Week 13: Middle East Crisis, $Oil, and the ECB's Dangerous Gamble

Added: 2026-06-03

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[00:00:33]>> Hello and welcome to Livqu's Market Talk uh our weekly review on Monday the 1st of June 2026.

[00:00:40]This is our weekly briefing which aims to break down the key stories from the past seven days and explore the subsequent implications for the markets.

[00:00:47]We'll also take a look at uh what's ahead, giving you a heads up on the events and data points to watch out for.

[00:00:55]uh listen in uh on our take of what to look uh what to focus on for the week ahead. Uh I'm joined today by uh beat Nusbalmer, founder and CEO of Macro Beat. He's an FX macro trader, researcher, and FX tutor and a market professional for now nearly 40 years.

[00:01:13]And he'll be helping us um just try and sift the the news and the the important stuff from the chaff really away from the chaff. Uh before we do that though, just a quick piece of housekeeping. Uh the content provided on this channel is forformational and educational purposes only. We are not licensed financial adviserss and none of the information shared should be considered as financial investment or trading advice. Please conduct your own research, consider your financial objectives and consult a qualified financial professional for making any investment decisions.

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[00:01:58]Uh and with that, just a quick look at what we've got on Monday today, as I said, the 1st of June, start of the meteorological summer um across the northern hemisphere. And really, it's as you were uh really we've got this war now going into its 13th well war got this dispute crisis in the Middle East. It's going on for its 13th uh week now. uh with no seeming resolution in sight despite promises from the US president uh Donald Trump that uh deal is around the corner uh and constant refute um uh backing away from that assumption from Iranian uh leaders as such. So much so we've had the same thing again uh over the weekend where President Trump has already said that um if a deal is not coming soon. Um he threatened uh if we don't get what we want, we're going to end it in a different way. he uh threatened uh to their end Iran's top negotiator Muhammad Muhammad Bagar uh Galibah uh speaker of the Iranian parliament said that Tran would not agree to any deal with the US unless the country's rights were fully protected.

[00:03:09]uh and subsequently we've had comments out uh today as said on Monday that says in light of the continuation of the crimes of the Zionist regime in in Lebanon and the fact that Lebanon was one of the preconditions for the ceasefire and that the ceasefire has now been uh violated on all fronts um including Lebanon the Iranian negotiating team is support is suspending talks and exchange of texts through mediators as coming from came initially from Tamnim Tasnim uh news service, Iranian news service. What we've had is over the weekend um strikes and counter strikes by the US and Iranian uh armed forces. Um that wasn't enough apparently to to call an end to the truce according to uh the uh the US administration. Uh but as you just heard, subsequently the Iranians have had enough and have uh now pulled all mediation whatsoever. They sent oil. Oil is up some 7% on the markets today. Um, and I guess we could talk about what's happened last week, but there's not there wasn't a material amount of uh news and information last week outside of the geopolitical situation. Uh, we do have um we had I think Kevin Walsh, he ended his first week as Fed chair. We'll have a look at that soon as we have an um FMC meeting coming up. Um, but we also have other central bank decisions coming in the next Fortnite or so that uh are quite telling. not um you know we could talk about that but I think ECB is probably at the foremost of most people's uh uh minds in terms of what we like to see. We'll go we'll get into all that with Pete now. Uh so hello. How you doing my man?

[00:04:48]>> Hi Harry. Uh not too bad. Thanks a lot.

[00:04:50]Thanks for having me. Uh >> that's all right. And uh yeah, as you rightly said, there was nothing really to talk much talk about uh uh last week other than the usual Friday news about peace, which seems to be a regular thing on a Friday >> uh just to be shattered earlier in the following week. I think you alluded to it. Um obviously the market is trading on a glass half full for weeks now. uh mainly on the basis of the view that neither Trump nor Iran actually wants to go back to war. It seems that is quite uh uh obvious. It looks like Trump is desperately looking for that offramp and has to sort of try to balance uh because problem right now is that the deal that he would be striking is actually you know worse than the one he ripped up in 2018. So uh so he has a bit of problems on all fronts. Now what you mentioned the the the C5 breaks last night and there was a similar incident last week didn't really cause any market reaction because the market just seems to think that something worse has to happen before actually it were to derail the talks. Now that those talks may have just been derailed because for some reason or another, it seems that Trump lost control of of Netanyahu or some say, you know, he gave him a hint that he has a few more days to achieve his targets before Trump would sign any deal. So there's a lot of conspiracy around going uh uh that in a few days time and Israel done whatever they done then Trump may be ready to sign some sort of aou which we all know is just really kicking the can on on the bigger issues that just cannot be solved uh on a weekly basis really which is the whole uranium stuff nuclear stuff is all a very technical story so you don't solve that on a on a on on a weekend but long story short the stop now from Iran on all the talks like you pointed out has just created quite a bit of a dollar rally. Uh oil has rallied 7%. So that is the first time that a market sort of uh uh started to get a little bit nervous that uh uh you know until this moment nothing seems to have derailed the sort of back channel talks back and forth but uh Iran seems to be quite serious that that any peace has to include Israel stopping the bombing in in Lebanon. Uh, it's a very delicate issue to comment, but you know, I think the whole world doesn't want to see a second Gaza. And I think that's why I think Iran speculates that they probably have more support out there than you might think in terms of what's going on in Lebanon and that it should be part of a wider uh solution. So personally I think you know we may have a bit of risk off today maybe leaks into tomorrow and then we probably going to get a few more positive headlines. It's really about uh what we might talk uh uh during our session the impact uh horm obviously a few more ships have passed but it's still literally still closed. So the longer this lasts, the bigger we said the impact is going to be on shortages on not just oil but other goods. Prices definely going to go up on all sorts of sim. We talked about talked about fertilizer last time. Those price shoots through the roof. Uh we have all the farmers already being in trouble in regards to that sort of food price increase and the whole inflation goes to this sort of as the knock on of that. So my personal view is we're not going to go back to war but you know I wonder how much longer we can just have horm closed the way it is for not creating additional problems and again this is we're looking at the impact on prices as we have done but also on the degradation of uh demand and the effect we're going to have the longer this continues to ro on and it's you know as I said we're in I think I think we're I've got it right in our 13th So again, these effects are going to become more embedded as we go along. Um we could get into the economics, all that, but just in terms of how that affects your trading and the way you think of things at the moment. We've been over this number of times and in the early days of this uh conflict, it was always, you know, you play the short hand. You you want to play what's in front of you right here and now. Don't get too deep into things. Don't put too much on because things change very swiftly. again two three months on now that situation hasn't really changed. So do is there any gearing that changes on that front or is just now simply just same same? Yeah, the only interesting part maybe has been that that you know we had these sort of uh uh RBA story Aussie story early in the year where the Aussie start to rally on the hawkish RBA blah blah blah and then suddenly we get like weaker CPI weaker job data suddenly we have like we have let's say on the periphery we have some interesting trades where the Aussie suddenly started to underperform we have a major peak in Aussie KBI after very long rally but these are all nothing to do with macro or let's say the broader macro that's just the sort of niche stuff where uh the only places where it can go is anything that is not directly linked with the war or directly linked with the dollar. So we gone from a a divergence between the RBA and the RBNZ to something like a convergence where we have like RBA hike slowing down or the view of them to slow down versus RBNZ suddenly turning a bit hawkish. So this is like I said the RV story. It's a bit, you know, an isolated story. We had some nice moves in Norway versus Sweden.

[00:10:45]Uh uh we see sort of big sell off in oil in the last one or two weeks on on the optimism on the story. But when we talk about the majors, when we talk about the actual [clears throat] dollar, the dollar index, then we are caught in a very very narrow range. No one is willing to actually stick their head out. Yes, we know that EC is going to hike in June. that's now more or less priced because if you look at all the data with a single mandate, you just have no other choice. Are they going to repeat what they did in 2008 and hike actually grow is at risk of going uh getting slower. Uh but in the meantime, we also have obviously repriced the fat.

