Markets on potential US-Iran deal, inflation, growth, and SpaceX

From geopolitical fear to tactical relief

The second half of the week clearly illustrated the current state of affairs for financial markets: not true calm, but a constant alternation between shock and relief. The Middle East remained the center of attention, with Iran striking US bases in Bahrain, Kuwait, and Jordan in response to American attacks in the Strait of Hormuz, and the United States subsequently launching new strikes against targets inside Iran. In a matter of hours, the market shifted from fears of a new regional escalation to the possibility of a deal over the weekend.

The turning point came when Donald Trump canceled the strike order scheduled for that day and hinted that an agreement with Tehran could be reached quickly. Iran, through its media and official statements, responded at least partially positively, while still claiming its own interpretation of the text. Pakistan also confirmed the existence of a written draft agreement between the United States and Iran, reinforcing the idea that diplomacy was once again taking precedence over military logic.

The market reaction was immediate. On Thursday, the S&P 500 rose 1.8%, the Nasdaq Composite 2.5%, and the Dow Jones 1.9%, just as oil prices retreated on hopes of a cooling of the conflict.

Wall Street recovers, but remains selective

At the end of the week, the S&P 500 closed at 7,431.46 points, up 8.56% since the beginning of the year. The Nasdaq Composite reached 25,888.84 points, up 11.39% for the year, while the Dow Jones closed at 51,202.26 points, up 6.53% since the start of 2026. The overall picture is of a stock market that remains positive, but increasingly dependent on two factors: the resilience of technology profits and the hope that the energy shock will not turn into a new wave of recession.

In Europe, the movement was similar. The Euro Stoxx 50 reached 6,181 points on June 12, with a daily gain of 2.05% and a monthly gain of 5.46%. However, the ECB has complicated the situation: the rate hike after three years disrupts the idea of a stable monetary policy and signals that Frankfurt is especially concerned about the transmission of the energy shock to inflation.

US inflation: the data that changes the tone of the week

The most significant macroeconomic news came from the United States. Annual inflation rose to 4.2% in May, from 3.8% in April, the highest level in nearly three years. Core inflation, excluding energy and food, rose to 2.9%, while energy prices recorded a 23.5% annual increase and gasoline a whopping 40.5%. These figures reveal a clear trend: domestic demand doesn't appear to be out of control, but the shock to raw materials is directly affecting final prices.

This makes the Federal Reserve's job more difficult. If inflation were merely geopolitical, the central bank could look beyond the data. But when energy, transportation, food, and expectations begin to intertwine, the risk is that imported inflation will become domestic inflation. This is why the bond market has moved cautiously: the yield on the 10-year Treasury note fell from 4.52% the previous week to around 4.48%, benefiting from hopes of an agreement, but without showing a true collapse in yields.

The ECB raises rates and cuts growth

In Europe, the European Central Bank has raised its three main interest rates by 25 basis points. Effective June 17, the deposit rate will rise to 2.25%, the main refinancing rate to 2.40%, and the marginal lending rate to 2.65%. This is a significant decision because it comes in an already fragile environment: the ECB now forecasts average inflation of 3.0% in 2026, 2.3% in 2027, and 2.0% in 2028, while euro area growth is estimated at 0.8% in 2026, 1.2% in 2027, and 1.5% in 2028.

The combination is delicate: higher inflation, lower growth, higher interest rates. For European markets, this means living with still-sustained stock valuations, but with a rising cost of capital just as consumers and businesses are forced to absorb higher energy costs.

Oil, Gold, and Currencies: The Risk Thermometer

Oil was the real indicator of the week. Brent crude fell to $87.33 a barrel after starting near $93, signaling that the market had begun to price in a possible more orderly reopening of the Strait of Hormuz. This move supported stock markets, as cheaper oil reduces the risk of further inflation and eases pressure on central banks and consumers.

Gold rose slightly while the dollar retreated. The euro and pound showed limited movement, consistent with a currency market that has yet to choose a strong direction: on the one hand, there are higher European rates, while on the other, the dollar remains a safe haven in times of tension.

Technology: Xbox undergoing renovation, SpaceX makes history

On the corporate front, Microsoft has returned its focus to the gaming sector. Xbox is reportedly planning major layoffs and budget cuts, while more profound reorganization options are also being explored, including a possible separation or transformation into a standalone subsidiary. This is an important signal: even among major tech giants, not all areas are growing at the same rate.

On the other hand, SpaceX had a historic first day on the stock market. The stock rose approximately 19%, from its initial public offering price of $135 to a close around $161, bringing the company's valuation to approximately $2.1 trillion. This debut confirms investors' enormous appetite for technology, space, defense, and artificial intelligence, but also the market's willingness to pay very high multiples when the growth narrative is sufficiently powerful.

Conclusion: Relief rally, no return to normality

The week thus ends with a mixed message. Stock markets have recovered because the risk of open war seems to have receded, oil prices have fallen, and the market has favored the possibility of a US-Iran agreement. But three problems remain beneath the surface: US inflation at 4.2%, the ECB forced to raise interest rates, and European growth revised downward.

The rebound in risky assets is understandable, but it shouldn't be confused with a return to normalcy. Markets are buying a truce, not a definitive solution. And in the coming weeks, the difference between the two could become crucial.