S&P futures point to a slightly lower open, while Asian and European stocks are likewise modestly in the red. Trading volumes are muted for most markets on Monday with investors spooked by rising geopolitical tensions in the Middle East and the Korean peninsula. It is also a holiday-shortened week in much of the West. As Bloomberg puts it, there is a “sense of unease” across markets, with global stocks mixed as investors weighed looming security risks and French bonds retreating ahead of the election following the surprising surge of far-leftist Melenchon in the polls.

The dollar inched towards three-week highs after Dudley’s Friday comments and overnight follow up from a hawkish Bullard who pushed for further tightening, drawing support from U.S. rate hike expectations while global stocks, reaching the point where some see them as expensive, were stuck in neutral ahead of U.S. earnings season this week.

Top aides to U.S. President Donald Trump differed on Sunday on where U.S. policy on Syria was headed after last week’s attack on a Syrian air base, while U.S. Secretary of State Rex Tillerson warned the strikes were a warning to other nations, including North Korea. “The risks of a conflict have certainly grown and that should keep the dollar supported against most Asian currencies with hawkish comments from the U.S. central bank also helping,” said Gao Qi, an foreign exchange strategist at Scotiabank in Singapore.

Meanwhile, with nothing but confusion coming out of the Fed, and with Bill Dudley himself saying on Friday that “some people misconstrued what I said last week”, we expect the market will closely watch what Janet Yellen says today in her ad hoc Q&A at the University of Michigan, where she will take questions from Twitter. Expect many questions on the Fed’s balance sheet normalization plans, as well as her thoughts on the future rate hikes, and – with unemployment tumbling to 4.5% without boosting inflation – NAIRU.

The Bloomberg Dollar Spot Index rises for the third day to touch the highest level in over three weeks as Treasuries trade steady before Janet Yellen’s speech

Global stocks have traded flat over the past month as investors after the 10 percent rise since last November’s lows has taken valuations above long-term averages. The MSCI AC World index trades at 16 times forward earnings, compared to a 15-year average of about 14 times.

S&P 500 futures advanced in early trading, then dipped back to unchanged as an American aircraft carrier bound for Australia was diverted to North Asia, sparking a selloff in South Korea on speculation the U.S. could take a more aggressive stance against Kim Jong-Un. French bonds fell, widening the yield spread over Germany to the highest since February after polls showed the country’s presidential election is becoming a four-way contest. European stocks traded mostly sideways as equities in France gave up ground. pushing the Stoxx Europe 600 Index some 0.2% lower even as shares of mining major BHP Billiton jumped more than 5 percent after activist hedge fund Elliot Management urged the company to pursue a spin-off of its U.S. business.

The MSCI All-Country World Index fell 0.1 percent.

The euro edged lower and France’s borrowing costs hit their highest level over Germany in six weeks as investors fretted over the rise of far-left candidate Jean Luc Melenchon in polls before this month’s presidential vote. Melenchon’s emergence over the past week has raised the possibility that he will square off against far-right leader Marine Le Pen in the decisive second round in May, making the final result far more unpredictable.

France’s bond yield spread over Germany hit 70 basis points in early trading on Monday, its highest since Feb. 27. “The market is focusing a bit too much on the extreme possibilities, but I guess with the elections coming up so soon some nerves are inevitable,” said DZ Bank strategist Christian Lenk. “But at the end of the day I think (the second round) will be Macron versus Le Pen.”

The Credit Suisse fear barometer, unlike the VIX, has been creeping steadily higher since the election, and is now at the highest since Trump’s presidential victory.

Some more thoughts from Bloomberg which notes that “while moves show demand for havens assets abating as financial markets attempt to shrug off Friday’s disappointing U.S. employment figures, a ratcheting up of geopolitical tensions and Europe’s looming test of populism look set to curtail optimism. Corporate results may provide the next fresh catalyst – they’ll accelerate this week with earnings due from the likes of JPMorgan Chase & Co., Tesco Plc and Prada SpA.”

“Geopolitics trumps economics as the main market driver, with strained U.S.-Russian relations and the dispatch of a U.S. aircraft carrier towards the Korean peninsula making the headlines,” Kit Juckes, a global strategist at Societe Generale, wrote in a note. “This week, it will be geopolitics and events outside the U.S. which drive markets.”

In commodities, oil prices rose, supported by strong demand and uncertainty over the conflict in Syria, although another run-up in U.S. drilling activity kept a lid on gains. Brent crude futures, the international benchmark for oil prices, were up 0.7 percent at $55.63 per barrel. U.S. West Texas Intermediate crude futures were up 0.6 percent at $52.55 a barrel. Spot gold was little changed.

Overnight Media Digest from RanSquawk