[00:11:25]So we gone from fat cuts to possible fat hikes. So the whole story in foreign exchange doesn't actually change because we gone from you know uh uh uh uh suddenly expect hikes on both camps. We talk about BOJ hiking but that's not the big story anymore as it used to be because now we have the Fed possibly hiking as well. So this whole divergences have suddenly become convergencies or let's say less you know direction moves on the margin. So that's why in the majors >> we just got to stick to that daytoday, week for week near-term narratives.

[00:12:03]There's no way that you can really call that because we don't actually know. Do we go back to war? I don't think so, but we could. Who knows? Uh how long is is homeless going to be closed? How long is there really going to be shortages into autumn winter on energy in Europe? uh I don't think an ECB hike is really has to be seen necessarily as bullish for the euro because you know it's about the least we can really afford and not to talk about all the UK stuff which is again an isolated stuff on sterling not to do with macro but on the macro side hit and run >> there's no other way right now than to just to sort of you know there's some volatility with the news right so why do you want to try to try to read what Trump really thinks really wants to do and when he wants to do it, it's just impossible. So, you know, I think more shortterm makes a lot lot more sense.

[00:12:56]>> What is the phrase that I was taught and I traded? KISS. Keep it simple or stupid.

[00:13:01]>> Exactly. To be honest, there has never been a better time for KISS than right now.

[00:13:06]>> No better time. And yeah, that seems to be the situation at the moment. Um, we do have to look at what's out and how that affects the economy. and and if we turn to um sort of this week, the week ahead again ongoing as you see from the clip there ongoing face of war is one of them.

[00:13:26]Tomorrow we got Euro zone uh May flash HICP uh data on the wires. We've had uh regional states reports um back end of uh last week. I've got a note here from Dawa said that of the four main states have reported May numbers, Germany inflation undershot expectations thanks in part to a taxdriven drop in auto fuel. Uh whilst inflation was up in France, Italy and Spain on a bounce back in services. Uh like the consensus we see headline HICP rising to 3.3% annually up 3%.3 of a percentage point from April's um 31 month high. Estimates from the member state suggest that energy inflation remained the principal source of upward pressure albeit in the instance led by a combination of base effects and household energy after a relatively tame monthly change in auto fuel prices. Bank experts added that the core HICP rate likely rose uh back to its pre-war mark of 2.4% year-over-year uh from its 4 and a half year low in April due in part to normalization in package holidays and pressure in trans transport services. Uh they end by saying core goods however appear to have fared better. Um is it fair to say then that the war if we hadn't had this war we still be look at a disinflationary um environment for the Euro zone and we wouldn't would hike still even be uh a distant thought for the Euro zone um and to add to that is a June hike a mistake in your opinion um the likelihood of it being reversed is I don't think small in in terms of um immaterial I'd say because this war could be if things change and and we've seen these things change on a on a penny and the situation changes and both sides decide look we don't really want a resumption this we want to get back to some form of normality uh and they then have to reverse it. So I'm answering my own question really, but do you think it's do you think it's a mistake first of all ECB going ahead with a June hike if they choose to do so? Nick, >> uh, yeah per personally I think this is exactly the problem when you have a single mandate. Obviously they do the right thing for the mandate which is a s a single mandate of inflation. Now the problem they had in the last 20 30 years has always been the same is the way oil prices or energy prices affect the Euro zone CPI and you can just draw a chart overlay and it's basically ECB policies about oil price and gas prices which is again make you wonder whether you need a central central bank in the first place or not because a five-year-old could do that. Um now the problem is and that's why they're not going to take any chance is what if the what while the war is not restarting what happens if the status quo remains as it is the oil t is going to get through we have a overall shortage on energy prices will stay elevate so the whole price pressure is there to stay so then they can argue well it was the right thing to do so I I still think there are the means if if Oh, let's put it this way. If you believe it's a short-term thing, which we I think we all kind of do because such a war is not going to last a few years. Um, there are probably other means and it's something I argued already during COVID that uh uh fiscal policy and monetary policy may just have to cooperate better in a way that central banks don't have the the all the tools anymore in this modern world to actually address the real problem. You know like we always arguing a rate hike doesn't bring the oil price lower. I mean it's just as simple as that. Are there other means how you can sort of at least temporarily which some countries have done cut VAT on fuel cut fuel tax whatever just to soften the blow a little bit for the consumer and for the inflation side. Uh I'm well aware that you know the fiscal side is already bit strained so that cannot last forever.

