The US Dollar Index (DXY) rises toward 99.50 as Iran’s strikes on US military bases reignite tensions between Washington and Tehran. The Islamic Revolutionary Guard Corps (IRGC) warned of stronger retaliation if the US launches further attacks. Meanwhile, markets are increasingly pricing in a hawkish Federal Reserve stance, with the probability of at least one Fed rate hike this year climbing above 50%.
The US Dollar (USD) attracts strong buying interest during Thursday’s Asian session after Iran retaliated against recent US strikes near Bandar Abbas airport, according to Tasnim news agency.
At the time of writing, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is up around 0.25% on the day and trading near the 99.50 level. The renewed escalation in US-Iran tensions has boosted demand for safe-haven assets, supporting the USD.
Iran’s Islamic Revolutionary Guard Corps (IRGC) stated that it had launched attacks on US military bases and warned that any further US aggression would trigger an even “more decisive” military response.
The IRGC had previously pledged retaliation following Wednesday’s so-called “defensive strikes” by the US Central Command, which targeted Iranian boats allegedly involved in deploying naval mines.
The renewed military confrontation between Washington and Tehran has sharply weakened hopes for a lasting peace agreement. Iran’s counterattacks have also fueled a strong rebound in oil prices, raising concerns about higher inflation and prompting traders to increase expectations of a more hawkish Federal Reserve (Fed) stance.
According to the CME FedWatch Tool, markets currently see a 43.1% probability that the Fed will keep interest rates unchanged through the year, while the remaining expectations point toward at least one rate hike. This marks a major shift from earlier market expectations that anticipated two rate cuts before the conflict escalated.
Looking ahead, investors are closely watching the release of the US April Personal Consumption Expenditures (PCE) Price Index data at 12:30 GMT. The Fed’s preferred inflation measure is forecast to rise 3.8% year-over-year, compared with the previous reading of 3.5%.
WTI attracts strong buying interest during the Asian session after fresh US strikes on Iran.
In retaliation, Iran’s IRGC launched attacks on a US airbase and warned of a stronger response ahead.
However, a sharp rise in US Dollar demand could limit further gains in crude oil prices ahead of key US economic data releases.
West Texas Intermediate (WTI), the US benchmark for crude oil, edges higher during Thursday’s Asian session and recovers a large portion of the previous day’s decline, which had dragged prices to their lowest level since April 21. The commodity climbed to a fresh intraday high in the past hour and is attempting to push back above the $91.00 level amid fears of a broader escalation in the Middle East conflict.
According to Reuters, the US launched fresh overnight strikes on an Iranian military facility believed to pose a threat to American forces and commercial shipping in the Strait of Hormuz. Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC), cited by Tasnim news agency, said it had targeted a US airbase in retaliation for an attack near Bandar Abbas airport and warned that any further US aggression would provoke a “more decisive” response. The rising geopolitical tensions continue to support crude oil prices by keeping the market’s risk premium elevated.
At the same time, US President Donald Trump stated that he was dissatisfied with the current terms of negotiations with Iran and stressed that he would not rush into an agreement, reducing optimism for a diplomatic resolution to the three-month-long conflict. In addition, shipping activity through the Strait of Hormuz remains constrained due to Iranian movement restrictions and a US naval blockade on Iranian ports. Further underpinning oil prices, data from the American Petroleum Institute showed that US crude inventories declined for a sixth consecutive week.
Overall, the fundamental backdrop continues to favor bullish sentiment in the oil market and reinforces the near-term positive outlook for crude prices. However, a sharp rebound in the US Dollar could limit additional upside, as a stronger greenback typically weighs on demand for dollar-denominated commodities. Traders are now turning their attention to upcoming US economic releases, including the Personal Consumption Expenditures (PCE) Price Index and the preliminary first-quarter GDP report, for fresh market direction later in the North American session.
