5 Market-Moving Stories This Week: Israel-Iran Tensions, G7 Summit, and the Fed in Focus

Markets enter the week with a sharp risk-off tone as geopolitical tensions, trade conflicts, and central bank decisions intersect. Here are five key developments investors are closely watching:

1. Israel-Iran Conflict Intensifies, Oil Surges Again

The Middle East is on edge after another weekend of violent exchanges between Israel and Iran. Despite global diplomatic efforts, Tehran has ruled out a ceasefire while Israeli airstrikes continue targeting nuclear and ballistic sites.

By early Tuesday, Brent crude rose 0.4% to $74.53 and WTI crude climbed 0.5% to $71.64, after earlier gains of over $4. The latest attacks have triggered fears of a wider regional war, with Israel urging civilians near Iranian nuclear facilities to evacuate.

Markets remain on high alert as energy supply disruptions and rising oil prices could trigger inflationary ripple effects globally.

2. G7 Summit: Diplomacy and Trade Tensions

G7 leaders are convening in Canada this week with two major challenges on the table: the Israel-Iran conflict and ongoing trade disputes with the U.S.

While a joint statement urging de-escalation is likely, the political dynamics are fragile. German Chancellor Friedrich Merz emphasized a dual-track approach—supporting Israel's right to defend itself while urging Iran to abandon nuclear ambitions.

Canadian PM Mark Carney signaled readiness to retaliate against U.S. steel and aluminum tariffs if the White House refuses to withdraw them. With President Trump's protectionist stance dominating global policy debates, investor sentiment around international cooperation remains low.

3. Federal Reserve Decision and Central Bank Lineup

The Federal Reserve's interest rate decision on Wednesday will anchor market focus. The Fed is expected to hold rates at 4.25%-4.5%, but the forward guidance will matter more—especially after a fresh surge in oil prices added inflationary pressure to an already cautious environment.

The Fed is navigating delicate ground: benign inflation, stable jobs data, and the lingering impact of Trump's tariffs on economic activity.

Other major central banks—Switzerland, Sweden, the U.K., and Norway—are also set to announce their rate decisions this week. Policy updates from these banks will shape the global monetary narrative alongside geopolitical developments.

4. U.S. Retail Sales: Consumer Resilience or Warning Sign?

Amid trade uncertainties, U.S. retail sales data for May will serve as a key barometer of domestic demand. Economists forecast a 0.6% monthly decline, reversing the modest 0.1% growth in April.

Encouragingly, consumer sentiment rebounded in June per University of Michigan data, driven by hopes of a U.S.-China trade détente. However, rising oil prices due to geopolitical risks could undermine that optimism quickly, putting pressure on future retail and discretionary spending.

5. China's Mixed Economic Data

China reported mixed economic figures for May, reinforcing the uneven global recovery. Industrial production rose 5.8% YoY, slightly below estimates of 5.9% and down from April's 6.1%. The underperformance reflects weaker export demand, especially from the U.S., due to elevated tariffs.

On the upside, Chinese retail sales exceeded expectations, driven by holiday spending and local promotional events. This signals pockets of consumer strength even as external headwinds persist.

For real-time economic data releases and macro indicators, refer to the Economics Calendar. To monitor commodity market reactions to geopolitical shifts, including energy prices, use the Commodities section.