Macro Wrap

Global risk sentiment remained fragile overnight amid escalating tensions in the Middle East, with Iran reportedly rejecting a US ceasefire proposal and President Trump warning Iran “could be taken out in one night.” The President added that ceasefire agreement must include reopening the Strait of Hormuz. Sentimentally negative for risk assets

Iran reportedly passed a rejection of a temporary ceasefire proposal to mediator Pakistan. Leaders in Tehran are instead demanding a permanent end to hostilities, the lifting of all sanctions, and the US funding substantial reconstruction efforts. They warned that any US strikes on civilian targets would trigger massive retaliation against Gulf energy infrastructure. Additionally, Iran has also threatened to block Bab Al Mandeb supplying 12% of world oil and gas trade. Positive for Crude oil and NG.

US markets pushed higher but lacked direction, flipping between gains and losses throughout the session. The S&P 500 and the Dow Jones Industrial Average edged 0.4% higher, while the tech heavy Nasdaq closed 0.5% in the green. The VIX rose 1.3% to 24.17, highlighting ongoing uncertainty.

Bond markets were little changed, with US Treasury yields higher at the front end. The 2 year yield rose 1bp to 3.85%, while the 10-year yield remained steady at 4.33%. Interest rate futures now price no change over 2026. The USD index was unchanged at 99.99, Brent crude oil prices rose 0.7% to USD109.77. Gold dropped 0.6% to USD4,650

The US ISM services PMI index fell by 2.1 points in February, to 54.0, remaining firmly in expansionary territory and close to the average level over the past six months, The index capturing prices paid for materials and services jumped by 7.7 points, the steepest rise in thirteen years, to 70.7.

Data watch: we have ADP employment, durable goods order, and New York Fed 1-year inflation expectation.