satisfactory answers, therefore it would take a bold man to bet on the reversal of the overnight price jump ahead of the weekend.

Risk is off across much of the investment suite as the Israeli attack into Iran brings flight into the US Dollar Index (DXY), ChF and Gold. 'Uncertainty' is the word in wires as it is paired with resurgence of tariff anxiety and general economic worries and how higher energy prices will accelerate inflation. Docket is light but would probably be ignored. DAX -1.27%, CAC -1.02%, FTSE -0.30%, Euro STOXX600 -0.84%. The USD and ChF are the best performers in FX benefitting from asset flight, DXY 98.33. Gold 3428. BTC $104,913.