The global financial markets have been in a state of turmoil following the US' military strikes on Iran, which have sent shockwaves through the commodity markets and heightened concerns about the potential for further escalation. The S&P 500 and Nasdaq have tumbled, with the former down 4.5% since June 2 and the latter and Semis Index down 7.1% and 12% from their recent record highs, respectively. This sudden downturn has been triggered by the US' decision to launch 'self-defence strikes' against Iran in response to the downing of an Apache helicopter in the Strait of Hormuz, a critical shipping lane. The strike has not only caused a spike in energy prices but has also led to a broad sell-off in commodities, with gold, platinum, and silver prices taking a hit. The situation is further complicated by the ongoing tensions between the US and Iran, with President Trump threatening more attacks, and the potential for a peace deal remaining uncertain. The US CPI, while mostly in line with expectations, has risen to a three-year high of 4.2%, indicating a possible shift in the Fed's monetary policy. The central banks are also in a tight spot, with the Bank of Canada holding off on raising rates but warning of a policy dilemma, and the ECB anticipating a rate hike this week amid rising inflation concerns. The global economy is feeling the heat, with China's factory-gate inflation rising to its highest level in almost four years and Japan's wholesale inflation rising above 6%. The ASX 200 is also expected to fall, adding to the overall bearish sentiment. The market is now in a state of uncertainty, with investors seeking refuge in transportation stocks, options bets, and profitable firms, while also being cautious about the potential for further escalation in the US-Iran conflict. The situation is further complicated by the upcoming IPOs of SpaceX and other companies, which could create a feedback loop as demand from index-tracking funds propels shares higher. However, the overall sentiment remains bearish, with the VIX jumping 12% to a two-month high and the CME's Fedwatch tool indicating a high likelihood of rate hikes by the end of the year. The markets are now in a state of flux, with investors trying to navigate the uncertain waters, and the outcome of the US-Iran conflict will likely have a significant impact on the global financial markets in the coming days.
