A look at the day ahead in European and global markets

By Wayne Cole,  Chief Correspondent, Treasury

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It's been a shaky start to the week for markets as Iran and the United States trade attacks in the Gulf, while Tehran claims to have closed the vital Strait of Hormuz. President Donald ‌Trump insisted the strait was open to commercial traffic, and U.S. officials said 20 ships were escorted through the waterway in the previous 24 hours.

The UKMTO reported transits had already slowed to 10 by Friday, and ship tracking sites showed no vessels in the narrowest part of the strait on Monday, or at least none with their transponders on.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 10, 2026. REUTERS/staff 

The mere threat to shipping was enough to see Brent and U.S. crude ⁠rise almost 4%, nudge 10-year yields up 2 basis points and lift the dollar broadly. The Nikkei led Asian markets lower, and European share futures are down 0.6% or so.

Nasdaq futures lost 0.6% with investors increasingly focused on the looming earnings season and whether sky-high expectations for AI-related companies and chipmakers can be met. The major banks kick off from Tuesday, while Netflix (NFLX.O), opens new tab and General Electric (GE.N), opens new tab are also on the docket.

Analysts at BofA warned the AI capex boom was eroding cash generation with hyperscalers having spent $234 billion this year and forward free cash flow expected to turn negative for the first time since at least 2007.

Graphics are produced by Reuters

Investors also nudged up ‌the ⁠chance of a hike in interest rates from the Federal Reserve, just a day before Chair Kevin Warsh is due to face Congress for the first time in his new role.

Inflation figures for June on Tuesday could show some cooling in the headline rate of 4.2% as petrol prices decline, though some of that will reverse now that oil is rising ⁠anew.

The dollar firmed to 162.05 yen , regaining some of the ground lost on Friday when Japanese Finance Minister Satsuki Katayama floated an idea to encourage the $1.8 trillion Government Pension Investment Fund (GPIF) and other retirement vehicles to bring some of their cash ⁠pile home.

The pound eased to $1.3381 ahead of a pivotal week in UK politics as Andy Burnham is expected to be formally anointed as Labour leader on Friday and named as prime minister on July 20.