Tuesday, 26 May 2026

Top of the morning

• US strikes targets in southern Iran even as Trump talks up peace progress

  Washington carried out what it framed as a self-defence operation against missile sites in southern Iran, hours after the White House again said an Iran agreement could be close. The renewed kinetic action underlines how thin the ceasefire really is, and Republican hardliners began publicly warning that Trump is giving up too much in the negotiations. Two LNG tankers were nonetheless tracked transiting Hormuz overnight, so the corridor is reopening even while the air war flickers back to life.
• Crude rebounds about 5% as the Hormuz relief unwinds

  WTI is bid back to roughly $91.70 a barrel after dropping nearly 6% on Friday, snapping the war-premium deflation that had been the dominant cross-asset trade. The renewed strikes near the strait, combined with the unresolved status of Iran's enriched-uranium stockpile and the design of sanctions relief, are enough to put a floor back under oil for now. Energy stocks were among the top performers in Europe last night.
• Israel orders an intensified campaign against Hizbollah in Lebanon

  Prime Minister Netanyahu instructed the military to step up attacks on Hizbollah even as the US-Iran negotiation track continues. The order reopens a second front in parallel with the Gulf de-escalation effort and complicates the regional risk picture — a reminder that an Iran deal, if it lands, would address the chokepoint but not the broader proxy war.
• Russia tells the US to evacuate its diplomats and citizens from Kyiv

  Moscow's unusually explicit warning to Washington over US personnel in Kyiv landed alongside reports that Russia fired its hypersonic Oreshnik missile at Ukraine in the latest barrage, and that Putin signed a law authorising use of the army to assist Russians detained abroad. Taken together, the moves point to a more confrontational Russian posture into the summer, with the diplomatic temperature dropping just as the Middle East thaws.
• Italian stocks hit their first record in 26 years; Meloni claims a Venice win

  The FTSE MIB closed at its highest level since 2000, led by energy and chip names. Politically, Meloni's coalition is claiming victory in the Venice mayoral vote after a referendum setback — a small but symbolically useful win as the government heads into a busy European policy summer. Separately, Italy's CDP is preparing to raise its stake in payments group Nexi, with CVC also weighing a bid.
• Treasuries catch up to Friday's risk-on, 10-year back at 4.50%

  With US bonds reopening after Memorial Day, Treasuries are repricing toward the Iran optimism that was building when the desks shut on Friday. The 10-year sits at 4.50%, down from the recent highs and helped by a parallel rally in UK gilts that delivered their biggest weekly yield drop since 2023. The longer-term curve, however, is still flashing higher-for-longer under a prospective Warsh-led Fed.
• Ebola outbreak in DR Congo is ‘outpacing’ the response, WHO warns

  The World Health Organization said the Congo outbreak is now moving faster than the public-health effort can absorb, with the response hobbled by armed violence in the affected region. The familiar Ebola playbook — ring vaccination, contact tracing, treatment centres — is failing where security has collapsed. A story worth tracking on the global-health side, with implications for travel, regional stability and African vaccine supply chains.
• Quad foreign ministers meet in India to revive the grouping

  Foreign ministers of the US, Japan, Australia and India convene in New Delhi today, aiming to put fresh substance back into the Quad after a period of strain in the Trump-era relationships. Expect language on Indo-Pacific supply chains, maritime security and critical minerals; concrete deliverables would be a positive signal that the format still functions despite the underlying tensions.
• China crackdown wipes $1.7bn off a single trader in a day

  Beijing's new cross-border equity trading curbs are biting: one mainland trading tycoon reportedly lost $1.7 billion in a day on the move, and Macquarie sees the yuan potentially weakening toward 5 per dollar on carry-trade unwinds. Hong Kong-listed Chinese stocks nonetheless rose overnight, shrugging off the policy shock. Separately, Taiwan has overtaken India as the world's fifth-largest stock market, lifted by AI-related semiconductor exposure.
• ECB summons banks over AI-model risk; US consumers face squeeze

  The ECB called a hastily-arranged meeting with euro-area banks to press them on flaws exposed by the latest generation of AI models — a notable supervisory signal that financial-stability worries about generative AI are now operational, not theoretical. Across the Atlantic, US consumers are heading into a spending squeeze as Trump-era tax rebates fade, a soft-data point for the demand side of the inflation debate ahead of Thursday's core PCE.

