Before the 'official' futures markets opened, the risk-off tone (due to the failed peace talks and Trump's threat to blockade Iranian vessels) was very evident in FX and crypto markets.
Even given the usual caveats about thin liquidity, AUD/USD is down around 1%, a classic growth-sensitive barometer flashing warning signs, while EUR/USD is weaker by roughly 0.5%.
The moves point to a softer tone for risk assets and sure enough bitcoin is down notably, but still up from pre-ceasefire levels...
All eyes are of course on the oil markets where hyperliquid perps were signaling a major jump higher as traders react to peace talks falling apart over the weekend, and the US moving to blockade the Strait of Hormuz in response.
WTI opened up over 8% surging back above $100 (topping $105)...
European gas futures also surged more than 10% as the trading day for the product expanded to 21 hours, from 10 hours, on Monday.
The timeline for the start of efforts to unwind the extreme supply shocks created by the war looks to be getting longer and longer.
And of course, as goes oil, so goes stocks etc...
Since the war started, markets have increasingly taken their cues from crude prices given their far-reaching consequences. Surging energy costs have driven both the pullback in risk appetite as an immediate reaction to the conflict, as well as investors’ longer-term anticipation for a pickup in inflation and slowdown in consumption.
The extent of the divergence (between oil and stocks) has now surpassed levels seen in 2022.
But, even as the bond-stock-oil correlations started to creak on Friday...
...they are back in sync on this thin Sunday evening with S&P futures down over 1% for now...
Treasury futures prices are down notably (implying around a 5bps jump in 10Y Yields)...
The stronger dollar has pushed gold back down below $4700...
Obviously, investors will continue to monitor Middle East tensions in the coming week, while monthly reports from OPEC and the IEA will add some insight into how the Iran war is affecting the oil market.
Several major US banks are due to report earnings, where any commentary on the impact from the conflict will also be closely watched.
US data releases include producer prices, industrial production and existing home sales, while the Fed’s Beige Book will offer additional color on the health of the economy.
China is also due to report first-quarter GDP plus retail sales and industrial production data for March.
As Morgan Stanley' Michael Wilson warned: The final phase of a correction is rarely easy and could require another re-test for markets, particularly if rates or bond volatility push higher again.
It may be about to get more difficult again.