(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, June 5 (Reuters) - What matters in U.S. and

global markets today

I'm excited to announce that I'm now part of

Reuters Open Interest (ROI)

, an essential new source for data-driven, expert commentary

on market and economic trends. You can find ROI on the

Reuters website

, and you can follow us on

LinkedIn

and

X.

Whatever the endgame is in the unfolding Israel-Iran war, global

financial markets will take their cue from the oil markets,

where prices moved up slightly today as hopes for a quick

ceasefire were dashed.

I'll discuss this morning's market news below. In my column

today, I explain how President Trump's mounting pressure on the

Federal Reserve could backfire.

Today's Market Minute

* U.S. President Donald Trump urged Iranians to evacuate Tehran,

citing Iran's rejection of a deal to curb nuclear weapons

development, as Israel and Iran attacked each other for a fifth

straight day on Tuesday.

* The Group of Seven nations expressed support for Israel in

a statement late on Monday, labeling Iran as a source of

instability in the Middle East, with the G7 leaders urging

broader de-escalation of hostilities in the region.

* The Bank of Japan kept interest rates unchanged on Tuesday and

announced that it would decelerate the pace of its balance sheet

drawdown next year.

* Critical energy infrastructure in Israel and Iran has not

escaped unscathed from the first few days of the countries'

escalated conflict. Worst-case scenarios have yet to be

realized, but the war is already having a notable impact on

energy production and exports in both countries, writes Roi

energy columnist Ron Bousso.

* China has built up crude oil stockpiles while refining

substantially less than what it has available from imports and

domestic production, which will likely enable the world's

biggest oil importer to buy lower volumes in the coming months

if prices surge over Middle East tensions, writes ROI Asia

commodities columnist Clyde Russell.

Oil contained as Mideast war wages

Despite reports on Monday that Iran was pushing for a ceasefire,

the two sides continued to bombard each other overnight.

U.S. President Donald Trump left the G7 summit in Canada

early to focus on the crisis, issuing an alarming evacuation

warning to the residents of Tehran in the process.

While U.S. crude prices edged back up above $72 per

barrel again on Tuesday, they remain below Friday's close and

almost 8% lower than they were this time last year.

For now at least, neither Iran's major oil export

installations nor the critical regional waterway of the Straits

of Hormuz have been closed off.

The firmer oil price was enough to knock back global stock

markets again after Monday's relief rally, with U.S. index

futures giving up about half of yesterday's jump.

Gold slipped back to Thursday's levels, while the

safe-haven Swiss franc firmed again ahead of the Swiss National

Bank's expected easing on Thursday.

Moves in U.S. Treasuries and the dollar were minimal ahead

of the Federal Reserve's two-day meeting starting later today.

Meanwhile, the Bank of Japan left its key rates unchanged as

expected earlier on Tuesday. Japan's yen weakened a touch

on the BOJ decision, which also included a plan to decelerate

the pace of its balance sheet drawdown next year, meaning the

central bank will be buying more bonds next year than they would

have under the prior plan.

"There is bigger downside risk for both Japan's economy and

prices," BOJ Governor Kazuo Ueda said at a press briefing after

the meeting.

The Fed is also unlikely to shift policy this week given the

fog surrounding both the trade war and now oil price

uncertainties around the Middle East war. Policymakers will,

however, update their quarterly economic and rate projections

and offer some guidance as to how they see the situation panning

out.

On trade, Trump said on Tuesday that he still planned to

send out letters to negotiating countries on the final U.S.

demands before a 90-day reprieve on 'reciprocal' tariffs expires

early next month. He also noted that pharma tariffs are coming.

The European Union was not yet offering a 'fair deal,' he

said, though there was a chance of a deal in the 'tough' talks

with Japan. There was better news for Britain as Trump signed an

agreement on Monday formally lowering some tariffs on imports

from the UK while the countries work toward a formal trade deal.

U.S. Senate Republicans, meantime, unveiled proposed changes

to Trump's sweeping tax cut and spending bill that would make

some business-related tax breaks permanent while limiting the

deduction for state and local income taxes.

Uncertainty about mounting debt piles and the long-term

course of inflation have caused investors around the world to

back away from super long-term government bonds where the price

sensitivity to shifts in thinking is greatest.

That move away from long-duration isn't helped by persistent

political pressure on the Fed this year to immediately slash

rates.

Today's column looks at the risk that White House demands

for lower borrowing costs could force the Fed to act tougher

than it might have otherwise.

Chart of the day

The Chicago Fed's index of U.S. financial conditions shows

the loosest reading in more than three years, back to levels

seen just before Russia's invasion of Ukraine in 2022. Interest

rates, stock prices and bond yields are key components of the

index, but so, too, are energy prices.

And the latest reading came just before the pop in oil

prices late last week on the outbreak of the Israel-Iran war.

This type of uncertainly is one more reason why the Fed is

widely expected to keep interest rates on hold for a few more

months.

Today's events to watch

* U.S. May retail sales, import/export prices (8:30 EDT),

May industrial production (9:15 EDT), April business/retail

inventories (10:00 EDT)

* Federal Reserve's Federal Open Market Committee starts

two-day meeting on interest rates; decision and new forecasts on

Wednesday

* Bank of Canada policy meeting minutes

* U.S. Treasury sells 5-year inflation protected securities

* U.S. corporate earnings: Jabil

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.

Want to receive the Morning Bid in your inbox every weekday

morning? Sign up for the newsletter here.