•  Meanwhile in markets, as prices begin to retreat from this morning’s extremes, it appears unlikely that we are on the verge of a TACO (Trump Always Chickens Out) moment that would abruptly bring the US-Iran war to an end;

•  Sovereign yields are edging higher today but have yet to fully reverse Friday’s declines, when chatter in DC restaurants reportedly made it clear that a strike was coming. US Treasury yields up 3-4bps in a bear-flattening move. The 10-year UST yield, at 3.97%, remains just below the psychological 4.00% threshold it briefly broke beneath on Friday;

•  Bund yields are also higher by 1–4bps, with the long end slightly less affected than USTs. Across the Eurozone periphery, spreads to Bunds have widened from their recent tight levels, though by less than 5bps;

• Moving to equities, the Stoxx 50 is down around two percent on the day after being down as much as 2.6% earlier in the session. The sell-off is broad-based across nearly all subsectors, with the notable exceptions of oil & gas and defense. Energy in particular stands out, with oil and gas stocks up more than two percent on the day. Across the Atlantic, S&P 500 futures are down about one percent at pixel time, though we’re trading roughly half a percent above the intraday lows;

• Shifting to commodities, Brent crude is trading around $78 a barrel after spiking above $80 earlier. Gold has also benefited from the safe-haven bid, currently at $5,388 a troy ounce, after touching a session high of $5,419;

•  The Swiss franc continues its run as a safe-haven darling, gaining roughly 0.75% against the euro over the past week and just under half a percent against the dollar. However, it too has eased from its highs. The franc has undone all of Friday’s gains against the dollar as EURCHF is up half a cent from its lows;

• Notably, the additional currency strength has not translated into materially higher rate cut expectations for the Swiss National Bank. SARON swaps are pricing roughly 7bps of easing by year-end, down marginally compared to a week ago. That comes after the SNB said it is more willing to intervene in the FX market with the global developments;

• Let’s shift to the Gulf Cooperation Council, whose members have all faced Iranian attacks since the outbreak of war. Sovereign bond yields for the UAE, Saudi Arabia, and Qatar climbed nearly 10bps today, with moves slightly more pronounced at the short end of the curve.  Bahrain has emerged as the primary casualty, with yields spiking 20bps. Bahrain was already reeling from its recent rating downgrade over its fiscal deficit problems;

• Oman remains the most resilient, with yields rising just 5bps. While it is less reliant on the vulnerable Strait of Hormuz than its GCC neighbors, the mediator of US-Iran talks has also suffered collateral damage. However, it appears that Iran’s strike on Oman was a mistake, with the nation not an indiscriminate target like the other GCC members;

• The seemingly indiscriminate strikes on GCC members are beginning to draw in Europeans allies to the conflict. France is repositioning its aircraft carrier from the Baltic to the Mediterranean – ready to shield its Gulf allies. The UK has also pivoted and will allow the US to strike Iran from its bases. London is already actively intercepting drones over the Gulf;

• Looking ahead, a couple of ECB-speakers and the release of US ISM Manufacturing PMI will allow us to focus on something else than the Middle East. Tomorrow, we have the release of the Eurozone February CPI to look forward to, alongside a couple of Fed- and ECB-speakers.

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