TL;DR

Record $6.5T US options expiry hits; Israel-Iran tensions escalate; China rare-earth exports to US plunge.

Highlights

• Record $6.5T in US equity options expire today in the largest June "triple witching" event, raising volatility risk as market-makers rebalance 1.
• Israel escalates strikes on Iranian missile sites; Iran refuses US talks until attacks stop; US evacuates aircraft from Qatar amid retaliation concerns 394.
• Brent crude steady near $77; Citi sees risk of a spike to $90 if Strait of Hormuz closes, though a prolonged shutdown is considered unlikely 2.
• Maersk suspends Haifa port calls due to security risks, signaling potential supply chain disruptions for Israel-bound cargo 6.
• China’s rare-earth magnet exports to the US plunge 93% in May after new export curbs, raising input costs for US tech and EV sectors 8.
• Taiwan reports largest Chinese air incursion since October; UK and Japan warships transit Taiwan Strait, increasing regional tensions 720.
• EU bars Chinese medical-device firms from public contracts above €5M, escalating trade friction 10.
• Japan’s core inflation rises to 3.7% in May; BOJ holds rates steady as trade deficits widen and US tariffs hit exports 1115.
• US national debt surpasses $37T, with interest payments now at 25% of federal revenue 12.
• Gold falls to $3,360/oz, down 2% for the week as haven demand eases and Fed signals a more hawkish stance 18.
• Meta hires Safe Superintelligence CEO after failed $32B takeover, intensifying the AI talent race among US tech firms 13.

Commentary

US markets open into a technical inflection point, with a record $6.5 trillion options expiry compressed by the post-holiday calendar 1. The scale of this "triple witching" event—especially in S&P 500 contracts—raises the potential for outsized volatility as dealers unwind hedges 1. Expect heightened intraday swings and possible dislocations, particularly in large-cap equities and index-linked products 1.

Geopolitical risk remains a key driver. Israel's expanded strikes on Iranian missile sites 3, Iran’s refusal to engage in US talks 9, and the US military’s repositioning in the Gulf 4 all keep the Middle East risk premium alive. While Brent crude is stable for now, Citi’s analysis highlights the upside risk to oil if the Strait of Hormuz is disrupted, which could quickly feed through to energy equities and inflation expectations 2. Maersk’s suspension of Haifa port calls signals emerging supply chain stress in the region 6.

In Asia, China’s sharp drop in rare-earth magnet exports—US imports down 93%—threatens higher input costs for US tech and EV manufacturers, with potential supply chain bottlenecks if export approvals remain slow 8. Meanwhile, the largest PLA air incursion near Taiwan since October 7 and allied naval transits in the Taiwan Strait 20 add to global risk sentiment, though direct market impact remains limited for now.

Macro data is mixed. Japan’s inflation continues to surprise to the upside 11, but trade deficits and US tariffs are weighing on growth and complicating BOJ policy normalization 15. In the US, national debt has topped $37 trillion, with interest payments now a quarter of federal revenue—raising questions about fiscal sustainability as Treasury supply remains heavy 12. Gold has pulled back as haven demand eases and the Fed signals a more hawkish stance, though the outlook remains sensitive to further geopolitical developments 18.