After rallying on Monday on hopes that the Israel and Iran conflict would remain contained, stock markets have lurched lower again on Tuesday after US President Trump left early from the G-7 summit in Banff and told Iran to evacuate Tehran, signalling potential escalation of the conflict. Trump said he left the summit early due to something “much bigger” than discussing a ceasefire. Israel and Iran meanwhile traded strikes for a fifth day. But reports have indicated that Tehran is willing to negotiate, but it takes two to tango and Israel won’t stop until it feels like it’s done enough. Diplomatic sources in Iran have reportedly pushed for a cease-fire, but Israeli PM Netanyahu said on Monday his country was “not backing down” from eliminating Iran’s nuclear programme. Palantir – which has skin in the game in terms of the global defence outlook – hit a record high.

Markets are very headline driven right now: Gold surrendered most of its safe haven bid to trade back below $3,400 on Middle East optimism, before climbing again overnight as some of the optimism faded on Trump’s remarks/early exit from G7. The gold trade is a bit tired and we are looking for fresh momentum – perhaps from the Fed and the tax bill moving through Congress right now? Likewise crude prices gave back most of the Israel/Iran war spike amid peace deal optimism, only to rally again after Trump called for the evacuation of Tehran. The crude market is not what it was in the 1970s when we saw conflict driven a long-term surge in prices and resultant stagflation in the West. We have a new energy paradigm and each unit of GDP requires far less oil than it used to, and we have the shale revolution which means the US is a net exporter of crude.