Markets start to react to an increase in geopolitical risk.

Wall Street, up until yesterday, had taken the increased risk of further escalation in hostilities between Israel and Iran would have greater implications for the global economy pretty well. Almost dismissing the likelihood. Indeed, on Monday, risk assets rose, while “risk-off” assets, such as the dollar and bonds, fell. Trump’s comments suggesting that civilians should leave Iran and that Iran surrender unconditionally, along with greater fear that Iran would try to close the Strait of Hormuz, a critical bottleneck for global oil supply, sent oil prices higher and shares lower yesterday. The consensus amongst political commentators is that shutting the Strait would damage Iran as much as others, so it is unlikely to happen. Studies indicate that oil prices would need to spike significantly further from here to have a material impact on the global economy. The price is still lower than it was at the start of the year.

The Bank of Japan left rates unchanged as expected, and tonight we have the much-anticipated Fed meeting. Then on Thursday, the Bank of England meet and neither is expected to move rates, the commentary that comes along with it will be most important.