Silver weakens as renewed US-Iran tensions fuel inflation concerns and reinforce expectations of higher-for-longer interest rates. Iran claimed it struck a US F-35 fighter jet and multiple drones after Washington confirmed “self-defense” strikes in southern Iran. Meanwhile, investors continue to evaluate the Federal Reserve’s policy outlook after May consumer confidence fell amid rising inflation fears linked to the Middle East conflict.
Silver prices (XAG/USD) stayed under pressure for a second straight session, hovering near $76.90 per troy ounce during Wednesday’s Asian trading hours. The precious metal remained subdued amid renewed geopolitical tensions and uncertainty surrounding the strategically important Strait of Hormuz, although investors continued to watch for possible progress in US-Iran peace negotiations.
Market sentiment was shaken by fresh military confrontations in the Middle East, heightening concerns over a potential energy-driven inflation surge. These fears reinforced expectations that major central banks may maintain restrictive monetary policies for a longer period.
The US military confirmed carrying out self-defense strikes in southern Iran, while Iran’s Revolutionary Guard stated it had targeted an American F-35 fighter jet along with several drones allegedly entering Iranian airspace.
Adding to tensions, Iran’s foreign ministry condemned the recent US airstrikes in Hormozgan province, calling them a “gross violation” of the fragile seven-week ceasefire. Iranian media also reported explosions across the region early Tuesday.
Investors are also evaluating the Federal Reserve’s policy outlook, a key driver for non-yielding assets such as silver. The US Consumer Confidence Index slipped to 93.1 in May from a revised 93.8 in April, as concerns over inflation tied to the Iran conflict weighed on sentiment. Although consumers remained pessimistic about current labor market conditions, many still expected improvement later in the year.
Attention is now turning to upcoming comments from Federal Reserve officials, including Vice Chair Philip Jefferson and Governor Lisa Cook, for further insight into the inflation and interest-rate outlook. Traders are also awaiting Thursday’s US Personal Consumption Expenditures (PCE) report, which could provide additional clues on the future path of Fed policy.
WTI advances amid renewed supply concerns after US self-defense strikes in southern Iran on Monday. President Donald Trump said talks on a deal with Iran are “proceeding nicely,” though he warned that failed negotiations could lead to fresh military action. Meanwhile, three LNG tankers and a previously stranded Iraqi crude supertanker have recently transited the Strait of Hormuz en route to Asia.
West Texas Intermediate (WTI) crude oil prices rebounded during Tuesday’s Asian session, recovering from four consecutive daily losses to trade near $90.60 per barrel. The recovery was driven by renewed concerns over supply disruptions after US forces carried out self-defense strikes in southern Iran on Monday.
According to Fox News, a spokesperson for US Central Command said the strikes targeted missile launch sites and Iranian vessels allegedly attempting to deploy naval mines. While Washington reaffirmed its commitment to protecting US personnel, officials also stressed that the military would continue exercising restraint under the current ceasefire arrangement. Iranian media outlets reported explosions in and around the coastal city of Bandar Abbas near the Strait of Hormuz.
Despite Tuesday’s rebound, WTI had plunged more than 6% on Monday after Bloomberg reported that US President Donald Trump said negotiations with Iran aimed at ending the conflict and reopening the Strait of Hormuz were “proceeding nicely.” Trump nevertheless warned that a breakdown in talks could prompt renewed military action, although reports suggested that a Pakistani mediator had informed China that an agreement was close.
The US and Iran are currently negotiating a framework that would extend the ceasefire for roughly two months. Under the proposed arrangement, Washington would ease its maritime blockade while Tehran would reopen the Strait of Hormuz.
Both sides have reportedly made progress toward a memorandum of understanding intended to pause hostilities and grant negotiators a 60-day window to finalize a broader peace agreement. Supporting signs of tentative de-escalation, ship-tracking data showed that three LNG tankers recently transited the strait en route to Pakistan, China, and India. In addition, a supertanker carrying Iraqi crude oil resumed its voyage to China after being stranded for nearly three months.
Gold comes under renewed selling pressure as geopolitical tensions and hawkish Fed expectations continue to support the US Dollar.
