As the fifth day of direct conflict between Israel and Iran unfolds, U.S. equity futures are blinking red - and the market's nerves are showing. The Dow, S&P 500, and Nasdaq all dipped between 0.5% and 0.6% Tuesday morning, signaling investor anxiety ahead of the Federal Reserve's closely watched monetary policy decision.

At the heart of the unease: oil. With Iran and Israel locked in a perilous aerial confrontation, fears are mounting that Middle Eastern oil flows could be disrupted. Brent crude and WTI are both up over 2%, a sharp climb that’s boosting U.S. energy stocks like Chevron, Exxon, and Devon Energy. However, Supply is currently abundant and Iran does not appear to have any intention of restricting access to the Persian Gulf by closing the Strait of Hormuz.

Wall Street currently expects the Fed to stand pat this week, with futures markets pricing in just under two rate cuts by year-end. But surging oil complicates that picture. If energy-driven inflation persists, the Fed may be forced to hold rates higher for longer - exactly the outcome equity bulls dread.

Elsewhere, solar stocks are reeling from proposed Senate changes to Trump-era tax cuts that phase out renewable energy incentives. Shares of Enphase, Sunrun, and SolarEdge plunged by double digits, while nuclear power names like Oklo rose on extended tax credits.

After tumbling on Friday in response to renewed hostilities between Israel and Iran, financial markets regained their footing on Monday. Some commentators believe the main argument in favor of de-escalation is the asymmetry of military power between Israel and Iran. The Jewish state's projection capacity is far superior and its air superiority is insurmountable for Tehran, which can only respond in a piecemeal fashion. In short, the damage dealt by Israel to Iran far outweighs what Iran can deliver in return - at least within the scope of the conflict that erupted last week. This state of affairs and Tel Aviv's clear desire to bring down the mullahs' regime are pushing Tehran to seek a negotiated way out. What might Donald Trump offer, having left the G7 summit in Canada prematurely to return to Washington and manage the crisis in the Middle East?

In other news, Donald Trump remains front of headlines. First, on the familiar terrain of customs duties: he has signed a US-UK trade pact with Keith Starmer, though the thorny steel issue remains unresolved. Also, the Trump Organisation plans to launch its own smartphone, the T1, in September. Yes, a Trump-branded phone, complete with a Trump mobile plan. Priced at $499, the Android device will be gold-plated. And while the Trump Organisation claims it would be "proudly built" in America, specialists point out that producing it domestically at that price is a fiction.

A superb illustration of the proverb ‘Do as I say, not as I do’. Tim Cook, CEO of Apple, must be moderately appreciative of the irony of the situation.

In other news, the Bank of Japan decided to leave interest rates unchanged last night. At the same time, the central bank will halve the pace of its balance sheet reduction. The BoJ's position comes as no surprise.

In Asia-Pacific this morning, markets were mixed. Japan, Taiwan and South Korea rose, while China, Hong Kong, India and Australia are clearly in the red. Leading indicators in the West are showing renewed nervousness and led to a bearish session in Europe.

Today's economic highlights:

The ZEW economic confidence index in Germany,  US retail sales and import/export figures, US industrial production, business inventories and the NAHB housing market index in the United States.

  • Dollar index: 97,750
  • Gold: $3,385
  • Crude Oil (BRENT): $74.48 (WTI) $71.48
  • United States 10 years: 4.44%
  • BITCOIN: $105,510

In corporate news:

  • OpenAI secures $200 million in Pentagon contracts for AI development amid potential strain with Microsoft over stake and cloud hosting rights.
  • Eli Lilly acquires Verve Therapeutics for up to $1.3 billion to enhance its cardiovascular treatment portfolio.
  • Boeing focuses on core operations and strategic partnerships, positioning for defense contracts amid US-India aviation safety discussions.
  • KKR to acquire Australian power producer Zenith Energy, with deal closure expected in late 2025.
  • Southwest Gas Holdings and Centuri Holdings Inc. launch secondary public offering of 9.75 million Centuri shares.
  • Kraft Heinz Co. plans to eliminate artificial FD&C colors from its U.S. product line by 2027.
  • Millennium Management negotiates sale of a minority stake, valuing the hedge fund at $14 billion.
  • MakeMyTrip plans to issue $1.25 billion in convertible senior notes and files for a share offering.

Analyst Recommendations:

  • Cisco Systems, Inc.: Deutsche Bank upgrades to buy from hold with a target price raised from USD 65 to USD 73.
  • Noble Corporation Plc: SEB Bank upgrades to hold from buy with a price target raised from USD 22 to USD 28.50.
  • Roku, Inc.: Loop Capital Markets upgrades to buy from hold with a price target raised from USD 80 to USD 100.
  • Transocean Ltd.: SEB Bank downgrades to sell from hold with a price target reduced from USD 2.10 to USD 1.90.
  • Carpenter Technology Corporation: JP Morgan maintains its overweight recommendation and raises the target price from USD 245 to USD 305.
  • Coreweave, Inc.: Jefferies maintains its buy recommendation and raises the target price from USD 80 to USD 180.
  • On Semiconductor Corporation: Roth Capital Partners maintains its buy recommendation and raises the target price from USD 50 to USD 70.
  • Robinhood Markets, Inc.: Mizuho Securities maintains its outperform recommendation and raises the target price from USD 65 to USD 80.
  • Sarepta Therapeutics, Inc.: Baird maintains its outperform recommendation and reduces the target price from 60 to USD 30.