The dominant macro driver is the US-Iran confrontation over the Strait of Hormuz, which has sent Brent crude surging 9.59% to $83.30 and WTI up 9.42% to $78.14 — moves that directly re-price inflation expectations across every major economy. US Central Command confirmed dozens of strikes on Iranian targets following the attack on the Cyprus-flagged container ship MV GFS Galaxy, with maritime intelligence platform Windward reporting just six vessels transiting the Strait in a 12-hour window versus the normal 18–22 daily crossings; the waterway handles roughly 27% of global seaborne crude and petroleum products. The VIX spiked 14.17% to 17.16, US 2-year yields rose 5bp to 4.21%, and Fed funds futures now price a nearly 50% probability of a July 29 hike — up from under 40% intraday — after Fed Governor Christopher Waller signalled openness to tightening if underlying inflation remains elevated, with PCE at 4.1% and core at 3.4%.

For European investors, the oil shock feeds directly into an ECB that only last month raised rates for the first time since 2023, with its own staff projections already pencilling headline inflation at 3.0% for 2026 and growth at just 0.8%. Markets now price a 70% probability of a September ECB hike. The EUR/USD slipped 0.25% to 1.1404 and GBP/USD fell 0.22% to 1.3387, reflecting broad dollar strength as the DXY rose 0.31% to 101.28 — driven partly by pension funds globally scaling back currency hedges on US assets amid higher real rates. European sector exposure is most acute in Oil & Gas (EXH2.DE +0.18% on the day but crude repricing has not yet fully fed through), Industrials (EXV8.DE -0.68%, most exposed to input cost and demand disruption), Insurance (EXV9.DE -1.23%, facing energy-driven liability and claims inflation), and Chemicals (EXV3.DE -0.47%), while Basic Resources led gainers with EXV2.DE up 1.64%, consistent with ArcelorMittal's 6.42% surge.