Another round of hostilities between the US and Iran moves crude benchmarks higher; JPY continues to strengthen - Newsquawk EU Market Open

• US forces struck multiple Iranian tankers tied to the IRGC in response to more attempted missile attacks on a US Navy warship; Iran launched missiles at targets in response to US strikes on tankers, while it launched at least 20 missiles at bases in Jordan.
• IRGC had warned that oil tanker crews in Kuwaiti and Bahraini ports would be targeted in light of the US Army targeting several Iranian oil tankers.
• Crude futures extended recent gains, with upside facilitated after the US and Iran exchanged another round of retaliatory strikes.
• DXY was little changed after the choppy mood on Tuesday; USD/JPY trickled lower beneath the 154.00 level amid the ongoing BoJ rate hike expectations.
• APAC stocks traded mixed as the region attempted to shrug off the weak lead from Wall Street; European equity futures indicate a lower cash market open.
• Looking ahead, highlights include US ADP Employment Change Weekly, US Treasury Long-End Bond Buybacks Announcement, NBP Announcement, EIA STEO. Comments from ECB's Lagarde. Supply from Germany & the US.

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LOOKING AHEAD

• Highlights include US ADP Employment Change Weekly, US Treasury Long-End Bond Buybacks Announcement, NBP Announcement, EIA STEO. Comments from ECB's Lagarde. Supply from Germany & the US.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US forces struck multiple Iranian tankers tied to the IRGC in response to more attempted missile attacks on a US Navy warship, while it was separately reported that Iran launched an attack against US Navy ships on Monday, although no American ships were struck in the attacks, but Iran's recent attempts to hit American naval assets are raising alarms that the regime is using more sophisticated weapons and could be getting assistance from China or Russia.
• US Central Command confirmed that forces destroyed five Iranian crude oil carriers on Tuesday after the IRGC targeted a US Navy warship with ballistic missiles twice over the past two days.
• US Secretary of State Rubio said every time Iran tries to hit US Navy ships, they will lose tankers.
• US official said they are focusing their efforts on freedom of navigation in the Red Sea, while an official said a US military underwater drone had malfunctioned more than a day ago in the Middle East.
• Iran launched missiles at targets in response to US strikes on tankers, while it launched at least 20 missiles at bases in Jordan, with the Al-Salti and Prince Hassan bases targeted, according to SNN. However, Jordan said air defences intercepted and destroyed 18 of 20 Iranian missiles, and two fell away from population centres, while it stated that no casualties were reported after the Iranian missile strike. Furthermore, it was later reported that Jordan intercepted additional missiles in the east.
• IRGC claimed missile strikes on US combat destroyers, while it announced that it attacked two US vessels, eight oil vessels and ten violating ships that intended to cross the prohibited and unsafe area of the Strait of Hormuz.
• IRGC had warned that oil tanker crews in Kuwaiti and Bahraini ports would be targeted in light of the US Army targeting several Iranian oil tankers, while Iran's joint military command earlier threatened to "heavily target" US interests in the Middle East if Iranian vessels are attacked.
• Iranian Presidency said there is no need to withdraw from the MoU with America and that they are committed to the MoU, but act according to circumstances. It was separately reported that Tehran demands new conditions from Washington to resume negotiations.
• Sources reported explosions in the Jazan region of Saudi Arabia and in Saudi oil fields.
• South Korea's Presidential Office said that South Korea and France discussed roles regarding Strait of Hormuz security, not troop deployment.

US TRADE

EQUITIES

• US stocks closed lower on Tuesday, with the Dow Jones lagging while the equal-weight S&P fell by around 1%, with the majority of sectors also in the red. Energy, Utilities and Real Estate closed higher, while Health Care, Financials and Materials lagged. The data highlight on Tuesday was the NY Fed SCE report, which saw inflation expectations little changed, while perceptions of the labour market deteriorated, albeit consumers saw a lower risk of losing their own jobs.
• SPX -0.58% at 7,674, NDX -0.12% at 29,508, DJI -1.18% at 52,791, RUT -0.52% at 2,960.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he is directing the General Services Administration, working with the USTR, to take all necessary steps to remove Canadian-origin products from GSA’s Multiple Award Schedules unless Canada restores full and fair reciprocity for American farmers and companies.
• White House posts proclamations regarding modifying scope of Canadian products subject to additional duties and excluding certain products from importation to the US, with respect to motor vehicles, dairy and alcoholic beverages.
• US senior administration official said President Trump approved a series of proclamations on Canadian trade measures, with the ban on dairy, most alcohol and motorcycle imports from Canada under Section 338, while the official stated the restrictions are to take effect in about 3 weeks and that Trump's stance on the January 1st, 2027 auto tariff hike remains in effect.
• Canada's Minister Responsible for US Trade LeBlanc said they are assessing the latest tariffs from the US, while he is in contact with US Trade Representative Greer and will work in good faith when the US is ready to engage.
• US Commerce Secretary Lutnick will meet with Mexican President Sheinbaum and Economic Minister Ebrard today and will discuss US tariffs on Mexican autos and metals, according to POLITICO.
• US Secretary of State Rubio said President Trump has a desire to reach an agreement with Colombia on tariffs.

