Markets are in a classic risk-off mode and bracing for the broader geopolitical fallout from the US-led military operation against Iran. USD is up across the board, global equity markets are selling off, gold surged by over 4%, and Brent crude oil prices soared as much as 13%. Most major sovereign bond yields climbed as the spike in crude oil prices pushed up inflation expectations, outweighing the supportive effect of haven flows into bonds.

Unsurprisingly, currencies of net oil-importing countries are underperforming while those of net oil exporters are holding up better (CAD, NOK, MXN). Central banks in Indonesia, India, and Turkey (all three are major net oil importers) intervened to stabilize their currencies and financial markets.

President Donald Trump said on Sunday that the US military intends to sustain its assault on Iran for “four to five weeks” if necessary. The longer the conflict drags on, the thicker the fog of war becomes, and the more durable the latest market moves are likely to prove. But risk assets will rebound quickly if the campaign weakens or removes the Iranian regime.

Beyond geopolitics, the broader direction for USD and risk assets will hinge on this week’s US jobs data. Check out our Driver for the Week Ahead for more details. Today, the data spotlight is the February ISM manufacturing index (3:00pm London, 10:00am New York). The headline index is projected at 51.5 vs. 52.6 in January. Pay attention to the Prices Paid and Employment sub-indexes for signs that the tension between employment and inflation is diminishing or worsening.