EMEA Morning Briefing: U.S., Iran Trade Strikes in Fight for Control of Hormuz

MARKET WRAPS

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No major economic events or corporate trading updates expected

Opening Call:

European stock futures traded lower early Wednesday. Asian stock benchmarks weakened; the dollar inched higher; Treasury yields were flat; while oil futures rose and gold fell.

Equities:

Stock futures point to a lower open in Europe, after the U.S. and Iran exchanged fire on Tuesday as the two countries continued to battle for control of the Strait of Hormuz.

"The main theme was the sharp escalation in the U.S.-Iran conflict, which sent oil prices surging and intensified the selloff in global bonds and equities," Commerzbank Research analysts said in a research report. "The renewed escalation raises the risk of a more prolonged disruption to energy flows through the Strait of Hormuz and has effectively reversed the tentative improvement in sentiment toward the conflict seen in recent weeks," the analysts added.

Forex:

The euro will be driven largely by relative growth considerations and interest-rate expectations, which should provide support for the currency, MUFG currency analysts said.

"Recent signs of economic resilience and the continued willingness of the European Central Bank to respond to upside inflation risks will continue to provide support for euro/dollar," they said.

MUFG expects the euro to rise to $1.1800 by end-2026 and $1.2000 by the end of the first quarter of 2027.

Bonds:

U.S. Treasury yields hit 4.8%, the highest of President Trump's presidency, this week. "The world is awash in debt...and the only way for us to get out of this is to grow our way out of this," Treasury Secretary Scott Bessent said at the G-20 summit.

The just-concluded summit hasn't done much to calm investor jitters. Growing stress in global markets have raised fears among many investors that leaders aren't confronting challenges that could quickly spiral out of control.

Energy:

Oil rose amid rising U.S.-Iran hostilities. The "fresh U.S. attacks on Iran raised concerns about prolonged disruptions to supply," ANZ Research analysts said.

Shipping "activity has stopped increasing and appears insufficient to prevent the decline in overall Persian Gulf exports and oil flows," the analysts added.

Metals:

Gold fell in early Asian trade. Escalating tensions in the Middle East, a stronger U.S. dollar and rising bond yields are likely weighing on sentiment, ANZ Research said. The prospect of higher energy prices is causing worries about inflationary pressures that could prompt the Fed to raise rates, it added. Copper prices weakened, as the recent tariff-driven rally is losing momentum, analysts said.

Broader risk sentiment is also under pressure amid rising geopolitical tensions and concerns over higher yields, Jinrui Futures analysts said. The copper market remains fundamentally supported, with physical availability outside the U.S. still relatively tight, while China's spot premiums remain elevated, they said. Developments around U.S. copper import tariffs would be the next catalyst, they said. Iron ore fell in early Asian trading. Expectations for strong supply in the second half of the year are putting pressure on the black metal, Nanhua Futures analysts said. Global iron ore shipments rose sequentially in the last week of August, they added.

TODAY'S TOP HEADLINES

G-20 Squabbling Overshadows Summit as Global Bond Markets Strain

ASHEVILLE, N.C.-Treasury Secretary Scott Bessent arrived here to host global economic officials in the Blue Ridge Mountains, fresh off the breakdown of trade talks with Canada, currency and bond-market interventions, and President Trump's renewed economic threats against Iran.

Two days later, the G-20 finance ministers' gathering comes to a close amid a global bond-market selloff, spats over tariffs, public insults and fighting over a group photo.

U.S. and Iran Trade Strikes in Latest Fight for Control of Hormuz

The U.S. and Iran exchanged fire Tuesday as the two countries continued to battle for control of the Strait of Hormuz.

President Trump said the U.S. strikes were launched in retaliation for Iran's attempt to mine the strait and target American servicemembers in the Middle East over the weekend.

Volkswagen Fights Chinese Competition-and Its Own Board-in Battle to Survive

When Volkswagen Chief Executive Oliver Blume took a cost-cutting plan to his board this summer that envisioned a doubling of job losses to 100,000, he was fully aware it would be rejected.

Such is the predicament of running Germany's premier industrial company, where half the supervisory-board directors are worker representatives and swing votes are held by the local government.

Germany Blames Russia for Explosive Drones Sent to Leipzig Airport

BERLIN-Germany accused Russia of being behind a plot to send explosive drones to a German airport last month and pledged to retaliate against Moscow, a rare public attribution of blame in the widening campaign of incursions and sabotage across NATO territory.

"We do not consider ourselves at war but we are the daily target of hybrid warfare," said German Interior Minister Alexander Dobrindt, announcing the findings Tuesday from an investigation into the incident at Germany's Leipzig airport last month, for which he said Russia was responsible.

New Google AI Model Said to Narrow Gap on Coding Ability

Google's artificial-intelligence research unit is set to release a new model with significantly upgraded coding capabilities, according to employees, potentially shoring up an area where the company has lagged behind competitors OpenAI and Anthropic.

The model, dubbed 3.8 Flash and referred to inside the company as "Skimaki," is scheduled for release as soon as Wednesday, the people said. In head-to-head testing within Jetski, Google's internal coding tool, the company's engineers have preferred it to Anthropic's Opus model, some of the people said.

OpenAI to Restrict Astra Model After Rating It 'Critical' Cyber Risk

OpenAI is limiting the cyber capabilities of a new model it deems capable of pulling off automated cyberattacks, adding layers of security after a swarm of its AI agents hacked a company earlier this summer.

The ChatGPT maker said Tuesday that its internal testing had determined that the forthcoming model, called Astra, is capable of devising and executing novel cyberattacks against difficult targets with only limited human input. As a result, the company said in a blog post that it has added additional layers of security to reduce the risk of misuse by hackers, or Astra going rogue and hacking targets on its own.

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Expected Major Events for Wednesday 06:00/ROM: Jul PPI

06:00/NOR: 2Q Balance of Payments

07:00/SPN: Aug Unemployment

07:00/SVK: 2Q Labour Force Sample Survey: Employment & unemployment

07:00/SVK: 2Q Average monthly wage of employees

07:30/EU: Aug EuroCOIN indicator of euro area economic activity

08:00/ITA: Jul PPI

10:00/IRL: Aug Monthly Unemployment

15:00/DEN: Aug Foreign Exchange & Liquidity

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September 02, 2026 00:18 ET (04:18 GMT)