Markets snapshot

Levels read this morning from the Bloomberg Europe live ticker. US and UK markets reopen today after Monday's holiday; futures and Asia have been doing the price discovery overnight.

Global markets & macro

Yesterday's neat “peace dividend” trade has gone two-way overnight. Crude has rebounded around 5% to roughly $91.70 on the US strikes near the strait, even as two LNG tankers actually moved through Hormuz — the market is telling you it now believes the shipping recovery is real but not yet safe. Equities are pulling back from the early gains but still sit near record highs, with Italy a standout: the MIB cleared its first new high since 2000, led by energy and chips. Gold's $4,576 print and the firmer euro complete the picture of a market that wants to lean risk-on but is keeping a geopolitical hedge on the side.

Fixed income is the cleanest read. With US desks reopening, the 10-year Treasury yield is back to 4.50%, catching up to the move that European bonds and UK gilts already had on Friday — gilts in fact logged their biggest weekly drop since 2023, helped by Andy Burnham's pledge to stick to UK fiscal rules. The longer-end story has not changed: strategists still see the Treasury curve flashing higher-for-longer under an incoming Warsh-led Fed, even as the White House argues that any peace dividend should free the central bank to cut. Thursday's US core PCE inflation print — last at 3.2% — will be the first data check on which side of that debate is right. In corporate news, Uber is reportedly weighing a higher bid for Delivery Hero after an €11.5bn offer was rebuffed, JPMorgan is looking to offload roughly $4bn of private-equity-linked loan exposure, and the ECB is leaning publicly on euro-area banks over AI-model risk.

Geopolitics & world news

The Iran picture has darkened modestly without breaking. The US strikes against missile sites in southern Iran are framed in Washington as self-defence and explicitly compatible with Trump's claim that a deal is close, but they have already drawn warnings from Republican hardliners that the negotiated track concedes too much. The two LNG tankers transiting Hormuz overnight show that the practical reopening of the strait continues; the unresolved enriched-uranium stockpile and the sequencing of sanctions relief are still the two cruxes. Layered on top, Netanyahu has ordered an intensified Israeli campaign against Hizbollah in Lebanon — the proxy war runs on a separate clock from the direct US-Iran channel, and any Iran deal would address Hormuz without resolving it.

Three other threads matter this morning. Russia's blunt instruction to the US to evacuate diplomats and citizens from Kyiv, together with Putin signing a law authorising use of the army to aid Russians detained abroad and a fresh Oreshnik missile barrage, signals a more confrontational posture into summer. In sub-Saharan Africa, the WHO now describes the DR Congo Ebola outbreak as outpacing the response, with conflict choking off the standard playbook. And in Asia-Pacific diplomacy, the Quad foreign ministers' meeting in New Delhi is the day's set-piece, an attempt to put substance back into a grouping that has visibly cooled under the second Trump administration; Mexico has, separately, agreed to host Iran's World Cup squad despite tensions, a small but pointed example of how the sporting calendar bends around the politics.

Week ahead (CET)

• Tue 26US & UK markets reopen after Memorial Day / Spring Bank Holiday · US new home sales · Conference Board consumer confidence · Richmond Fed manufacturing · 2y Treasury auction · Quad foreign ministers meet in New Delhi
• Wed 27Bank of Korea rate decision · US 5y Treasury auction · Fed speakers · UK gilt syndication watch
• Thu 28US core PCE (Fed's preferred inflation gauge; 3.2% y/y last month) · durable goods orders · Q1 GDP second estimate · initial jobless claims · personal income & spending
• Fri 29Euro-area flash CPI · Tokyo CPI · Canada Q1 GDP · month-end portfolio rebalancing
• WatchAny concrete US-Iran agreement (or further strikes) · pace of Hormuz tanker traffic and whether oil holds the $91 rebound · ECB speakers as the June meeting approaches · PE secondary pricing after the JPMorgan offload story