Escalating Geopolitical Tensions in the Middle East

Markets Await Key Sector Data from Europe The euro declined in the European market on Monday at the start of the weeks trading against a basket of global currencies, resuming losses that had paused for two days against the U.S. dollar. This is due to investors risk aversion and focus on the dollar as the best alternative investment.

This comes amid rising geopolitical tensions in the Middle East, especially after the United States carried out military strikes on Irans nuclear sites, with markets awaiting Irans response to these attacks.

Expectations of a European Central Bank interest rate cut in July have declined, pending further evidence on the path of monetary policy easing in Europe during the second half of the year.

Price Overview EUR/USD today: The euro dropped by 0.6% to $1.1452, down from Fridays closing price of $1.1521, with a session high of $1.1507. The euro closed Friday up 0.25% against the dollar, marking the second straight daily gain, continuing its rebound from a one-week low of $1.1446. Last week, the euro lost about 0.3% against the dollar, its first weekly loss in the past three weeks, due to profit-taking and corrections from a four-year high of $1.1631. U.S. Dollar The U.S. Dollar Index jumped 0.4% on Monday, hitting a two-week high of 99.16 points, reflecting strength against a basket of major and minor currencies.

The rise comes as investors turn to the dollar as the best alternative investment, while markets await Irans response to U.S. airstrikes on its nuclear sites, which have intensified geopolitical tensions in the Middle East.

U.S. Strikes on Iran Over the weekend, the U.S. conducted air and missile strikes targeting three key Iranian nuclear facilities (Fordow, Natanz, and Isfahan), involving more than 125 U.S. military aircraft, including 7 B-2 Spirit stealth bombers.

The stealth bombers dropped 30,000-pound bunker-busting bombs on Fordow Irans most fortified site, buried 8090 meters beneath the Zagros Mountains. U.S. submarines also launched 30 Tomahawk missiles at Natanz and Isfahan.

The U.S. strikes followed Israeli attacks that began on June 13 targeting nuclear and military sites in Iran, which triggered Iranian missile and drone retaliations against Israel.

President Trump said the strikes aimed to weaken Tehrans nuclear program. In a Truth Social speech, he urged Iran to "make peace" and warned of further strikes if U.S. bases or interests in the Middle East are targeted.

Satellite images showed six large craters at the Fordow site with scattered concrete debris, indicating severe damage though the site was not completely destroyed.

At Natanz, Irans largest uranium enrichment facility already damaged by Israeli strikes on June 13 the U.S. targeted underground enrichment halls, with two new craters seen in satellite images.

In Isfahan, which contains a uranium conversion facility, Tomahawk missiles struck above-ground buildings, with reports indicating six additional buildings were destroyed.

Iran condemned the U.S. strikes as a brutal violation of international law and vowed severe retaliation through Foreign Minister Abbas Araghchi. The Iranian parliament approved closing the Strait of Hormuz. Meanwhile, the IRGC launched ballistic missiles at Israel, hitting Tel Aviv and Haifa.

European Interest Rates European Central Bank President Christine Lagarde stated: With the recent cut and the current level of rates... I believe we are approaching the end of the monetary easing cycle. According to Reuters sources, a clear majority in the last ECB meeting favored keeping interest rates unchanged in July, with some calling for a longer pause. Money markets reduced their expectations for ECB rate cuts, pricing in a 25 basis point cut by year-end, down from 30 basis points before the last meeting. Current market pricing for a 25 basis point ECB rate cut in July stands below 30%. Key Sectors To reassess those expectations, investors are awaiting the release of key sector data in Europe today, including preliminary readings for manufacturing and services PMI for June.

These figures provide vital clues about the economic performance pace in Europe during Q2. Weak data would reflect a slowdown in the eurozone economy and increase the likelihood of further ECB rate cuts.