Uncertainty over the Iran war persists

In recent weeks, equity markets have become more positive following a strong earnings season and moderate inflation figures. Consequently, implied volatility has decreased, suggesting complacency among many investors. However, rising interest rates in the US suggest that bond investors are still concerned about inflation. Furthermore, several political and macroeconomic events over the next few months could disrupt the current summer lull in the equity markets.

The 2026 Jackson Hole Economic Policy Symposium, organised by the Kansas City Fed, is scheduled for 27–29 August. This event is important because markets can use the Chair's remarks, the research agenda, and surrounding commentary to reassess policy direction, inflation tolerance, and financial conditions. A VIX-positive outcome could, for example, be a more hawkish message on inflation persistence. According to the CME Fedwatch, there is currently around a 30 per cent chance of a rate hike following the September FOMC meeting, down from 52 per cent a week ago.

The 2026 US midterm elections are scheduled for 3 November. While the outcome on election may be less important than the build-up, factors to consider  include polling shifts, the probability of control of Congress, fiscal proposals, rhetoric on taxes and tariffs, and the possibility of a disputed or delayed result. While elections alone do not guarantee a sustained spike in the VIX spike, the risk increases when political uncertainty coincides with stretched equity valuations, high concentration or an already fragile Treasury market.

The concentrationof the equity market in a relatively small number of large technology and AI-related companies can also amplify volatility. Not only should headline earnings misses that should be monitored, but also lower-than-expected cloud or AI capital expenditure guidance andr evidence that AI spending is not translating into near-term revenue or margin expansion.

Finally, the ongoing risk remains that the US–Iran conflict could cause further energy or shipping disruptions.  This risk has increased as  the Houthi movement in Yemen has made shipping routes from the Red Sea more uncertain.

From a seasonal perspective, September has been the weakest month of the year for the S&P 500 over the last 20 years.

The five-year chart shows that current levels are near the lower end of the observed range. Several previous volatility shocks demonstrate the familiar VIX pattern of long periods of compression followed by abrupt, non-linear spikes. While a low reading itself is not a timing signal, it does make the payoff more attractive if a catalyst forces equity-index protection higher.

In July, US core inflation stood at 0.2%, corresponding to an annual rate of 2.5%. On Wednesday, August 12, the US bond market priced in a 35% probability of the Fed raising its policy interest rate at the September meeting following the release of the inflation figure  that day. Should the conflict between the US and Iran continue into autumn, the risk of inflation would increase, resulting in higher oil prices, fgreater transportation costs, and increased prices for exported goods.

As the graph below shows, the Nikkei, DAX and SSE Composite (Shanghai) indices have been the top performers among all the major global stock market indices over the past month. The three strongest performers year-to-date are the Nikkei, the Russell 2000 and the Nasdaq.

On Wednesday 19 August, Danish companies Carlsberg and Lundbeck will release their interim reports. In macroeconomic news, the day begins in Japan with the release of machine orders for June. A few hours later, the UK will publish figures for the consumer and producer price indices, as well as retail sales, for July. From the eurozone, data will be released on the current account for June and the consumer price index for July. Finally, the US Department of Energy will release weekly oil inventory data, along with the minutes from the Federal Reserve’s 29 July meeting.

On Thursday 20 August, interim reports are expected from the Swedish companies Holmen and Hufvudstaden, the Norwegian company Orkla, the Danish company GN Store Nord, the US companies Deere and Walmart, and the Chinese e-commerce giant Alibaba. The day’s macroeconomic news begins with Japan’s trade balance for July, followed by Germany’s producer price index for July and the interest rate decision of the Swedish Riksbank. Next is the UK’s CBI industrial trends survey for August. Finally, we turn to the US, which will provide the Philadelphia Fed index and weekly jobless claims.

On Friday 21 August, we will receive an interim report from Nibe, a Swedish heat pump company. Friday's macroeconomic agenda is dominated by the August Purchasing Managers' Indexes (PMIs) from Japan, India, France, Germany, the Eurozone, the UK and the US. Other data releases will include Japan’s consumer price index for July, UK retail sales for July, French industrial expectations for August and a consumer confidence indicator for the Eurozone.

The S&P 500 is under pressure following the collapse of the ceasefire talks with Iran. Renewed threats around the Strait of Hormuz have pushed oil prices to a two-week high, keeping bond yields elevated and risk appetite subdued. As can be seen in the chart below, the MACD is close to generating a soft sell signal, while the index is trading below its EMA9. The next downside level to watch is the MA20, currently at 7,610.

Tech stocks sensitive to interest rates, as represented by the NASDAQ-100 index, are trading below support and approaching the MA50 level, which is currently at 29,306 and serves as the next downside target. This is followed by the MA20 at 29,027.

The OMXS30 in Sweden has been under pressure for some time, falling below the MA20 during yesterday’s trading session. MACD has generated a soft sell signal, and RSI is indicating neutral levels. Support levels are around 3,225 and the MA50, which is currently just below 3,200.

The German DAX is trading below the EMA9 level. The MACD is close to generating a soft sell signal, so the index may be heading towards the support level of 25,880.

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence in which each successive number is the sum of the two previous numbers.

MA20: 20-day Moving Average

MA50: 50-day Moving Average

MA100: 100-day Moving Average

MA200: 200-day Moving Average

MACD: Moving Average Convergence Divergence