Iran’s uranium enrichment program and control over the Strait of Hormuz remain major obstacles in negotiations.
The technical outlook also favors the bears, reinforcing the likelihood of additional downside pressure.
Gold (XAU/USD) faces renewed selling pressure after Thursday’s volatile price action, although it continues to hold above the key $4,500 psychological level during Friday’s Asian session. The US Dollar (USD) stays near a six-week high reached earlier this week, supported by growing expectations that the Federal Reserve will maintain a hawkish stance. In addition, uncertainty surrounding a possible US-Iran peace agreement boosts demand for the Greenback’s safe-haven appeal, weighing on the precious metal.
Markets have now fully ruled out any Fed rate cuts for the rest of 2026 and are increasingly pricing in at least one rate hike before year-end amid concerns over rising energy costs and persistent inflation. Minutes from the April 28–29 FOMC meeting showed policymakers leaning toward keeping interest rates elevated — or even tightening further — if inflation remains above the Fed’s 2% target. According to the CME Group FedWatch Tool, traders currently see more than a 60% probability of a 25-basis-point rate increase in December. This outlook has fueled a recent rise in US Treasury yields, strengthening the USD and reducing the appeal of non-yielding assets like Gold.
Meanwhile, a senior Iranian official stated that although no agreement has been finalized with the US, differences between both sides have narrowed. However, Iran’s uranium enrichment program and control over the strategically important Strait of Hormuz remain major obstacles in negotiations.
Marco Rubio warned that Iran’s proposal to impose tolls on vessels passing through the Strait could effectively undermine prospects for a peace deal. US President Donald Trump also reiterated that Washington opposes any toll system in the Strait of Hormuz and stated that the US military would move to secure Iran’s highly enriched uranium stockpile. These geopolitical risks continue to support the USD, reinforcing the broader bearish outlook for Gold.
WTI edged lower after Iranian media reported that 30 vessels had successfully passed through the Strait of Hormuz. Still, crude remains on track for a weekly gain of more than 6% as stalled US-Iran negotiations continue to disrupt traffic through the key shipping route. Meanwhile, the White House noted that President Xi could increase purchases of US oil, potentially helping China reduce its dependence on the Strait of Hormuz.
West Texas Intermediate (WTI) crude remained under pressure on Friday during Asian trading, hovering near $97.60 per barrel after posting modest gains in the previous session. Despite the pullback, WTI is still set for a weekly increase of more than 6%, as diplomatic negotiations aimed at ending the conflict between the United States and Iran continue to stall, leaving the critical Strait of Hormuz effectively shut down.
Oil prices eased slightly after Iranian state media reported that 30 ships had successfully passed through the Hormuz Strait. Nevertheless, investor concerns remain elevated amid ongoing vessel seizures and attacks in the region.
The so-called “dual blockade” of the strategic waterway has become a major obstacle in peace discussions. US President Donald Trump recently described the ceasefire as being on “massive life support” after rejecting Tehran’s latest response to his proposed peace framework.
Meanwhile, a possible change in global energy trade dynamics emerged after a two-hour meeting in Beijing between Presidents Trump and Xi Jinping. According to the White House, Xi signaled interest in increasing Chinese purchases of US crude oil in an effort to diversify energy imports and reduce dependence on the unstable Strait of Hormuz route.
Still, the broader supply outlook remains concerning. The International Energy Agency (IEA) said oil and fuel shipments through the Strait fell by roughly 4 million barrels per day during March and April. The agency also cautioned that even if the conflict is resolved next month, global oil markets may continue facing significant supply shortages through October.
WTI prices climb toward $95.70 during Tuesday’s early Asian trading session, supported by rising US-Iran tensions and growing concerns over potential disruptions in the Strait of Hormuz. Meanwhile, markets are also watching as Trump is expected to arrive in Beijing later this week.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading near $95.70 during Tuesday’s early Asian session, extending gains as renewed geopolitical tensions in the Middle East support oil prices.
