Market Day: Monitoring the weekend conflict once more

June 20, 2025

Orlando, FL

Trading date

There’s a kind of cautious optimism about the emissions surrounding the ongoing conflict between Israel and Iran, which gave a relatively positive spin to global markets on Friday. Most stock markets saw gains, and this helped stave off what could have been the largest drop in oil prices in over a month.

There’s quite a bit of uncertainty, though. President Donald Trump is expected to take up to two weeks to decide on America’s role in this situation. Even if he decides to engage in discussions, the outcome isn’t clear yet. Negotiations involving Iran’s foreign minister and European officials are still in the early phases.

Interestingly, despite the earlier optimism, Wall Street wasn’t catching the same vibe on Friday.

Iran has made it clear that they won’t negotiate a new nuclear deal with Washington until Israel halts its attacks. As airstrikes continue, the situation remains unstable and complicated. Just a week prior to this conflict, stocks were near their all-time highs, making the current atmosphere feel a bit more tense.

This weekend’s events and developments in diplomacy are likely to influence the market’s tone come Monday. Investors will also be digesting what has been quite a monumental week for the central banks.

To summarize, the Federal Reserve has taken a hawkish stance regarding expected interest rate adjustments, even as Chair Jerome Powell seems somewhat blindsided by policymakers. On the other hand, the Bank of Japan has shifted to a more dovish approach regarding its plans to cut its balance sheet.

The Swiss National Bank has lowered interest rates to zero, reluctantly acknowledging that negative rates could be a possibility. Meanwhile, Norway’s central bank has unexpectedly cut rates, contrasting with Brazil’s central bank which raised rates, marking the highest rate since 2006.

Looking ahead, a slew of Fed officials are set to make public appearances next week, and investors will be sifting through the headlines to understand the prevailing sentiment regarding the diminished “dot plot.” Powell’s remarks during his six-month testimony to Congress will be closely monitored.

On Friday, Fed Governor Christopher Waller suggested that rate cuts should remain an option next month, given that inflation isn’t under control and there’s little chance of boosting it through import tariffs.

There’s been a noticeable slowdown in trade recently, indicating that securing the numerous trade deals promised by the Trump administration is proving more challenging than anticipated. Trump himself has pointed out that negotiations with China and Japan are facing serious obstacles.

China holds significant leverage, especially in terms of rare earths and pharmaceuticals. The U.S. has become a less critical export market compared to previous years, and Beijing seems to have a broader range of options for counteraction than it did in 2018.

It’s also noted that China’s capacity for enduring economic hardship might be greater compared to that of the democratic U.S.

The next several weeks will be vital for the market, especially as investors keep a close watch on the six-month markers.

Key market movements this week:

European stocks are faring poorly, with the Euro Stoxx 50 falling by nearly 2%. The UK’s FTSE 100 also dropped nearly 1% over the past two months.
The Japanese yen weakened by over 1% against the dollar, influenced by the BoJ’s plans for balance sheet reductions.
The Norwegian krone experienced a decline of 2.5% against the dollar, following Norges Bank’s surprise rate reduction that reversed oil-related gains.
Oil markets have seen a dramatic week, with Brent crude trading between $60 and $70 per barrel. Although oil prices fell by 3.5% this week, they rose 20% this month, making it the largest monthly gain since November 2020.
Platinum prices rose by 3% and have seen a 20% increase this month, marking the third consecutive month of gains.

This week’s charts highlight some interesting points, with Goldman Sachs noting a cooling in wage pressures across G10 countries. This sheds light on interest rate pathways diverging between developed and emerging markets, with rates falling in EM regions.

How long might this divergence last?

Some notable readings this week include: