• US stocks were pressured with the Nasdaq the clear underperformer as Technology led the broader market lower, while the weakness in Tech was driven by sharp losses in memory names (DRAM -c. 9%) and semiconductor stocks (SOXX -5%) amid concerns surrounding SK Hynix's upcoming earnings, with the stock also giving back some of Friday's gains following its US listing. Broader risk sentiment was also weighed down by ongoing geopolitical tensions between the US and Iran after further military strikes over the weekend. President Trump announced that the US would reinstate the blockade on Iran and assume control of the Strait of Hormuz, adding that the US would impose a 20% charge on cargo vessels transiting the Strait in exchange for safe passage. The developments pushed crude prices higher throughout the session, with benchmarks settling near their highs after the US military confirmed the blockade on Iran would take effect from Tuesday. Meanwhile, retaliatory strikes between Saudi Arabia and Yemen were seen, adding to concerns that the conflict could broaden across the region.
• USD was firmer amid the broad-based risk-off sentiment, and hawkish comments from Fed's Waller. For the former, a few factors weighed, such as concerns ahead of SK Hynix's earnings, but the more pressing issue was the US/Iran relationship worsening once again and the conflict threatening to break out across the whole region again, with explosions heard in numerous Saudi Arabian locations as Yemen's Houthis attacked an airport in response to Saudi Arabia bombing an airport in Yemen. On the Fed footing, and ahead of the looming US CPI report and Fed Chair Warsh's testimony, Waller stated that if there is another hot reading on core inflation this week, the Fed will need to consider a rate hike in the near term, and that they would need to see several months of lower core inflation to feel inflation is moving in the right direction.
• Looking ahead, highlights include New Zealand NZIER Business Confidence, Singapore GDP, Australian Westpac Consumer Sentiment & NAB Business Confidence, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include New Zealand NZIER Business Confidence, Singapore GDP, Australian Westpac Consumer Sentiment & NAB Business Confidence, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump reiterated that Iran has no air force, no navy and no military, while he said they will hit Iran very hard on Monday night and on Tuesday. Trump said they had a deal yesterday and that Iran breaks deals, as well as commented that the MoU was built to test Iran and that Iran didn't honour it. Trump also stated that they will hit 'Pickaxe Mountain' pretty soon and have their eyes on the site all the time, which is a good potential target
• US President Trump said, "we're taking over the Strait of Hormuz" and that Iran "has nothing", its leaders are professional negotiators and "haven't gotten anything", while he added the US had a deal with Iran, but Tehran broke it, and that the US hit Iran "very hard" the previous night. Trump also stated the US would become the guardian of the Strait of Hormuz and that Iran had no chance of rebuilding, as well as commented that if the US operated the Strait, it would be reimbursed, and that the US would probably run the waterway.
• US President Trump posted that the Strait of Hormuz is open, and will remain open, with or without Iran, while he announced the reinstatement of the "Iranian Blockade", under which only Iranian ships and customers would be prevented from entering or leaving, while all other countries would retain free passage. Trump added the US would be known as "THE GUARDIAN OF THE HORMUZ STRAIT" and would be reimbursed at a rate of 20% on all cargo shipped to cover the costs of providing safety and security, with the process beginning immediately.
• US had reportedly not discussed with regional allies the possibility of imposing transit fees for passage through Hormuz, according to Axios citing sources.
• US official said the renewed naval blockade had not yet come into effect because ship owners must legally be notified 24 hours in advance, according to Axios's Barak Ravid. US military Central Command would announce the specific timing later on Monday, while a US defence official said the military had plans for several days of additional strikes in the Hormuz area and along Iran's southern coastline aimed at degrading the IRGC's ability to attack ships.
• US Navy-led JMIC said the US military will begin enforcement of a naval blockade of all Iranian ports and Iranian coastal areas at 20:00 GMT on 14th July, which will apply to all vessel traffic, regardless of the flag. It added that the blockade encompasses the entirety of the Iranian coastline, including but not limited to Iranian ports and oil terminals, although it will not impede neutral transit passage through the Strait of Hormuz to or from a non-Iranian destination.
• UN shipping agency spokesperson said they were awaiting further details on Trump's proposal to charge 20% for cargo transiting Hormuz, while adding that the agency opposed charging fees for any strait used for international navigation and that there was no legal basis for introducing mandatory transit tolls through an international strait.
• Iran's Foreign Minister said whoever provides secure and safe passage of commercial vessels through Hormuz should be compensated, while he added that Iran has always been the Guardian of the Strait and will remain so forever. Furthermore, he said 20% is too much and that they will be fair.
• Iranian security official said the management of Hormuz is by their will, not Trump’s tweets, while the official reiterated that repeated provocative US behaviour would lead to an expansion of Iran's actions and that the US and its allies must accept Iran's arrangements.
• Iran’s top joint military command said it would not allow the US to intervene in the management of the Strait of Hormuz, while it warned that any attempt by the US to transit through the Strait without Iran's authorisation would be strongly confronted and that any cooperation with the US would be considered war against Iran.
• Iran’s PGSA stated that, due to recent hostile actions by US forces, passage through the Strait of Hormuz was currently unfeasible, but added that once stability and calm were restored, all applications would be reviewed in accordance with the scheduled timeline and the permitting process would resume.
• Explosions were heard in Bandar Abbas, Lark and Konarak in Iran, while explosions were also heard in Keran and Chabahar. However, the source of explosions is unknown, while some suggested the situation is calm and that no explosions were heard.
• Saudi Arabia attacked Sanaa airport as an Iranian plane approached, according to Fars citing Yemeni sources, while a spokesperson for the Yemeni Armed Forces said the Saudi attack on Sanaa airport would not go unanswered or unpunished. Furthermore, Houthi political bureau member Ali al-Bukhaiti said the group would target the "vital infrastructure" of Saudi Arabia in retaliation for the attack on Sanaa Airport.
• Sources reported that a Yemeni missile hit King Khalid Air Base near the Saudi city of Abha, and there were reports of an attack on Abha International Airport in southern Saudi Arabia. It was also reported that at least six missiles had been fired from Yemen towards Saudi Abha Airport, while the Saudi-led coalition said it dealt with ballistic missiles launched by Houthis towards the southern region, and sources reported the sound of an explosion in Jeddah.
• There was no clear timetable for Israel's withdrawal from the experimental areas in southern Lebanon amid a policy of consolidation and non-compliance with the framework agreement, according to Al Araby citing sources.

