Markets Brace for Record SpaceX Listing, US CPI, and ECB Decisions

The euro traded modestly higher against the US dollar during early Asian trading on Monday, with EUR/USD rising to around 1.1535 as investors continued to price in further monetary tightening from the European Central Bank (ECB).

Market sentiment remained cautious, however, as ongoing geopolitical tensions in the Middle East limited the pair’s upside potential. Investors are also awaiting Germany’s Factory Orders data and the Eurozone Sentix Investor Confidence report later in the day for fresh economic signals.

Geopolitical developments remained in focus after US President Donald Trump urged Israel not to retaliate against Iran following Tehran’s recent missile attack. Speaking to Axios, Trump warned that additional military action could jeopardize ongoing diplomatic efforts and indicated he planned to discuss the situation with Israeli Prime Minister Benjamin Netanyahu.

Meanwhile, Iranian officials warned that further attacks could follow if Israel continues its military operations in Lebanon. The comments came after a deadly Israeli strike hit Beirut on Sunday amid escalating hostilities involving Iran-backed Hezbollah. Any further deterioration in regional stability could strengthen demand for the US dollar, which is typically viewed as a safe-haven asset during periods of heightened uncertainty.

Supporting the euro, expectations for additional ECB policy tightening remain firm. According to a Reuters survey of economists, the central bank is widely expected to raise its deposit rate to 2.25% at its upcoming June meeting, with another rate increase potentially following in September. The prospect of higher eurozone interest rates continues to provide underlying support for the single currency.

Gold prices recovered during early Asian trading on Monday, with XAU/USD climbing toward the $4,345 level after recent losses. While ongoing geopolitical tensions in the Middle East continue to support safe-haven demand, expectations that the Federal Reserve will keep interest rates elevated could limit further gains in the precious metal.

Investor attention remains focused on developments in the Middle East after Israel's military reported intercepting multiple waves of missiles launched from Iran on Sunday, marking the first such exchange since early April. Iranian officials warned that any Israeli military action against either Lebanon or Iran would trigger a "crushing and comprehensive response," raising concerns about a broader regional conflict.

At the same time, diplomatic efforts appear to be continuing. US President Donald Trump said he plans to speak with Israeli Prime Minister Benjamin Netanyahu to discourage any retaliatory action against Iran. Trump also expressed confidence that Netanyahu would ultimately support a negotiated agreement, adding that the recent Iranian strikes have not altered Washington's commitment to pursuing talks with Tehran.

Despite the geopolitical backdrop, gold's upside remains constrained by expectations for higher US interest rates. Escalating tensions have fueled concerns about potential inflationary pressures, reinforcing market expectations that the Federal Reserve will maintain a restrictive monetary policy stance for longer.

Oil prices rallied sharply on Monday, with Brent crude climbing more than 3% as renewed military tensions in the Middle East heightened fears of prolonged supply disruptions across global energy markets.

Market sentiment shifted after reports emerged of fresh Israeli strikes in Lebanon on Sunday, followed by explosions heard in several Iranian cities, including Tehran, Tabriz and Isfahan, according to local media. The developments dampened expectations for a near-term resolution to the regional conflict and renewed concerns over crude exports passing through the Strait of Hormuz.

The strategic waterway, which handles roughly one-fifth of global oil shipments, has remained at the center of market concerns since tensions escalated earlier this year. Ongoing disruptions to shipping activity have significantly tightened global supply conditions and contributed to a sharp rise in crude prices since March.

Despite Iran launching a missile attack against Israeli targets over the weekend, U.S. President Donald Trump maintained that a broader peace agreement remains achievable. Trump reportedly urged Israeli Prime Minister Benjamin Netanyahu to avoid further military escalation, signaling continued diplomatic efforts aimed at preventing a wider regional conflict.

Meanwhile, the broader conflict has continued to disrupt energy markets. Tehran has maintained restrictions on shipping through the Strait of Hormuz, while the United States has increased pressure on Iranian maritime trade, contributing to a prolonged supply squeeze.

Adding to the market backdrop, OPEC+ on Sunday approved its fourth production increase in as many months. However, analysts questioned the practical impact of the decision, noting that several member countries remain unable to meet output targets due to logistical challenges, infrastructure disruptions, and ongoing geopolitical instability.

Wall Street suffered its sharpest setback in months on Friday, ending a nine-week winning streak as technology stocks came under heavy selling pressure following stronger-than-expected U.S. employment data that reinforced expectations of a prolonged restrictive monetary policy stance from the Federal Reserve.

The selloff was concentrated in semiconductor and high-growth technology shares, which have led the market's advance in recent months and helped push both the US Tech 100 and US 500 to record highs. All three major U.S. equity benchmarks closed significantly lower. Investors moved aggressively to lock in profits after an extended rally that had left valuations stretched across much of the sector.

While concerns over monetary policy were a key catalyst, many analysts believe the broader bullish outlook for technology and artificial intelligence-related stocks remains intact.

The market reaction followed the release of robust U.S. labor market data. According to the Labor Department, the U.S. economy added 172,000 jobs in May, comfortably exceeding expectations, while the unemployment rate remained steady at 4.3%.

Among individual stocks, semiconductor giants experienced significant losses. Nvidia fell 6.2%, while Intel, Micron Technology, AMD and Broadcom declined between 8% and 13%. The broad-based weakness reflected concerns over valuations after the sector’s exceptional performance earlier in the year.

Despite Friday’s broad-based decline, many analysts view the move as a healthy correction following an extended rally rather than a signal of a major trend reversal. Investors will now closely monitor upcoming inflation data and Federal Reserve communications for further clues on the direction of interest rates and the broader market outlook.