[00:17:31]But if you think you have a three, four, five months window of this before it eases the pressure, then I think fiscal policy may have more to do than just simply easy hiking rates. I think it's very stupid and and very it almost feels like clunky. You know, in the modern world today, it almost feels like monetary policy shouldn't be just like that.

[00:17:53]>> But it is clunky though by by the nature of the the time it takes to effect and and and to work its magic.

[00:18:00]That is true. The only question is does it have to work its magic if oil price would top out the moment this crisis is over. We talk about wars held a speech last week about whether he will be right or not. We shall see. He's like a big big his big ideas of this massive disinflation from AI and all this stuff.

[00:18:21]Whether it happens or not we we don't know. So he's despite that we look at the US inflation data and you would argue you know it's definely going the wrong way too. Uh he is absolutely convinced that this is just a sort of bump in the road which you know I I I'm not that far of an expert to say whether it is or it is but in the case of the ECB they have to make that mistake time and time again just to be bailed out by the Fed. uh uh it was the same in 2008 maybe not as dramatic this time than it is. You can argue does one hike really make a difference? It probably doesn't.

[00:18:58]So in that sense it would be probably wrong to to talk about a massive policy error. But if prices remain elevated and they indeed go into a two three uh hikes during 2026 then there then that's insane right? One hike okay whatever.

[00:19:15]Yeah, [clears throat] I mean >> um >> yeah but sorry just to interrupt. So she speaking on the 30th of at the end of April she spoke um on prices one of the times she spoke and she said energy prices are central to the inflation outlook um and constantly linked to the inflation outlook to the Middle East conflict in energy markets and saying that uh supply chain disruptions and a rise in inflation expectations could reinforce uh these price pressures if energy prices were to rise by more and for longer than currently expected. Dur area inflation would increase further.

[00:19:47]>> Um it's really all about expectations though, isn't it? And second round effects that that should be their predominant fear, shouldn't it? Yeah. In terms of where they're at and and not purely the the energy price, as you say, because central banks have >> never been able to uh pull down um energy prices simply by rates.

[00:20:09]>> Yeah. The ECB has the old problem, right? It has the bondest bank problem.

[00:20:13]It has it has this kind of problem where it was initiated uh uh in 1999 as trying to copy the Bundes Bank as closely as possible because that creates uh uh these sort of trust into the central bank and they just seem not to get away from the fact that they just remain as soon as we have these sort of price development on energy whatever you get all the hawks out there the Germans the Belgiums the whatever else core euro which is roming that that kind 1930s kind of worried and and you know I'm not saying wrong or right but it just you have this old problem of of of the ECB being reminded actually you're a bundas bank when it comes when inflation start to go up >> and and so whenever there is these moments they have never looked through such a moment they always reacted the way they're going to react now again by hiking rates uh like I said the only reason I can't call them fools is Because if you if it suddenly turns out that in November we still talk about the same thing of horses not really being open like just semiopen and all the problem then no doubt then the price you know prices will continue to be elevated or going higher. So then I look like a fool because I go like you know I call them fools but maybe they're done the right thing but it doesn't do we both know we're talking stlflation that's what we talk about right now. The only thing we see is interesting when we quickly flip back to the US some of the data we see we just saw manufacturer ISM we're going to see uh uh service ISM on Wednesday there is a feel and I think we touched on that in one of our last chats about the dollar that you know until a few weeks ago the market would have sold dollar aggressively when the war is over go back to sell dollar because of Trump and all that stuff that seems to have eased it seems like the market is now looking again at the US exceptionalism a little bit if if if that is the right word for it where the data is holding in extremely well while we can argue they have stlflationary trend data because of inflation going up they don't have the same problem because their grow level come from a much higher level so I'm just worried that stackflation will be this next topic and and that's why I would have wished that bank of England is going to look through what's happening right now and the ECB should looking through what's happening right now and maybe just buy time for months or two uh uh because I think they could but that's just my view.

