AFS Markets Blog: Morning 07/09/2026

• Meanwhile in markets, US markets may be closed for the day but that doesn’t mean it’s quiet on our feeds. Tit-for-tat strikes in the Gulf have heated up again, and oil and gas prices are on the rise as a result;

• Over the weekend, the US and Iran traded strikes on oil tankers – with both nations claiming to have hit three vessels apiece. As a result, Brent crude has risen to $97 a barrel to its highest level since late July. In our neck of the woods, the focus is more on natural gas prices which reached €75/MWh – their highest level since 2023. That translates to a roughly 175 percent increase since the start of the year and will undoubtedly weigh on the ECB ahead of Thursday's rate decision – where a 25bps hike is a done deal;

• The surge in tit-for-tat strikes in the Middle East marks the most intense fighting in over a month, triggered by a new US ‘eye-for-an-eye’ doctrine aimed at deterring Iranian attacks on tankers. Nevertheless, Iran shows no sign of backing down for now. Parliament Speaker Mohammad Bagher Ghalibaf – a lead negotiator in previous ceasefire talks – declared that proportionate responses are a thing of the past, warning that the game has changed and threatening heavier retaliatory strikes;

• Shifting to broader market commentary, Bund futures are lower this morning, feeling the inflationary pressure from rising energy prices. Asian equities are showing a mixed picture, with Chinese on- and offshore markets down this morning. The Nikkei and Kospi are up over 2 percent and 4 percent, respectively. In our neck of the woods, Stoxx 50 futures are sitting on marginal losses this morning. Over in FX, USDJPY continues to trade near last week’s lows in the 155 handle;

• Moving on to weekend news, the US diplomatic duo of special envoy Steve Witkoff and President Trump’s son-in-law Jared Kushner visited both Kyiv and Moscow in an effort to breathe new life into ceasefire negotiations. While both Russia and Ukraine described their discussions with the US as substantive, Presidents Putin and Zelenskiy both signaled that ending the war will be neither simple nor fast. We’ll be keeping an eye on our market peace proxy – Raiffeisen Bank International, with its large Russia exposure – to gauge whether punters are optimistic about the renewed talks – and President Trump’s Nobel Peace Prize hopes;

• In other news, the German far-right party AfD won an astounding victory in the state elections in Saxony-Anhalt – securing its biggest electoral win ever. It fell just short of an outright majority – by three seats according to the exit polls – meaning it will have to look for a coalition partner to govern with;

• Looking ahead, today is set to be uneventful – at least if we base it on our calendar. While the US will be back at the office, tomorrow won’t be much more exciting – so we’ll have to wait until the latter half of the week for real action. Thursday brings the ECB’s rate decision and the US PPI release, followed by the closely watched US CPI release on Friday. A hot print will be enough to lock in a 25bps rate hike by the FOMC in September – which is still priced at roughly coin-flip odds. However, if the data show that core inflation is continuing to slow – as the Cleveland Fed’s inflation nowcast suggests it will – it will give the doves real ammunition to argue for a rate hold.

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