Oil Prices Plunge as Trump Cancels Attack on Iran and OPEC+ Increases Production
International oil prices fall nearly 5% following a de-escalation of the conflict with Iran and OPEC+'s decision to increase crude oil production quotas by 188 thousand barrels per day for September.
Key points
The U.S. backs Japan in a historic intervention to support the yen.
Growth in China's manufacturing activity slows.
Today at 8:00 a.m., the United States releases the July ISM Manufacturing report.
For the remainder of the day, the interbank exchange rate (pesos per dollar) could trade between $17.28 and $17.38 spot.
The easing of geopolitical tensions in the Middle East, the release of earnings from major technology companies this week (including SpaceX and AMD), and Friday's U.S. official employment report will be the main focus of financial markets at the start of the month. Against this backdrop, U.S. equity futures begin August in positive territory, with the S&P 500 up 0.5% and the Nasdaq 100 gaining 0.4%. In commodities, Brent crude falls nearly 5% to around $84 per barrel, while WTI declines 5% to $79.8 per barrel. In fixed income markets, the yield on the U.S. 10-year Treasury note falls 5 basis points to 4.68%, moving away from the highs reached since January. In foreign exchange markets, the spotlight is on the yen after the United States and Japan carried out their first coordinated currency intervention in 15 years to support the Japanese currency.
Monitor
Bolsas / Exchanges
S&P 500
7,564
0.60%
Nasdaq
28,460
0.20%
Dow Jones
52,269
1.20%
IPyC
67,308
0.60%
Monedas / FX (Foreign Exchange)
USD/MXN
17.3008
-0.20%
EUR/MXN
19.9508
-0.10%
EUR/USD
1.1528
0%
Índice DXY
99.82
0.50%
Tasas / Exchange Rates
Treasury 2 años
4.25
-4.3 bp
Treasury 10 años
4.68
-6.5 bp
TIIE 3 meses
6.58
2.0 bp
M Bono 10 años
9.19
-1.7 bp
Commodities / Commodity Markets
Petróleo (Brent)
83.2
-5.40%
Oro
4048
0.20%
What you need to know about the economy and markets
President Trump said on Sunday that he had canceled the planned military strike against Iran after receiving a request from Tehran and other Middle Eastern countries to advance negotiations. At the same time, Iran suggested on Monday that negotiations to restore normal shipping through the Strait of Hormuz are making progress. This has contributed to a sharp decline in international oil prices.
Our Take
The market is welcoming a signal of de-escalation, but the concrete solution currently under negotiation is, at best, only partial. The U.S. president's decision to suspend the attack on Iran fits a pattern observed since February, in which similar pauses have been followed by renewed episodes of tension.
The Japanese government has confirmed a historic joint intervention with the United States to counter the sharp depreciation of the yen, which had fallen to its weakest level against the U.S. dollar in four decades. Japan reportedly deployed between Thursday and Friday a total of $87 billion to counter the severe weakness of its currency. The amount used by the United States has not been disclosed, but it appears to exceed the scale of the interventions carried out in 1998 and 2011, when the U.S. contribution did not exceed $1 billion.
Our Take
Over the long term, it is unlikely that the intervention alone will reverse the yen's trend without further monetary policy normalization by the Bank of Japan and narrower interest rate differentials.
Growth in China's manufacturing activity slowed in July to its lowest level in four months. Specifically, the China General Manufacturing Purchasing Managers' Index (PMI), compiled by RatingDog and S&P Global, fell to 50.9 points in July from 51.7 in June. Output and new orders increased at a slower pace, while export orders returned to growth after having contracted.
Our Take
We believe the moderation reflects a normalization from elevated levels rather than a structural deterioration in demand, particularly as total new orders have posted their longest expansion streak since 2018 and all five components of the index contributed positively for the second consecutive month.
Later today, at 8:00 a.m., the United States will release the July ISM Manufacturing Index. In June, the indicator stood at 53.3 points, reflecting an expansion in manufacturing activity, and for July, market consensus expects a slight increase to 53.9 points. If confirmed, the index would reinforce its position in expansionary territory and point to a moderate improvement in the performance of the U.S. manufacturing sector.
Our Take
Consensus expects the ISM Manufacturing Index to continue signaling moderate expansion in the sector, without a significant acceleration. A reading in line with or above expectations would reinforce the perception of resilient industrial activity and support expectations for continued growth in the U.S. economy. Conversely, a weaker-than-expected reading would suggest a loss of momentum in the sector at the beginning of the third quarter and could temper economic growth expectations.
Corporate News
AstraZeneca is evaluating a potential acquisition of Bristol Myers Squibb in what would become the largest deal in the history of the pharmaceutical industry if completed. Although discussions remain at an early stage, the combined company would generate approximately $107 billion in annual revenue and have a market capitalization of nearly $400 billion. The news was received cautiously by the market, triggering a significant decline in AstraZeneca's shares.
Our Take
Investors are questioning the strategic rationale of the transaction given AstraZeneca's strong track record of organic growth and the potential business overlaps, particularly in oncology. Nevertheless, regardless of whether the transaction ultimately materializes, interest in a deal of this scale highlights that consolidation remains a structural trend within the pharmaceutical industry.
Prysmian agreed to acquire Atkore, a U.S. manufacturer of electrical infrastructure products, for $95 per share in a transaction that values the company at $3.8 billion, including debt. Atkore's shares surged 26%.
Alibaba shares rose 4.6% after the company unveiled Qwen3.8-Max, its largest artificial intelligence model to date, with performance metrics that the company says match the world's leading AI models and surpass Moonshot AI's Kimi K3 model across several benchmarks.
The To-do List
Monitor oil prices throughout the day, Trump canceled the planned attack, and Iran says negotiations over the Strait of Hormuz are making progress.
Follow the July ISM Manufacturing report at 8:00 a.m., consensus expects a reading of 53.9 points, up from 53.3 in June.
Tonight, make a hearty pot of frijoles charros with pork ribs and epazote, comforting, filling, and one of the best ways to kick off the week.
Set aside 30 minutes for a yoga or Pilates session at home, starting the week with calm and stretching sets the tone for everything ahead.
Today's Quote
"Make your life a dream, and a dream a reality."
— Antoine de Saint-Exupéry
Alejandra Marcos amarcos@kapital.com
James Salazar jsalazars@kapital.com
Guillermo Quechol gquechol@kapital.com
Nahely Suasnavar nsuasnavara@kapital.com
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