According to CNN, US President Donald Trump has become increasingly dissatisfied with Iran’s approach to negotiations aimed at ending the conflict. Some of Trump’s advisers reportedly believe he is now more open to restarting major military operations than at any point in recent weeks.
At the same time, Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Iran’s military is fully prepared to respond to any future attacks. The remarks followed Trump’s rejection of Tehran’s latest peace proposal over the weekend, describing it as “simply unacceptable.” Concerns over a potential prolonged disruption of the Strait of Hormuz — a key global energy shipping corridor — continue to provide support for WTI prices.
Meanwhile, Trump and Chinese President Xi Jinping are expected to meet on Thursday and Friday during Trump’s first visit to China since 2017. The two leaders are set to hold their first in-person talks in more than six months as both sides attempt to ease tensions linked to trade disputes, the US and Israeli conflict with Iran, and broader geopolitical disagreements.
Market participants are also awaiting the release of the American Petroleum Institute (API) crude oil inventory report later on Tuesday. A larger-than-expected decline in inventories could signal stronger demand and further support WTI prices, while a surprise increase in stockpiles may point to weaker demand or oversupply, potentially pressuring crude prices.
WTI weakens as concerns over supply disruptions subside, with the US Navy taking steps to reopen the Strait of Hormuz.
Maersk reported that its US-flagged vehicle carrier, Alliance Fairfax, successfully transited the strait under US military escort.
Meanwhile, Iran launched drone and missile attacks on the UAE, and the US stated it had destroyed Iranian boats in the Hormuz region.
West Texas Intermediate (WTI) crude edges slightly lower during Tuesday’s Asian session, hovering near $101.80 per barrel after posting modest gains a day earlier. Prices are under pressure as immediate supply disruption fears ease, with the United States Navy working to restore traffic through the crucial Strait of Hormuz following Iran’s attempted shutdown.
On Monday, Washington initiated a fresh operation to reopen the waterway, and Maersk later confirmed that its US-flagged vehicle carrier, Alliance Fairfax, successfully exited the strait under US military escort.
According to Reuters, Tim Waterer, chief market analyst at KCM Trade, noted in an email that the incident demonstrates limited safe passage is still possible under current conditions, easing worst-case supply concerns. However, he cautioned that it appears to be an isolated case rather than a sign of a full reopening.
Even so, tensions remain elevated after Iran launched drone and missile strikes on the United Arab Emirates (UAE). CNBC reported that the US also destroyed Iranian boats in the Strait of Hormuz. US President Donald Trump warned that Iran would face severe consequences if it targeted American ships protecting commercial traffic in the area.
Meanwhile, Iran’s Foreign Minister Abbas Araghchi stated that the situation in the Strait of Hormuz underscores the absence of a military solution to what he described as a political crisis. He added on X that as diplomatic efforts—supported by Pakistan—continue, the US should avoid being drawn deeper into conflict, warning that “Project Freedom is Project Deadlock.”
As of now, the Strait of Hormuz has effectively been shut since February 28, halting about 20% of global seaborne oil flows through this critical passage. The International Energy Agency called it “the largest supply disruption in the history of the global oil market.” Producers in the Gulf have curtailed nearly 9 million barrels per day, while U.S. gasoline prices have surged from $2.98 to above $4.00 per gallon.
Historically, shocks of this magnitude—1973, 1979, 1990—have delivered stagflationary blows severe enough to rattle markets. But after decades of observing market cycles, one lesson stands out: when price action refuses to validate a crisis narrative, it’s often because markets are factoring in dynamics that headlines overlook. That seems to be the case with Hormuz today.
Brent crude briefly spiked near $120 but has since eased to around $96, well below the $132 level projected by the Dallas Fed for a prolonged closure. Meanwhile, the S&P 500 continues to edge higher, and China—despite routing roughly a third of its crude imports through the strait—has remained resilient.
The real issue, then, isn’t why the worst-case forecasts missed the mark, but what they failed to account for—and where the true risks may now lie.
