Take Five: Time to cool down?

LONDON, June 20 (Reuters) - Rising oil prices, Middle East tensions, a NATO meeting and a testimony by the U.S. Federal Reserve chief all vie for market attention in the days ahead.
Here's your heads up on the week in world markets from Alden Bentley in New York, Kevin Buckland in Tokyo, Amanda Cooper and Lucy Raitano in London and Andrew Gray in Brussels.
The Israel/Iran war has lit the fuse for a possible oil supply shock for investors. Brent crude has topped $75 for the first time since January .
For now, there are no signs of disruption to output. Iran produces around 3.3 million barrels a day and exports around half that, according to Reuters and LSEG calculations, a fraction of the world's roughly-100 million barrels in daily consumption.
A shortfall in Iranian barrels, while jarring to markets, could be offset by other OPEC countries tapping spare capacity to fill that void. What markets are more worried about is Iran blocking the Strait of Hormuz, through which some 20% of total daily crude supply passes. Analysts say it's unlikely.
But a lot of things that were considered unlikely six months ago and are now a reality. Market volatility has room to pick up.
European foreign ministers were set to meet their Iranian counterpart on Friday aiming to create a pathway back to diplomacy over its contested nuclear programme despite the U.S. considering joining Israeli strikes against Iran.
NATO aims to keep Donald Trump happy, hold the alliance together and agree a big new spending target in The Hague.
It's also hoping the Israel-Iran conflict won't overshadow Wednesday's summit.
Trump lambasted NATO members in his first term and threatened to quit the military alliance if they did not raise defence spending.
Now, NATO boss Mark Rutte wants all allies to commit to Trump's proposed target of 5% of GDP.
To do that, NATO will interpret defence more broadly.
It would hike its current target of spending 2% of GDP on traditional defence – weapons, troops etc – to 3.5%.
And members would spend at least 1.5% of GDP on broader measures such as adapting roads, bridges and ports to handle military vehicles and protecting against cyber-attacks.
Only Spain is publicly opposing the new target.
Due to the focus on pleasing Trump, Ukrainian President Volodymyr Zelenskiy may have to settle for a seat at the pre-summit dinner rather than the meeting itself.
Markets will look to Fed boss Jerome Powell to elaborate on what his expectation for "meaningful" inflation means for the rate outlook when he testifies before Senate and House committees on Tuesday and Wednesday.
Powell told reporters after the Fed's June meeting that goods price inflation is coming as tariffs work their way to consumers.
Having stressed that a solid expansion continues, Powell could also be asked how a further Middle East escalation impacts inflation.
Thursday's final read on first quarter GDP meanwhile should confirm that the economy shrank. The Fed's favorite inflation indicator, the Personal Consumption Expenditures Price Index for May on Friday, will be read through the lens of the Fed's decision to leave rates alone, while predicting two cuts this year.
A month ago, Japanese government bond yields surged to record peaks as investors baulked at auctions and the prime minister ill-advisedly compared Japan's fiscal predicament to Greece's.
Now, things couldn't look more different thanks to some deft team play between the Bank of Japan and Ministry of Finance.
Just days after the BOJ tweaked its bond taper plans to keep buying more of the super-long debt at the heart of the yield spike, the finance ministry presents a plan to cut issuance of the longest-dated securities.
The BOJ's dovish tone on future rate hikes has also helped keep yields in check this week, although Governor Kazuo Ueda left the door open to policy tightening this year by highlighting the risks from broadening price pressures.
Tokyo CPI for this month and published on June 27 will give fresh hints on how soon the central bank may need to act.
U.S. President Donald Trump's reciprocal tariffs initially led to order front-loading, supporting global business activity, but that is fading fast with global recession creeping back up.
With little forward guidance from companies, economic indicators are more vital than ever for markets, and a raft of them hit screens in days to come.
Monday brings the first release of June business activity for a host of economies including the euro area, Britain and the United States.
Hopes are for better news from the euro zone after May's PMI slipped to 50.2 from 50.4 in April, moving closer to the 50 mark that separates a contraction from an expansion.
Particularly concerning was the bloc's dominant services sector contracting for the first time since November. Meanwhile in the UK, the May PMI showed the services sector returning to tepid growth.

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