US TRADE

• US stocks were pressured with the Nasdaq the clear underperformer as Technology led the broader market lower, while the weakness in Tech was driven by sharp losses in memory names (DRAM -c. 9%) and semiconductor stocks (SOXX -5%) amid concerns surrounding SK Hynix's upcoming earnings, with the stock also giving back some of Friday's gains following its US listing. Broader risk sentiment was also weighed down by ongoing geopolitical tensions between the US and Iran after further military strikes over the weekend. President Trump announced that the US would reinstate the blockade on Iran and assume control of the Strait of Hormuz, adding that the US would impose a 20% charge on cargo vessels transiting the Strait in exchange for safe passage. The developments pushed crude prices higher throughout the session, with benchmarks settling near their highs after the US military confirmed the blockade on Iran would take effect from Tuesday. Meanwhile, retaliatory strikes between Saudi Arabia and Yemen were seen, adding to concerns that the conflict could broaden across the region. Fed commentary also influenced markets after Governor Waller struck a hawkish tone, in which he stated that another firm core inflation reading in Tuesday's CPI report would force the Fed to consider a near-term rate hike, adding he would view such an outcome as a genuine signal rather than noise. Conversely, a softer reading would not be sufficient on its own, with Waller saying he would need to see several months of cooler inflation before becoming confident that price pressures were moving back towards target. The combination of higher oil prices and Waller's hawkish comments pushed Treasury yields higher across the curve, with the front-end yields leading as markets increased expectations for additional Fed tightening.
• SPX -0.78% at 7,517, NDX -1.88% at 29,264, DJI -0.26% at 52,499, RUT -0.78% at 2,955.
• Click here for a detailed summary.

TARIFFS/TRADE

• UK struck a services trade deal with Switzerland worth an estimated GBP 5.2bln a year in exports.

NOTABLE HEADLINES

• Fed's Waller (voter) said that if there was another hot reading on core inflation this week, the Fed would need to consider a rate hike in the near term, while he would need to see several months of lower core inflation to feel inflation was moving in the right direction, and expressed concern about the elevated pace of core inflation. Waller said there was still a credible case for inflation to fall back to the 2% target without higher rates, but noted there was an equally plausible case that tighter policy would be needed. Furthermore, he remained committed to returning inflation to the 2% target while also avoiding over-tightening policy and risking recession, while he expects a deceleration in headline inflation beginning with this week's inflation data, but said his focus would remain on core inflation. Waller also commented that he had been sceptical of the Fed's dot plot for a long time and said he would remove the long-run estimates, not extend projections beyond 18 months and would release the dots a day after the meeting.
• NY Fed plans to conduct approximately USD 17.6bln in reinvestment purchases (prev. 16.5bln) and an additional approximately USD 10bln in reserve management purchases (prev. USD 10bln) over the noted monthly period.
• US President Trump said he will be making a speech to the nation on Thursday evening at 21:00EDT/02:00BST.
• US President Trump said the US could see a government shutdown in September if the filibuster did not end.
• US House budget committee will mark up a budget resolution on Wednesday, according to Punchbowl's Sherman.

