Now the ball is in Iran's court

A look at the day ahead in European and global markets from Wayne ColeAs if there wasn’t enough uncertainty in the world already, President Trump has to get the United States embroiled in another Middle East conflict. It’s not often a president announces an attack on another country via social media, or that the word “bombs” is used in all caps.The U.S. administration says it’s not at war and it will not escalate if Iran makes peace. Then again, it also said it was not aiming at regime change in Iran, until Trump posted on social media about that very prospect.For now the ball is in Tehran’s court and it has not yet struck at any U.S. site, although its parliament was reported to have approved an attempt to close the Strait of Hormuz. Iranian media said such a move would need approval by the Supreme National Security Council.Polymarket even makes a book on the chance of Iran managing to close the Strait, and that’s currently at 47%. So, suddenly every market commentator is an expert on how to close shipping lanes, the efficacy of bunker busting bombs and the intricacies of enriching uranium.The market position is to hope this U.S. intervention will not escalate, and perhaps might even make the region safer should Iran’s nuclear ambitions really be set back by years.Oil is up almost 2%, but well off early five-month peaks as analysts note OPEC has plenty of extra supply to add if they want.Wall St share futures are down 0.3%, having started with losses of 1%, while European futures are off 0.4% or so. The dollar is marginally firmer on the euro and yen, reflecting the reliance of the EU and Japan on imported oil and LNG, and the U.S. status as a net exporter.Treasury yields are up slightly, so not many safe-haven bids there, while Fed fund futures are down a tick, likely on the risk a sustained rise in energy costs could add to inflationary pressure just as tariffs are being felt in prices.Fed Chair Jerome Powell is set for a grilling on all this when he faces Congress on Tuesday and Wednesday, along with queries on Trump’s threats to fire him. It will also be interesting to see how Powell responds to Fed Governor Waller’s sudden embrace of a July rate cut, when it seemed the FOMC choir had all been singing from the same cautious hymn sheet.Markets imply still only a 16% chance of a July easing, preferring a 70% wager on a September move. (0#USDIRPR)Key developments that could influence markets on Monday:EU and UK PMIs for JuneIntroductory remarks by ECB President Christine LagardeAppearances by Fed members Waller, Bowman, Goolsbee and KuglerOil supply shocksOPEC spare oil production capacityMideast Gulf monthly crude oil exports(By Wayne Cole; Editing by Edmund Klamann)