Executive Summary

• Credit Markets: Spreads sold off, government bond yields rallied and oil prices spiked this past week, as a major US military buildup around Iran in recent weeks developed into direct strikes on Iran and a broader Middle East conflict over the weekend. On Saturday morning, US and Israeli defense forces executed substantial joint military actions in Iran, including targeted strikes that killed Ayatollah Ali Khamenei and key Iranian military leaders. In response, the IRGC retaliated with its own strikes against US military assets in countries across the Persian Gulf and strikes against Israel, and reportedly attacked three US and UK-owned tankers in transit to the Strait of Hormuz.

• To our knowledge, no European countries were involved in the US and Israel military strikes in Iran this past weekend, as confirmed by UK Prime Minister Starmer and French President Macron. However, several media reports on Sunday stated that Iranian missiles were fired toward Cyprus (where the UK operates military bases) and also hit French naval assets in Abu Dhabi. At the time of writing, France has reportedly deployed its aircraft carrier to the eastern Mediterranean sea and strike group amid heightened tensions. Starmer has since granted a request by the US to use UK naval bases for ongoing operations in Iran.