TL;DR

U.S. weighs Iran strikes; equity allocations hit record; Brazil hikes rates to 15%, surprising markets.

Highlights

• Trump has approved Pentagon plans for potential strikes on Iran but is delaying a final order, while pressing the Pentagon on the feasibility of a bunker-buster strike on Fordow15.
• U.S. military has repositioned aircraft and naval assets away from Gulf bases as a precaution against possible Iranian retaliation2.
• The U.K. government is debating support for potential U.S. action against Iran, with Prime Minister Starmer convening an emergency COBRA meeting and placing the cabinet on alert34.
• The U.S. Senate will hold a classified briefing on Iran next week amid heightened Israel-Iran tensions6.
• Goldman Sachs reports U.S. investor equity allocations have reached a record 53% of financial assets, surpassing dot-com era peaks; retail and foreign participation are at all-time highs8.
• Brazil’s central bank unexpectedly raised its Selic rate to 15%, the highest since 2006, citing persistent inflation and strong domestic activity7.
• The Federal Reserve announced plans to cut staff by 10% over several years, part of broader federal downsizing9.
• Microsoft signals it may exit OpenAI equity talks over terms but will retain access to OpenAI tech through 2030 under existing contracts11.
• Ohio House passed a bill to exempt capital-gains tax on crypto payments up to $200 and codify digital asset rights12.
• Honda is recalling 259,000 U.S. vehicles due to a brake pedal defect; no injuries reported10.
• Caris Life Sciences raised $494 million in a Nasdaq IPO, with shares opening 28.6% above offer price13.

Commentary

Geopolitical risk in the Middle East is elevated as the U.S. edges closer to direct involvement in the Israel-Iran conflict. Trump’s authorization of strike plans—while holding off on a final decision—keeps markets on alert for any sudden escalation15. The repositioning of U.S. military assets and the U.K.'s active contingency planning further underscore the risk of regional spillover234. The Senate’s upcoming classified briefing signals that Washington is preparing for a range of outcomes6. Energy markets, especially oil, remain sensitive to any military developments in the region.

Equity markets are showing signs of exuberance, with U.S. investor allocations to stocks now at record highs, exceeding even the dot-com era8. Retail and foreign inflows are both elevated, increasing the risk of sharp reversals if sentiment shifts. This crowded positioning comes as volatility could be triggered by either geopolitical events or macro surprises.

In monetary policy, Brazil’s larger-than-expected rate hike to 15% highlights persistent inflation pressures in some emerging markets and stands in contrast to the Fed’s steady stance79. This divergence may support BRL and attract yield-seeking flows, but also signals a challenging environment for global risk assets if EM tightening continues.

On the corporate side, Microsoft ’s willingness to walk away from OpenAI equity talks introduces uncertainty in the AI sector, though its existing access to OpenAI technology provides some stability11. The strong IPO debut for Caris Life Sciences points to renewed risk appetite in biotech13. The Ohio crypto bill, if enacted, could encourage more routine use of digital assets and attract blockchain activity to the state12. The Honda recall is notable for the auto sector but appears contained10.

Traders should monitor overnight headlines for developments on U.S.-Iran action, watch oil and equity futures for volatility, and remain alert to any signs of risk-off sentiment given crowded positioning.