Gold bars to be exempt from tariffs, White House clarifies
Investing.com - A sudden U.S. attack on Iranian nuclear sites over the weekend heightens tensions in the Middle East, but some analysts suggest that the move actually erases financial market uncertainty around President Donald Trump’s decision to join Israel’s multi-day campaign against Iran. Elsewhere, Federal Reserve Chair Jerome Powell is scheduled to testify before Congress and Republican lawmakers reportedly aim to push a Trump-backed fiscal bill through the Senate this week.
1. Iran’s response to U.S. strikes in focus
Tehran has yet to give any clear indication of how it plans to respond to the U.S. attack, saying only that it reserved all options to defend itself.
The Islamic republic has also warned of "everlasting consequences" and stepped up its aerial bombardments of Israel, which kicked off the violence 11 days ago with its own surprise strikes on Iranian nuclear infrastructure.
Iran has called Trump a "gambler" and seemed to hint that the strikes on Saturday expanded the range of legitimate targets for its military. Trump, meanwhile, raised the question of regime change in Iran in a social media post on Sunday.
Media reports in Iran have suggested that the country is mulling blocking the Strait of Hormuz, a key artery for global oil and gas supplies being sent around the world from Middle East. Other reports have said that Iran may target one of several U.S. military bases located throughout the region.
Some analysts have argued that, for financial markets, although tensions in the Middle East have now intensified, the strikes have removed at least one shroud of uncertainty around whether Trump would move to strike Iran. U.S. stock futures inched higher on Monday.
"America’s entry into the Israel/Iran war will have far-reaching macro consequences," analysts at Barclays (LON:BARC) said in a note to clients.
2. Financial market fallout from U.S. strikes on Iran
Markets are now keen to see how the sudden decision, which came after Trump previously suggested that he would take as long as two weeks to deliberate on a possible strike on Iran, could impact sentiment, inflation and interest rates.
Much of the worry over price growth stems from oil, with traders warning in recent days that an escalation in the Israel-Iran fighting could lead to a disruption of key crude supplies, particularly along the Strait of Hormuz along Iran’s southern coast.
Some analysts have flagged worries that these supply constraints could cause a spike in oil prices, refuel inflation, and potentially persuade the Federal Reserve to further delay interest rate cuts.
Brent crude futures for August jumped by 0.8% to $76.11 per barrel by 03:38 ET on Monday and West Texas Intermediate crude future rose by 0.9% to $74.48 a barrel. Both of the contracts have pared back some earlier gains.
3. Powell to deliver testimony to Congress
Fed Chair Jerome Powell is due to deliver his semi-annual testimony to Congress, taking questions from lawmakers in the House of Representatives on Tuesday and the Senate on Wednesday.
Powell will likely be pressed to expound on the central bank’s decision to leave interest rates unchanged after its latest policy gathering last week. Policymakers indicated that they continue to back a wait-and-see approach to further rate changes, flagging lingering uncertainty around the broader impact of sweeping U.S. tariffs.
Speaking during a press conference last Wednesday, Powell strongly suggested that if the levies were not an issue, the Fed would probably be cutting rates right now, analysts at Vital Knowledge said in a note to clients.
On the economic calendar, investors will be keeping tabs on business activity figures for June. S&P Global’s manufacturing purchasing managers’ index is seen dipping to 51.1 from 52.0, while the services gauge is tipped to fall to 52.9 from 53.7.
Other data points set to be released this week include a reading of consumer confidence on Tuesday and an inflation-measure closely followed by the Federal Reserve on Friday.
4. Senate aims to pass tax-and-spending bill version
The U.S. Senate is reportedly aiming to hold a vote on their version of a massive tax-and-spending package this week.
Republican lawmakers are pushing to approve their update to the so-called "One Big Beautiful Bill Act," send it back to the House, and then have it placed on Trump’s desk for signing by a self-imposed deadline of July 4.
Backed by Trump, the measure includes the extension of 2017 tax cuts instituted during his previous term in office and lift expenditures on defense and spending. Some of these costs would then be offset by slashes to expenditures on entitlements like Medicaid, a federal health insurance program for low-income Americans that covers more than 71 million people.
But the Senate parliamentarian, the rules arbiter for the upper chamber, has issued recent guidelines stating that a selection of items in the package do not fall within budgetary rules. The nonpartisan referee flagged that Republican provisions such as a reduction in funding for the Consumer Financial Protection Bureau and other financial watchdogs may not be passed by a simple majority in the Republican-controlled Senate.
The GOP has been planning to use the so-called budget reconciliation process to help overcome Democratic opposition and pass the broader fiscal bill. In this process, some budget-related provisions can be approved by a simple majority instead of the Senate’s typical 60-vote threshold.
5. Micron to report
Micron (NASDAQ:MU) is due to be one of the headliners of this week’s slate of corporate earnings, with the chipmaker expected to unveil its quarterly returns after the close of U.S. markets on Wednesday.
Earlier this month, Micron pledged to expand its U.S. investments by $30 billion, becoming the latest company to move to appease Trump’s ongoing push to bolster the domestic semiconductor industry.
The firm added that its planned investments, which included previously announced spending on manufacturing sites in New York and Idaho, will now total $200 billion.
With the threat looming of possible changes to Biden-era chipmaking subsidies, several companies have recently announced fresh investments in the U.S.
In April, Nvidia (NASDAQ:NVDA) said it was aiming to build artificial intelligence servers worth as much as $500 billion in the U.S. over the next four years. Elsewhere, Texas Instruments (NASDAQ:TXN) said last week that it will spend over $60 billion to build out its U.S. manufacturing operations.
(Reuters contributed reporting.)