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[European stocks were under pressure across the board, but the energy sector bucked the trend and led the gains; geopolitical conflicts triggered a comprehensive repricing of expectations for interest rate hikes by the Bank of England and the European Central Bank] ⑴ On Tuesday, European stocks generally fell under the impact of the third consecutive night of military strikes by the US and Iran and Trump's announcement to restart the blockade of Iranian shipping in the Strait of Hormuz and impose a 20% toll on other transit goods. The FTSE 100 in London fell 0.5%, the German DAX dropped 0.55%, the French CAC declined 0.9%, and the Italian and Spanish stock indices also closed down 0.7% and 1.07% respectively. However, energy giants BP and Shell bucked the trend and rose 3% and 1.7% respectively, boosted by soaring oil prices. (2) Brent crude oil rose more than 3% intraday, breaking through $86 per barrel, marking the first time it has reached the $85 mark since the ceasefire agreement. The Dutch TTF natural gas benchmark contract rose nearly 3% to €52.8 per megawatt-hour, while the UK natural gas contract climbed 3.3% to 128.27 pence per tsum, a three-month high. Rising energy costs are being forcefully transmitted to the interest rate pricing system through inflation expectations. (3) The money market is currently fully pricing in a 25 basis point rate hike by the Bank of England in September, with a possible follow-up hike before the end of the year. The ECB is also fully pricing in a similar rate hike in September, and expectations for another rate hike in December are accumulating. Even during the ceasefire earlier this month, the market's combined pricing for the two central banks was insufficient for a full rate hike. Geopolitical risk premiums have completely reshaped expectations for policy paths. (4) On the data front, the US CPI and Warsh's congressional testimony are about to be released. Strategists at BNY Mellon warned that inflation data will remain highly volatile and the market will fluctuate accordingly. Meanwhile, news that China's crude oil imports in June plummeted by 41.3% to a near ten-year low adds uncertainty to the demand side. If core inflation stickiness exceeds expectations, the spreads on bonds in peripheral European countries may widen further to the key threshold that triggers systemic hedging behavior.