[00:22:50]>> Yes. Interesting that you say no it's all right didn't press the button. Um on the Iran situation and I've got a piece on the board here. It says Iran war inflation shock set to fall short of the 2022 surge. FT analysis shows that economists more optimistic now than three months after Russia's full-scale invasion of Ukraine. So going by what you said and just at present it looks a little bit foolhardy potentially that um ECB is going to um that should hike but like you say we don't know what's going to happen down the road and they're ensuring I guess that they can try and keep a lid as best they can on those second round effects on the Euro zone economy. So um need to try and be a bit balanced like you say that's their view but again it's really interesting this FTR article said uh in an FT review of forecast created by consensus economics it shows that inflation projections have on average increased by8 percentage points since Middle East conflict began in late February. is far below the 2.3 percentage point rise in economies forecast 3 months after Russia's full-scale invasion of Ukraine in 22 which triggered a race in Europe to secure alternative gas supplies. Uh downgrades to global economic growth projections have also uh so far been smaller than similar stage of the 2022 crisis according to the analysis. So, it's really interesting. Everyone's downplay downplaying this for some reason and and seemingly thinking maybe rightly or wrongly that this is like we talked about a little while ago a short-term um disruption if anything and we'll be right as rain.

[00:24:30]>> Yeah.

[00:24:30]>> In the next >> and it's there's a little bit of complacency is there.

[00:24:34]>> Yeah. I usually am on the side of complacency [laughter] but but this I have to say you know if you if you look at if you just let's put this way we just let's just a very try to do a very brief review of the war but what what actually happened as I think is Trump thought that war last two days right three at at most right you killed the leader at the weekend peace on Monday boom boom boom Venezuela all over again that obviously went wrong um Now we have other things that happen right so let's say Abu Dhabi or the UAE has exited OPEC we know the US is drill baby drill uh so once and I think this is maybe where the idea is coming from I could think that's why I'm also not on the trying not to bet too much on the complacency even though that would be my natural trading style I think like you have Trump obviously doesn't want to have war again he wants to open it uh people going to pump like crazy because there's a lot of money that got lost in the Middle East. Uh there's like you know everyone's gonna just just produce up to the limit that he can whatever the quotas are from OPEC. So I think the way step is the first step to maybe definitely once a war is over there's a race to the bottom of oil at some point.

[00:25:58]Yes, we know some stuff has to be brought back online and there's some delays here and there and so that's why we're not going to have oil glued right away. But if you look a bit further out, you have to expect that, you know, if you think the money that got lost from Saudi Arabia, Qatar, UAE now in these sort of few months of the war, the damage that's gone done to their reputation as whatever they try to build up, it's huge, right? That has to be fed one way or another. So that is the only reason why I'm actually on the sort of main theme of underplaying this maybe or not betting on complacency. Politically I'm nervous as in complacency. I totally agree with you. I mean there's they exchanging back and forth exchanging a few missiles over the weekend which is not your normal kind of stuff.

[00:26:49]>> Uh so there is the risk. What always makes me a bit nervous on these situations is the accidental war as in you know the wrong missiles at the wrong place at the wrong time creating all sorts of of of mess and that is obviously the risk if you have like the Gulf is full of American warships uh missiles are flying up and down the the Gulf uh that is a worry. Well, sorry.

