EMEA Morning Briefing : Volatility Set to Persist as Mideast Conflict Widens

MARKET WRAPS

Watch For:

EU GDP; Germany manufacturing orders; trading updates from Deutsche Lufthansa, Atos, IMI

Opening Call:

European stock futures traded higher early Friday. Asian stock benchmarks were mixed; the dollar fell; Treasury yields were little changed; while oil fell and gold rose.

Equities:

Stock futures point to a higher open in Europe on Friday, signaling some improvement in risk sentiment.

"While the market impact on risky assets of geopolitical risk is typically short-lived, it is also quite volatile, and we believe the best approach is a wait-and-see approach," Citi said. "In the end, a peak in oil is needed for the all clear."

The conflict in the Middle East continued to escalate. Israel launched another wave of large-scale strikes on Tehran and hit Hezbollah command centers in Beirut, while Iran fired more missiles toward Israel and struck its northern neighbor, Azerbaijan.

U.S. labor data will come into focus later in the day. Higher-than-expected job creation could "ease US growth concerns, even if downside risk remains from a prolonged global energy price shock," Goldman Sachs said.

Forex:

"Nearly a week into the conflict, Iran retains substantial asymmetric capability, with no clear endgame in sight," Westpac's Richard Franulovich said.

"There is no clear roadmap to de--escalation, and the risk of outcomes beyond the White House's control looms large. This backdrop is toxic for risk appetite," the head of FX strategy added.

Bonds:

This week, Treasury yields have experienced their biggest four-day rise since last May. Futures markets are now seeing a less than 50% chance of two or more quarter-point Federal Reserve interest-rate cuts this year.

Some on Wall Street, including Morgan Stanley economist Diego Anzoategui, argue the Fed may overlook the one-time oil shock. But "it goes without saying that another meaningful leg higher in oil (i.e. >$85/bbl) would quickly shift the conversation," said Ian Lyngen, head of US rate strategy at BMO Capital Markets.

Energy:

A U.S. stopgap measure announced by Treasury Secretary Bessent could somewhat provide immediate downward pressure on oil prices, ING said.

However, this measure "is not a game-changer," adding that "the only way for [oil] prices to come down on a sustained basis is a resumption of oil flows through the Strait of Hormuz."

Metals:

Geopolitics and the global macro backdrop remain supportive of gold, State Street Investment Management said. "Gold remains an under-owned portfolio asset with significant room for both tactical and strategic holdings to expand through 2026."

Gold could re-test $5,500/oz-$5,600/oz in March if the conflict in Iran escalates, State Street added.

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Economic planners at China's National People's Congress signaled orderly reductions to steel capacity, which could lift steel prices and improve margins.

"Nevertheless, we remain doubtful that this strength will persist, with the market facing renewed headwinds," ANZ said, noting expectations for softer Chinese steel exports this year.

TODAY'S TOP HEADLINES

Tariffs Are Lower and Businesses Are Racing to Take Advantage

Michael Burns made a bet that the Supreme Court would strike down some of the Trump administration's tariffs. Now it is paying off.

Burns, who owns the auto-products maker ValvoMax, decided to hold parts for the company's oil-change kits in India back in October, hoping a court ruling would lower the tariff bill.

U.S. Has a Big Ask for China: Buy Less Oil from Russia, More From America

Ahead of President Trump's visit to Beijing, Treasury Secretary Scott Bessent is considering putting a tricky trade-off on the agenda for coming talks with his Chinese counterpart: reducing China's oil purchases from U.S. adversaries like Russia.

In private consultations held in recent days with former U.S. officials, business executives and policy analysts, Bessent described a continuing effort to try to get China to instead buy American oil-and-gas products, said people familiar with the meetings. Bessent is thinking about raising the energy issue, the people said, in a meeting with his Chinese counterpart, Vice Premier He Lifeng, in Paris in mid-March. They are planning to firm up a framework for the summit between Trump and Chinese leader Xi Jinping, currently slated for the beginning of April.

U.A.E. Explores Freezing Iranian Assets to Punish Tehran for Attacks

The United Arab Emirates is weighing freezing billions of dollars of Iranian assets held in the Gulf state, according to people familiar with the discussions, a move that could sever one of Tehran's most important economic lifelines.

If the U.A.E. goes ahead, it would significantly curb Tehran's access to foreign currency and global trade networks as its domestic economy, already buckling under inflation, is now engulfed in a military conflict.

Large-Scale Attacks Intensify Tensions in Middle East

Israel launched another wave of large-scale strikes on Tehran and hit Hezbollah command centers in Beirut, while Iran fired more missiles toward Israel and struck its northern neighbor, Azerbaijan, the 13th nation to be attacked since the start of the war.

Israel has struck several sports venues and other sites in Tehran, targeting civilian locations used by Iranian security forces in emergency situations, according to people familiar with the matter.

ECB Could Change Policy Stance If Iran War Drags On, De Guindos Says

An extended war in the Middle East could push up inflation expectations and prompt a change in the European Central Bank's policy stance, its vice president said Thursday.

"The outlook of the European economy now is clearly shaped by what is happening now in the Middle East," Luis de Guindos said at a summit in Brussels of the Institute of International Finance, a financial-services trade body.

Anthropic Says It Will Fight New Pentagon Move as CEO Apologizes for Leaked Memo

Anthropic Chief Executive Officer Dario Amodei has apologized for a leaked memo in which he questioned the Trump administration's motives for declaring his artificial-intelligence company a supply-chain risk and severing its government relationships.

But Amodei said Anthropic would challenge the designation in court, saying, "We do not believe this action is legally sound."

Sam Altman Wants Elected Officials, Not OpenAI, to Decide How Military Uses AI

OpenAI believes elected officials, not technology company executives, should ultimately determine the limits of how artificial intelligence can be used in national defense, Chief Executive Sam Altman said at an investor conference Thursday.

Speaking at the Morgan Stanley Tech, Media and Telecom Conference in San Francisco, Altman said "we have to trust in the democratic process" to supply some of the answers to the questions OpenAI and rival Anthropic are wrangling over in their separate negotiations with the Department of Defense.

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Expected Major Events for Friday

00:01/UK: Feb BRC-Sensormatic IQ Footfall Monitor

07:00/SWE: 4Q Balance of Payments

07:00/DEN: Jan Industrial production & new orders

07:00/GER: Jan Manufacturing orders

07:00/GER: Jan Manufacturing turnover

07:00/UK: Feb Halifax House Price Index

07:00/NOR: Jan Industrial Production Index

07:00/ROM: 4Q GDP

07:30/HUN: Jan Preliminary Industrial Production

08:00/CZE: 4Q Wages

08:00/AUT: Feb Wholesale Price Index

08:00/SWI: Feb SNB foreign currency reserves

08:00/SVK: 4Q GDP

08:00/SPN: 4Q Housing Price Index

09:00/ICE: Feb External trade, preliminary figures

09:00/BUL: 4Q GDP - preliminary data

09:30/UK: 4Q Bank of England external business statistics

10:00/CRO: Jan Industrial Production Volume Index

10:00/GRE: 4Q Provisional GDP

10:00/EU: 4Q GDP and Main Aggregates Estimate

10:00/EU: 4Q Employment

10:00/LUX: 4Q GDP

11:00/IRL: Feb Irish Live Register latest monthly figures

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

03-06-26 0018ET