FX

• USD was firmer amid the broad-based risk-off sentiment, and hawkish comments from Fed's Waller. For the former, a few factors weighed, such as concerns ahead of SK Hynix's earnings, but the more pressing issue was the US/Iran relationship worsening once again and the conflict threatening to break out across the whole region again, with explosions heard in numerous Saudi Arabian locations as Yemen's Houthis attacked an airport in response to Saudi Arabia bombing an airport in Yemen. On the Fed footing, and ahead of the looming US CPI report and Fed Chair Warsh's testimony, Waller stated that if there is another hot reading on core inflation this week, the Fed will need to consider a rate hike in the near term, and that they would need to see several months of lower core inflation to feel inflation is moving in the right direction.
• EUR whipsawed and ultimately reverted to beneath the 1.1400 handle amid dollar strength and a lack of currency-specific newsflow.
• GBP retreated after hitting resistance near the 1.3400 level, while focus in the UK is on politics with Andy Burnham to be crowned the leader of the ruling Labour party on Friday after winning 349 nominations out of 403 MPs, making it mathematically impossible for any rival to launch a challenge.
• JPY gave way to the firmer buck with USD/JPY extending above the 162.00 level amid firmer US yields and higher oil prices. Furthermore, source reports suggested that Japan has no immediate plan to change target asset allocations of its state pension funds but could work within existing allowable ranges to direct more investment to domestic assets, although Chief Cabinet Secretary Kihara stated the GPIF is to tweak its basic portfolio as needed.

FIXED INCOME

• T-notes were sold amid rising oil prices and a hawkish Waller, ahead of US CPI data and Fed Chair Warsh's testimony.

COMMODITIES

• Oil prices rallied as US/Iran tensions escalated, and with a late surge seen as the US confirmed it is to reinstate the Iranian blockade, while Saudi Arabia was hit by the Houthis. Overall, tensions between the US and Iran are once again flaring as over the weekend, US CENTCOM said it had "completed" its latest round of strikes in Iran, in response to Iran targeting commercial ships in the Strait of Hormuz. Following this, and prompting benchmarks for another leg higher, was US President Trump announcing the US will be reinstating the blockade, adding that the Strait of Hormuz will remain open, with or without Iran, but the US will be reimbursed at a rate of 20% on all cargo ships transiting the strait as a payment for providing safety and security. Pushing the energy space further, and showing the conflict encompassing further regions, there was an attack on Abha International Airport in southern Saudi Arabia, and also reports of an explosion in Jeddah from the Houthis after the Saudi's attacked an airport in Yemen to prevent an Iranian jet from landing there. Further, and heading into settlement, which prompted benchmarks to settle at highs and soar into the close, was the US-Navy Led JMIC confirming the blockade on Iran will resume, while there were also comments from US President Trump, who said they would hit Iran very hard tonight and tomorrow.
• OPEC MOMR (Jul) stated that global oil demand was forecast to grow by 0.8mln BPD Y/Y in 2026, and global oil demand in 2027 was forecast to grow by about 1.9mln BPD Y/Y.
• US Strategic Petroleum Reserve crude oil stocks fell by about 3mln bbls to 316.5mln bbls last week, which was the lowest since 1983.
• Dubai plans a new port to bypass the Strait of Hormuz, with DP World planning to build a new port and container terminal on the UAE's east coast that would reduce Dubai's dependence on its flagship Jebel Ali hub and bypass the Strait of Hormuz.
• Qatar set August Marine crude OSP at Oman/Dubai minus USD 5.00/bbl and Land crude OSP at Oman/Dubai minus USD 4.50/bbl, according to a pricing document.

GEOPOLITICAL

RUSSIA-UKRAINE

• Russian President Putin vowed a more powerful response to Ukraine's strikes.
• Ukrainian President Zelensky said there is an urgent need for defence systems, while he is requesting 100 Patriot interceptors per month and a total of 300 by winter to deter further Russian aggression.
• Coalition of the Willing agreed on establishing an integrated anti-ballistic missile coalition with Ukraine.
• EU's Kallas said they were quite close to an agreement on a new sanctions package against Russia.
• US Senate Majority Leader Thune expressed hope for progress on a Russia sanctions bill.

OTHER

• US issued Cuba-related sanctions on the Ministry of Tourism and other entities.

ASIA-PAC

NOTABLE HEADLINES

• Chinese Premier Li said policymakers needed to clearly recognise problems in the economy and step up counter-cyclical adjustments, while economic work in the second half of the year was directly related to achieving this year's development goals, according to CCTV.
• German Chancellor Merz said there was a need for dialogue on monetary policy with China.
• Japan reportedly had no immediate plans to change the target asset allocations of its state pension funds, although it could work within existing allowable ranges to direct more investment towards domestic assets, according to sources. Furthermore, a source stated that markets had moved more than expected following Katayama's comments and that her remarks were not intended to imply asset allocation changes.

EU/UK

NOTABLE HEADLINES

• UK's Burnham will be crowned Labour leader on Friday as he won 349 nominations from MPs out of 403, which makes it mathematically impossible for any rival to launch a challenge.