Peak Iran war fear remains elusive, so brace for more severe financial market turbulence. Treasury Secretary Scott Bessent highlighted on Sunday that “sometimes you have to escalate to de-escalate.” Indeed, US President Donald Trump gave Iran until today (7:44pm, New York time) to “fully open” the Strait of Hormuz or have its power plants destroyed.

In response, Iranian officials vowed to close that crucial waterway “completely” if Trump follows through on his threat. Iran has both the capability and the incentive to destabilize global markets and impose as much economic/political pain on the US and its allies.

An energy shock with no end in sight, major central banks edging toward tightening despite weak growth, and rising borrowing costs hitting already stretched public finances are a brutal mix for risk assets.

USD risks remain skewed to the upside driven by dollar funding needs in periods of financial market stress. CAD and NOK should also perform relatively well the longer this energy price shock persists. Both Canada and Norway get the terms of trade boost and have fiscal space to absorb some of the growth drag to domestic demand.

No policy-relevant economic data due today. Fed Governor Stephen Miran speaks today and is poised to justify his case for a rate cut amid upside risk to inflation.