[00:27:18]>> I was going to say and I guess all of this is being cushioned by this AI phenomenon that we got at the moment uh and which is keeping the equity markets buoyant uh and very optimistic about the future. Uh and I think maybe that is playing into the psyche a little bit that against this backdrop of of uh the oil crisis, you have this tech boom um that's really promising to to revolutionize the way we we live and work and everything else that that comes with that. And there's a lot of time and money especially a lot of money been invested into the AI boom and getting that right and and the race to be uh the the the peak the top provider of that and so I think there is an element of that in mixing with all this as well.

[00:28:03]It's you know it plays into the corporate world and all that sort of stuff. Yeah.

[00:28:07]>> Um well this is I want to sort of move on to the big key point of uh this week coming week which is non-farm payroll.

[00:28:16]Um we have just as a matter of course you got Australian GDP Q1 GDP that's really back uh backward looking stuff now really now we're in the uh summer months uh you've got um US non-farm payrolls this week Barclay's reports here say we'll be closely watching the US labor market data for May um they forecast 75,000 I think the number is a bit higher I think it's about 93,000 if I'm correct for non-farm payrolls around that 93 95,000 down for 115 15,000 seen uh last month. Uh but Barclay's uh with 73,000 for the headline and private non-farm payroll says alongside an unchanged unemployment rate of 4.3%.

[00:28:57]Says barring revisions, this would place the four month moving average of payroll gains at 55,000 which we regard as underlying as the underlying pace. Uh we'll also get jolts survey data. We've got ADP on Wednesday, the private payroll uh report as well. uh as well as initial job list as as usual. Uh on the jolts, um Barkley says that we think job openings remained relatively flat at 6.9 million from 6.866 million previously.

[00:29:26]So the labor market data in the US is one to watch. Um again, uh you're trading this in the short term. Uh where how'd you get into the the labor market?

[00:29:37]would what would be an anomaly anomaly for you in order to uh maybe uh be inspired to press the button on Friday when the numbers [laughter] >> that's a very good that's a very good way how you put it motivates you to press the button on Friday afternoon after we chiggle all week >> no to be honest the the sensitivity from payroll data has gone away a little bit since that sort of dip that we saw not so long ago didn't actually materialize so when the fed shifted to uh worry about the job market away from inflation. That obviously didn't prove to be correct. The job market seems to be all right. And so I think we we would need to, you know, I think we talking about big misses or big beats where you may see a trade. I just cannot see and I hate to sound so boring because I much rather talk about real macro stuff. But the reality is the market just goes from next data to next data and the only real deciding fact is where do we it's like today again right it's like one headline from Iran and everything is uh is on its head so why do you want to really commit you can have your view about the US economy US jobs and in theory about uh whether the Fed is now starting to hike or not and then everything falls apart by whatever the big beautiful piece deal and and all that stuff. Um so personally I I will just make a judgment call on the day. I see where the expectations are. I know where the market is and then decide. But I would say for a quick trade I would need to see a big miss. So I want to see something below, you know, 50K or 40K on the top. I would want to see something in the 130s before I would even think of pressing a button. any anything in a I don't know 75 to 115 range I I probably don't bother because there is nothing to bother in my it's just taking over the way we know it which is actually solid job grow and no problem >> interesting well nicely rounded up um but thank you very much for um your words today much appreciated >> thanks for having me Harry >> always a pleasure uh we'll have your we'll put a link up to where people can find you if they want to a bit more of your insight into the markets and trading and so forth. Anyone who's missed the start of this episode, go back and listen to it on um our social media platforms or on the uh podcast platforms out there, the likes of Apple iTunes and Amazon Music and the and the like. So, we're all on we're all all over those as well. But, uh thank you all for listening. Thank you to speak again and um good luck trading this week and um we'll see you again for another episode soon.

[00:32:25]>> Thank you very much Harry. Have a lovely afternoon. Thank you. See you. Bye-bye.

[00:32:28]>> Likewise. Bye. Lives keeps serious market participants ahead of the news around the clock. Start your free trial at liveswalk.com.

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