Middle East Tensions Sink Wall Street's Early Gains on July 20
Escalating Iran conflict fears wiped out Monday's stock rally, lifted oil and Treasury yields, while Canada's June CPI cooled to 2.8%.
Wall Street reversed sharply Monday as rising Middle East tensions overwhelmed an early bullish mood, with reports of nearly 100 U.S. troops injured in Iranian attacks and President Trump vowing Iran would "pay many times over" for killing American soldiers. The geopolitical headlines drove investors into defensive positions late in the session, erasing gains that had built through the morning hours.
Energy markets responded swiftly to the heightened risk environment, with crude oil futures settling at $82.48. At the same time, Treasury yields climbed to new highs, dragging the U.S. dollar higher across most major pairs. Axios reported that the Trump administration is focused on holding Iran accountable for violations of an existing memorandum of understanding as well as recent American military casualties.
Read more Mediators Propose 10-Day Strike Halt to Salvage US-Iran Nuclear Deal →
Mediators attempted to de-escalate the standoff by proposing a 10-day cessation of strikes aimed at reviving the U.S.-Iran nuclear deal, and Iran signaled openness to the mediation proposals. European equity markets closed mixed as traders also weighed a leadership change in the United Kingdom, where John Healey was named Chancellor of the Exchequer.
On the economic data front, Canada's June CPI rose 2.8% year-over-year, coming in just below the 2.9% consensus estimate and well below May's 3.2% reading. Prices fell 0.4% on the month, driven largely by lower gasoline costs, though travel-related categories surged due to FIFA World Cup demand for hotels, airfares, and rental vehicles. The softer inflation print weakened the Canadian dollar, pushing USD/CAD up 0.35% and back above its 100-hour moving average toward session highs near 1.4070.
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