The US-Iran conflict and the effective closure of the Strait of Hormuz since 28 February 2026 remain the dominant macro force, with Brent crude holding at $94.25/bbl — well off the $126/bbl peak but still reflecting a structurally elevated risk premium as ceasefire talks remain fragile and Tehran has warned it will resume hostilities if Israel continues operations in Lebanon. US CPI has accelerated from 2.4% at year-start to 3.8% in April, with Tuesday's May print expected at 4.2% YoY; CME FedWatch places the probability of at least one Fed rate hike in 2026 at 72%, while the 10-year Treasury yield rose to 4.53% last week — a combination that drove Friday's S&P 500 decline of more than 2.6% and ended a nine-week winning streak. The VIX falling 12% to 18.92 on Monday reflects partial stabilisation rather than any fundamental resolution of these pressures.

European markets are caught in a multi-directional squeeze: the EUR/USD dropped 0.77% to 1.1523 and GBP/USD fell 0.68% to 1.3336, reflecting dollar demand as rate-hike expectations build and safe-haven flows persist, while EUR/GBP slipped only 0.10% to 0.864, suggesting broadly symmetrical pressure on both European currencies. The DAX fell 0.58% and the IBEX 35 dropped 0.66%, with the SMI down 0.50%, while the MIB outperformed at +0.63%. Sector data shows Industrials (-1.32%) and Construction (-1.28%) as the hardest-hit European sectors, consistent with stagflationary dynamics — rising input costs, weak growth of 0.9% forecast for the eurozone in 2026, and the prospect of ECB rate hikes compressing margins. Europe's exposure to Qatari LNG through the Strait of Hormuz — estimated at 12–14% of total LNG supply — means energy supply risk is not merely a cost story but a potential physical availability issue, concentrating cross-asset pressure in utilities, chemicals, and energy-intensive industrials.