COMMODITIES: Crude Prices Surge Amid No Iran Off Ramp, Metals Sharply Lower

US President Donald Trump has delivered wide-ranging remarks on Iran ahead of a bilateral meeting with German Chancellor Friedrich Merz. The Oval Office presser is the first live question-and-answer session Trump has provided since announcing military action against Iran on Saturday. 

• Trump says the Iran operation is “going well,” claiming that Iran’s air force, navy, and air detection have all been “knocked out.” Later adds, “their missile count is going way down.”
• Trump appears to row back on Secretary of State Marco Rubio’s suggestion that an imminent Israeli attack on Iran compelled the US to strike the country. “If anything, I might have forced Israel's hand,” Trump says.
• He says he “felt strongly” that Iran was going to attack first, based on the way indirect nuclear talks were going. “I didn’t want that to happen.”
• Trump says, in reference to Gulf States, “all those countries are now fighting against them.” He says Iran’s response shows they will hit “somewhat friendly” countries too.
• Trump suggests that senior Iranian officials “want to quit or have immunity”. He says “a lot of people are coming forward.” He says, soon they’ll be “laying down their guns.”

Asked his assessment for the worst-case scenario, Trump says if someone takes over that is “no better” than the previous regime. Trump re-visits the idea that Iranian anti-govt protestors could take control of govt institutions: “We’ll see what happens… We’ve said ‘don’t do it yet’ its very dangerous.”

• Trump reiterates that a number of Iranian officials the US had considered for an interim government have been killed in strikes. He notes that he doesn’t believe in the removal of regime officials, “that’s where ISIS came from [in Iraq],” he says. He adds, “first we have to finish off the military.”
• Trump singles out some European allies for criticism. Says Germany has been “great” and NATO Sec Gen Mark Rutte has been “fantastic.” He says Spanish President Pedro Sanchez has been “terrible,” and notes that he has directed Treasury Secretary Scott Bessent to cut off “all dealings” with Spain. He adds, “we’re going to cut off all trade with Spain.”
• USTR Jamieson Greer and Treasury Secretary Scott Bessent note that the administration is moving forward with tariff investigations. They both claim the Supreme Court ruling "reaffirmed [Trump's] ability to implement an embargo."
• Trump adds unprompted that he is “not happy with the UK either,” referencing London’s decision to bar US use of Diego Garcia. Says UK Prime Minister Keir Starmer is “not Winston Churchill.”
• Trump notes, “You could have oil prices for a little while, but as soon as this ends, prices are going to drop, I believe lower than before.” 

European bonds sold off for a second day on the Middle East conflict.

• A further surge in energy prices saw European front-end instruments sell off sharply in early trade once again, with 2Y yields up 15-20bp in the UK and Germany at one point.
• Gilts also saw a bit of additional pressure after the UK's Spring Statement brought a slightly higher-than-expected issuance target.
• Yields came off session highs going into the cash close, on a Reuters report that the US was considering supporting insurance for oil tankers in the Mideast, which helped oil prices pull back.
• While intraday losses were pared, on the day the German curve bear flattened, with the UK's seeing broad weakness and Gilts underperforming Bunds overall.
• Periphery/semi-core EGB spreads widened sharply as equities declined, with BTPs underperforming.
• Wednesday's agenda includes final PMIs and multiple ECB speakers including Villeroy and Muller.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 6.6bps at 2.155%, 5-Yr is up 5.2bps at 2.379%, 10-Yr is up 4bps at 2.752%, and 30-Yr is up 2.8bps at 3.386%.
• UK: The 2-Yr yield is up 9.6bps at 3.734%, 5-Yr is up 8.6bps at 3.961%, 10-Yr is up 9.7bps at 4.471%, and 30-Yr is up 9bps at 5.174%.
• Italian BTP spread up 5.9bps at 70.3bps / French OAT up 5.5bps at 64.1bps