European Shares Set For Cautious Start Amid Hormuz Tensions

(RTTNews) - European stocks may drift lower on Tuesday amid lingering concerns about artificial intelligence spending and escalating U.S.-Iran tensions.

Investors also await key U.S. inflation readings, earnings from major U.S. banks, including Goldman Sachs and JPMorgan Chase, and congressional testimony from U.S. Federal Reserve Chair Kevin Warsh for directional cues. Brent crude futures extended overnight gains to surge toward $85 a barrel after the U.S. reinstated a naval blockade on Iranian shipping through the Strait of Hormuz and proposed to charge a 20 percent transit fee on cargo passing through the strategic waterway.

In a post on X, Iranian foreign minister Seyed Abbas Araghci mocked U.S. President Trump over his proposal and said Iran has always been the GUARDIAN of the Strait and will remain so FOREVER. "20 percent is of course too much. We will be fair," Araghchi wrote.

Trump also said he would back a Russian bill championed by the late Senator Lindsey Graham that would renew efforts to penalize buyers of Russian oil and natural gas.

Meanwhile, after the United States launched fresh strikes on Iran for the third consecutive night, Tehran responded with attacks targeting Bahrain, Jordan and two tankers associated with the United Arab Emirates.

Russia has sent one of its most secure airborne command aircraft to Tehran, as per flight tracking data.

Iran's Islamic Revolutionary Guard Corps (IRGC) claimed that it downed an American MQ-1 drone over the Strait of Hormuz.

Houthis launched missiles and drones at Saudi Arabia's Abha airport after strikes on Sanaa.

Asian markets were mixed as China's upbeat trade data indicated resilient global demand and strengthening domestic economic activity.

China's exports rose 27 percent year-on-year in June, the fastest since 2021, while imports jumped 36 percent to a five-year high despite lingering global uncertainties. The dollar index held steady and gold was modestly higher at $4,020 an ounce ahead of the release of U.S. CPI and PPI inflation data as well as Fed Chair Kevin Warsh's testimony before Congress that could shape the outlook for interest rates.

Money markets are pricing in nearly a 50 percent probability of a Federal Reserve rate hike in July after Governor Christopher Waller expressed caution about inflation and said a hot core inflation reading this week could prompt the FOMC to consider tightening policy at its late-July meeting.

U.S. stocks fell sharply overnight as crude oil futures soared nearly 9 percent to reach their highest level in about a month following President Trump's announcement that he is imposing the U.S. blockade on Iranian shipping.

In an apparent policy reversal, Trump said the U.S. will impose a 20 percent fee on shipping through the Strait of Hormuz, raising concerns over shipping costs, inflation risks and interest rates.

The USA will be, from this point forward, known as 'the guardian of the Hormuz Strait," said the President.

The tech-heavy Nasdaq Composite slumped 1.6 percent amid a sharp sell-off in chip stocks. The S&P 500 shed 0.8 percent and the narrower Dow dipped 0.3 percent.

European stocks ended on a muted note on Monday after the U.S. Central Command hit dozens of targets at multiple locations with precision munitions and Tehran responded by attacking Gulf Arab states, further straining the fragile ceasefire between the two countries.

The pan-European STOXX 600 index closed flat with a negative bias. While the U.K.'s FTSE 100 index finished marginally higher, the German DAX edged up by 0.2 percent and France's CAC 40 rose 0.3 percent.