A look at the day ahead in European and global markets from

Wayne Cole.

While Israel and Iran continue to exchange missiles, markets

have been resilient so far on Monday with most Asian indexes in

the black. Chinese retail sales topped forecasts, but to no

discernible reaction.

Oil jumped 4% at the open, but soon calmed down and is now

up around 1%. Given the region's history, war in the Middle East

is not surprising and, so far, this one does not look like

spreading wider.

Crucially, investors seem to be assuming Iran will not

threaten to close the Strait of Hormuz since that would risk

dragging the United States into the conflict. There's also

plenty of scope for Saudi Arabia and the rest of OPEC to expand

supply if needed to keep prices restrained.

The escalation is certainly an unwanted headache for the G7

meeting in Canada, which faces more than enough confrontation

ahead over President Trump's tariffs on allies.

There has been little sign of concrete progress on any trade

deals, and even last week's U.S.-China tariff truce might not

have fixed the restrictions on minerals most closely tied to

national security.

The spike in oil will be an added complication for the

Federal Reserve meeting this week, but it would have to be a

sustained rise in prices to be a true inflationary threat.

A steady outcome on rates is considered a done deal with the

real focus on whether the Fed's dot plots keep two cuts for this

year, or scale back to just one as some suspect.

It's a busy week for central banks in general, with the Bank

of Japan expected to stand pat on Tuesday but maybe signal a

slowdown in its bond tapering for next year.

The Bank of England and Norges Bank are also seen holding

steady, while the Riksbank is likely to cut. Markets are fully

priced for a quarter point easing to zero from the Swiss

National Bank, with a good chance of going negative given the

strength of the franc.

Key developments that could influence markets on Monday:

- Appearances by ECB members Joachim Nagel and Piero

Cipollone