Manufacturing Surge and Iran Tensions Drive Oil, Yields Higher

US equities closed modestly higher Monday as a blowout manufacturing print offset renewed geopolitical anxiety. The S&P 500 added 0.23% to 7,599.96 and the Nasdaq 100 outperformed with a 0.72% gain to 30,513.86, while WTI crude surged 4.14% to $92.16/bbl on fresh Iran ceasefire doubts. The 10-year Treasury yield climbed to 4.475%, up roughly 2 basis points, and the dollar index edged up 0.24% to 99.20. Gold retreated 1.07% to $4,475.20/oz as the stronger growth and dollar narrative undercut haven demand.

The ISM Manufacturing PMI printed at 54.0% in May (ISM) — a 1.3 percentage-point beat versus April's 52.7% and the highest reading since May 2022 — anchoring the session's risk-on tone. New Orders surged to 56.8% from 54.1%, and the Backlog of Orders expanded to 52.2%, signaling durable forward momentum. The Prices Index remained hot at 82.1%, only modestly off April's 84.6%, with steel, aluminum, and petroleum costs — partly attributable to the Middle East conflict, cited in 42% of panelist comments (ISM) — keeping inflation concerns front and center. The data implied annualized GDP growth near 2.2% and kept Fed rate-hike speculation alive, compressing the bond market's room to rally.

Geopolitical risk was the session's other dominant driver. Weekend reports of fresh US strikes on Iranian sites and a warning from Defense Secretary Hegseth that full military operations could resume pushed Brent crude toward the $92–$94/bbl range. The Strait of Hormuz remains effectively closed to normal commercial traffic, sustaining an energy supply premium that is feeding directly into the ISM Prices component and headline inflation expectations. Gold's underperformance relative to oil reflects a market rotating toward growth-sensitive commodities over pure haven assets, while the dollar's modest gain illustrates the twin support from stronger US data and risk-premium flows.

Copper markets added a secondary layer of complexity, with the US-LME price premium re-expanding above $500/ton ahead of the June 30 Commerce Department deadline on tariff recommendations (Bloomberg). Trump's potential imposition of a phased 15%-to-30% universal import duty on refined copper — layered atop the existing 50% Section 232 levy on semi-finished products — is already distorting global flows and embedding additional cost pressures into manufacturing supply chains. With the ISM Prices sub-index already near multi-year highs, any further copper tariff escalation would compound the Fed's dilemma between growth and inflation.

Markets will be watching three catalysts closely this week: any formal statement from Trump or Hegseth clarifying the US-Iran ceasefire status, Friday's nonfarm payrolls report which will be read in the context of Monday's manufacturing beat, and any Commerce Department signals ahead of the June 30 copper tariff deadline. A sustained oil move above $95/bbl would likely reset rate-cut timing expectations significantly further out, while resolution of the Hormuz situation remains the single largest potential relief valve for both energy markets and the Fed's policy path.