The European session delivered a powerful risk-on rally as the interim US–Iran agreement to reopen the Strait of Hormuz sent shockwaves through global markets. Brent crude plunged to a 3-month low just above $87/bbl, unwinding the geopolitical risk premium that had added $5–8/bbl during the three-month standoff. European equity indices surged in response, with Spain's IBEX 35 leading the charge as volatility collapsed and investors rotated aggressively into cyclicals and financials. The DAX 40 posted a 1.15% gain, the FTSE 100 rallied 0.82%, and smaller European bourses followed suit. Lower oil prices are a direct tailwind for Europe's net-energy-importing economies, reducing input costs for manufacturers and easing inflation pressures—a narrative that resonated strongly with equity investors.

The US pre-market is extending the risk-on tone, with S&P 500 futures up 0.52% and the Nasdaq 100 gaining 0.38%. The Dow Jones is outperforming, up 0.74%, as investors favor cyclical value stocks over growth in the near term. The blockbuster SpaceX IPO—the largest US public offering in history—continues to fuel tech optimism, while the unwinding of Middle East tail risk is prompting broad-based buying across sectors. Crypto markets are also rallying, with Bitcoin up 1.89% at $65,632 and Ethereum outperforming at +2.68%, as the risk-on flows and lower energy costs for mining provide a double tailwind. The dollar is showing modest weakness as investors rotate out of defensive assets, with EUR/USD edging higher to 1.1585 and GBP/USD testing 1.3423. The Australian dollar is the standout FX performer, rallying 0.45% to 0.7065 on higher copper prices and improved global growth optimism.

Gold is under pressure, down 0.68% at $2,318.45/oz, as the unwinding of geopolitical risk reduces demand for traditional safe havens. Silver is underperforming even more sharply, down 1.05%, as its dual role as both a safe haven and industrial metal provides little support in the current environment. The precious metals selloff mirrors the broader rotation into risk assets, with investors favoring equities, crypto, and industrial commodities over defensive plays. Natural gas is holding relatively steady near $2.87/MMBtu in a quiet session, while copper is rallying 0.67% to $4.52/lb on improved demand expectations and lower mining input costs.

The European macro calendar was light, with ECB President Lagarde's remarks at 07:30 ET the only medium-impact event. Lagarde's speech will be closely watched for any hints on the pace of future rate cuts or commentary on inflation dynamics in the wake of lower oil prices. German WPI and euro-area Industrial Production and Trade Balance data all printed on the low end of impact, providing little market-moving surprises. The G7 meetings later this morning are unlikely to generate significant volatility unless there are unexpected geopolitical developments.

The US session brings a packed data calendar that could test the durability of the risk-on rally. At 12:30 ET, the Empire State Manufacturing Index is expected to decline to 13.2 from 19.6—a moderation that would confirm the ongoing manufacturing slowdown but likely have limited market impact given the index's recent volatility. The real focus is at 13:15 ET with Industrial Production (expected +0.3% m/m vs. +0.7% prior) and Capacity Utilization (forecast 76.2% vs. 76.1%). A miss on either release could reignite concerns about US growth momentum and spark a quick reversal in risk assets, especially after the strong rally in recent sessions. Conversely, an upside surprise would reinforce the risk-on narrative and potentially push the S&P 500 toward the psychologically important 5,500 level.

Later in the week, the focus shifts to the FOMC decision on Wednesday, followed by additional Fed speakers and potential guidance on the pace of rate cuts. This week's data releases will be critical in shaping Fed expectations—strong numbers could reduce the urgency for aggressive easing, while weak prints might fuel dovish repricing. Traders should also watch for any developments on the US–Iran deal implementation—while the agreement has sparked a sharp rally, any snags in the Hormuz reopening process or unexpected geopolitical complications could quickly reverse the oil selloff and weigh on risk assets. OPEC+ commentary is also worth monitoring; if the cartel signals emergency supply cuts in response to falling prices, Brent and WTI could stage a sharp rebound.

On the earnings front, this week is exceptionally light, with no major S&P 500 names reporting today. The lack of earnings catalysts shifts the focus entirely to macro data and Fed signals. Traders should be prepared for heightened volatility around the data releases this afternoon, especially if the numbers deviate significantly from consensus. The risk-on rally has been powerful, but positioning is now stretched, and any disappointment could trigger aggressive profit-taking.