A Reminder that Iran Risk Still Lurks, but Market Reaction Lacks Panic
July 7, 2026
Just six weeks remain in the 60-day negotiating window laid out in the Memorandum of Understanding between the United States and Iran. The past weekend had lacked the customary military craziness, but a big ship carrying energy took on fire in a reminder that investors mustn’t make assumptions that this political distraction will end with a happy ending. All things considered, today’s 1.2% rise in West Texas Intermediate crude oil to a still sub-$70 level was mild and indicative of the dominant expectations that renewed full-scale warfare will be avoided one way or another.
In other geopolitical developments, the start of the two-day 2026 NATO summit in Ankara, Turkey kicks off this Tuesday, with attention concentrated on how confrontational President Trump chooses to be. Confidence that America will by abide by Article 5 of the treaty has diminished greatly.
An upcoming economic events commanding market attention is tomorrow’s scheduled publication of minutes from the last Federal Open Market Committee meeting. Minutes have been a pillar of policy transparency and forward guidance, an area that the new Fed Chairman Kevin Warsh wishes to modify considerably. The immediate statement that was released following the June FOMC meeting was extensively streamlined, and similar changes will likely characterize tomorrow’s minutes.
In overnight market action, the dollar fell 1% against the won and 0.3% relative to the rupiah but barely moved against the euro, yen, Swiss franc, sterling or Canadian, New Zealand and Australian dollars. Ten-year sovereign debt yields are two basis points higher in the United States, Germany, Italy, and Switzerland and up a signle basis point in France, Spain and the United Kingdom. Stock markets plunged 4.9% in South Korea, 2.3% in Taiwan, 2.1% in Japan and 1.3% in China. Nasdaq futures are 0.9% lower, but other major U.S. indices and European stock market changes so far today have been mild. Bitcoin (-0.6%) and silver (-0.7%) have fallen similarly, while gold is holding pretty steady.
Japanese finance committee data shows no intervention support for the yen occurred in the statement month ending June 26, but the currency’s behavior suggests that possibility more recently. Japanese and Chinese reserves declined in June by $18.4 and $26 billion, respectively. Other Japanese data out today showed 1) 58- and 37-month highs in the indices of leading and coincident economic indicators, 2) 3.2% and 1.4% on-year growth in average nominal and real wage earnings during May, and 3) considerably stronger-than-forecast household spending, which climbed 3.7% in May from April and only dipped 0.4% compared to a year earlier.
The World Bank revised projected GDP growth in China lower to 4.4% this year and 4.3% in 2027. GDP in 1Q 2026 was 5.1% above its year-earlier level.
Although marginally less than forecast, the U.S. trade deficit of $77, 585 billion in May was 42% wider than in April and the largest monthly shortfall since President Trump unveiled an array of very elevated tariffs on the first day of April in 2025. The year-to-date deficit of $297.9 billion was 40.6% narrower than the gap of $501.8 billion in the first five months of last year.
A 0.9% monthly increase in German industrial production in May far exceeded expectations. Output was unchanged from a year earlier versus year-on-year declines of 0.9% in April and 2.0% in the first quarter.
In Denmark and Finland, industrial production dropped in May by 4.4% and 1.4%, respectively. Compared to a year earlier, Danish output was up 4.2%, its smallest 12-month increase in five months. Finnish IP was only 0.6% above its year-earlier level.
Dutch consumer price inflation in June was left unrevised from the preliminary estimate and down from May’s 13-month high of 3.5%. Consumer price inflation also decelerated last month to a 74-month low of 2.3% in Estonia, a 4-month low of 1.5% in the Czech Republic and a 4-month low as well in Hungary of 1.7%.
Wholesale price inflation in Austria receded to a 3-month low of 5.4% from April’s 39-month high of 6.9%.
France’s trade deficit expanded more sharply than anticipated to a 13-month high of EUR 6.91 billion in May.
House price inflation in the U.K. according to the Lloyd’s index edged up 0.1 percentage point to a still stagnant 0.6%.
Egypt’s non-oil purchasing managers index sank more deeper into contractionary territory during May with a 41-month-low reading of 46.0.
Canada recorded its largest monthly trade surplus (CDLR 4.24 billion) in four years during May. It was the third surplus in a row. Before March, there had been a run of five consecutive trade deficits.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: German industrial production, Japanese and Chinese reserves, U.S. and Canadian trade balances
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