NOTABLE HEADLINES

• US Treasury Secretary Bessent said markets are not efficient and are run by humans, who make mistakes, while he added the Treasury's narrative in August was that the sky is falling and that the narrative was absurd.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the region attempted to shrug off the weak lead from Wall Street, where all major indices declined on return from the long weekend amid rising oil prices and geopolitical escalation.
• ASX 200 was subdued as gains in energy, resources, mining and materials were offset by weakness in healthcare, financials and the consumer-related sectors.
• Nikkei 225 swung between gains and losses with few fresh catalysts and as further reports continued to point to a BoJ rate hike next week, while Nintendo was among the laggards after its Legend of Zelda 40th Anniversary Direct announcements underwhelmed.
• KOSPI resumed its regional outperformance and climbed above the 7,000 level with Samsung underpinned following several recent announcements and with SK Hynix unfazed by reports that Kioxia's CEO dismissed prospects of closer ties with the South Korean chipmaker.
• Hang Seng and Shanghai Comp were mixed, with price action contained after the PBoC continued to refrain from open market operations and as participants digested the Chinese inflation data in which CPI matched estimates, but PPI was firmer-than-expected and showed an acceleration in factory gate prices.
• US equity futures were rangebound following the prior day's uninspired Wall Street performance.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.5% after the cash market closed with gains of 0.1% on Tuesday.

FX

• DXY was little changed after the choppy mood on Tuesday as geopolitical developments dictated oil price swings ahead of US CPI and PPI this week, while the greenback failed to track the move higher in 2yr yields and oil prices. Furthermore, there was little reaction in the FX space to the US announcing an import ban on alcohol and other goods from Canada in response to the latter's tariff retaliation.
• EUR/USD lacked direction with price action confined within tight parameters at the 1.1600 handle amid the absence of pertinent drivers and tier-1 data from the bloc, while participants await the ECB on Thursday.
• GBP/USD eked slight gains in range-bound trade and after BoE rhetoric did little to shift the dial.
• USD/JPY trickled lower beneath the 154.00 level amid the ongoing BoJ rate hike expectations, while there were also comments from US Treasury Secretary Bessent, who dared traders to bet against him regarding the yen and said that he has good insight into what the BoJ and policymakers will do.
• Antipodeans remained afloat in uneventful trade amid a quiet calendar on both sides of the Tasman and following the inline-to-slightly firmer-than-expected Chinese inflation data.
• PBoC set USD/CNY mid-point at 6.7769 vs Exp. 6.7042 (prev. 6.7804).

FIXED INCOME

• 10yr UST futures lacked direction following yesterday's indecision as oil prices chopped and despite a solid 3yr US auction, while demand was contained ahead of today's 10yr supply and as participants await inflation data later in the week, which could be the tipping factor on whether the Fed hikes rates next week.
• Bund futures demand was subdued after oil prices were ultimately lifted by the ongoing geopolitical escalation, and with prices also not helped by today's EUR 5.5bln Bund issuance.
• 10yr JGB futures eked mild gains but with upside capped after the weakness in global peers and amid ongoing BoJ rate hike expectations.

COMMODITIES

• Crude futures extended recent gains, with upside facilitated after the US and Iran exchanged another round of retaliatory strikes, in which US forces destroyed five Iranian crude oil carriers, and Iran launched at least 20 missiles targeting bases in Jordan.
• Stocks of crude oil in the US SPR fell by about 1.2mln barrels to 285.4mln barrels last week, which is the lowest since 1982.
• Spot gold rebounded from an early trough although remained beneath the USD 4,400/oz territory amid inflationary headwinds from higher oil prices and as participants await US inflation data later in the week.
• Copper futures retreated overnight as LME futures continued to pull back from record levels and amid the overall cautious mood.

CRYPTO

• Bitcoin mildly gained, albeit with upside capped beneath the USD 79,000 level in choppy trade.

NOTABLE ASIA-PAC HEADLINES

• US Treasury Secretary Bessent said he has good insight when they intervene on the yen and dared people to bet against him, while Bessent commented that he has information and good insight into what the BoJ and policymakers will do.
• Japan cabinet reshuffle is set for September 17th, according to Asahi.
• US cyber and law enforcement officials accused Chinese AI companies of aggressive, industrial-scale distillation activities.

DATA RECAP

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Foreign Minister Lavrov said Russian President Putin may meet with US President Trump and Chinese President Xi at APEC in November, while he also stated that Russia is not planning to attack Europe and that saying such delusional things is not serious.
• Russia is anticipated to prolong the Ukraine war into 2027 as peace talks stall, with President Putin believed to be waiting for a stronger military and political position before serious negotiations. Furthermore, Western officials warned that Moscow will intensify winter attacks on Ukraine's energy infrastructure whilst escalating cyber attacks, sabotage and influence operations across Europe.