Why the Headlines Looked Worse Than the Reality
The “20% of global oil supply shut” narrative was always an oversimplification. In practice, the actual impact was cushioned by several key factors—each grounded in primary data and policy responses.
First, Gulf producers quickly rerouted a significant share of crude exports. According to estimates from Rystad Energy’s Tom Liles, around 5–6 million barrels per day could be diverted through pipeline networks in Saudi Arabia and the UAE, bypassing the Strait via outlets on the Red Sea and the Gulf of Oman. That’s roughly one-third of the region’s typical seaborne exports, reestablished within weeks rather than months.
At the same time, Iran quietly shifted from outright disruption to selective control. By late March, it allowed tankers from countries like China, Russia, India, Iraq, and Pakistan to pass. In effect, the “closure” functioned more as a rationing system than a complete blockade.
Second, strategic reserves performed exactly as intended. The International Energy Agency coordinated a record 400 million–barrel release, while the U.S. Strategic Petroleum Reserve alone contributed about 1.4 million barrels per day. As Bernstein analysts succinctly noted, the goal wasn’t to fully replace lost supply—it was to buy time. And it did just that, bridging the gap while alternative logistics ramped up and demand began to soften.
Third, China entered the الأزمة in a position of strength. Data from the U.S. Energy Information Administration showed commercial inventories approaching 1 billion barrels before February 2026, alongside an additional 360 million barrels in state reserves. That buffer equates to several months of imports, meaning Beijing had both the stockpile and the policy flexibility to weather disruptions—especially when paired with Iran’s selective transit allowances.
Taken together, these factors explain why the real-world impact fell far short of the initial shock implied by the headlines.
Finally—and most critically—the United States is structurally very different from what it was in the 1970s. Domestic crude output now exceeds 13 million barrels per day, providing a significant buffer against external supply shocks like those seen during the Arab Oil Embargo. In addition, LNG exports reached nearly 18 billion cubic feet per day in March, according to the EIA’s April Short-Term Energy Outlook. Less than 10% of U.S. crude imports pass through the Strait of Hormuz, meaning that in a global disruption, the U.S. acts more as a marginal supplier than a marginal victim.
Importantly, even the Dallas Fed’s worst-case scenario assumes the economic damage would be short-lived—limited to roughly one quarter, with an estimated 2.9 percentage point annualized drag on global real GDP. Current conditions appear much closer to the base-case outlook, which anticipated that rerouting, strategic reserves, and demand adjustments would absorb most of the shock. So far, that expectation has largely held true.
The Real Risk Lies on the Other Side
Here’s where the consensus may be misjudging the setup. If the bearish, crisis-driven oil narrative was overstated on the way in, the bullish case for oil at $96 may be equally overstated on the way out.
Once the Strait of Hormuz fully reopens, three forces are likely to hit the market simultaneously. Gulf producers could quickly bring back roughly 9 million barrels per day of shut-in supply, in line with EIA estimates. At the same time, tankers that have been sitting in storage will begin releasing cargoes, while U.S. shale—revitalized by prices near $95—continues operating at elevated output levels. Together, this creates a classic oversupply scenario.
The main counterbalance is the need to rebuild strategic reserves. More than 30 IEA member countries have drawn them down and will likely spend the latter half of 2026 replenishing stocks. Analysts at Kpler have pointed out that the back end of the oil futures curve appears undervalued, with late-2026 Brent priced around $74 compared to a fair value closer to $85.
That said, the direction may be right, but the scale could be off. Restocking demand will unfold gradually over several quarters, whereas supply can return within weeks. That mismatch is where the real risk of dislocation lies. A reasonable base case is for Brent to fall back toward the low $70s within about 90 days of a sustained ceasefire, with a meaningful chance of overshooting toward $60 if demand weakness—triggered by $4+ gasoline—persists.
This isn’t a call for a collapse in crude, but rather a recognition that the adjustment may be uneven. From current levels, upside appears limited, while the downside risk could be swift and pronounced.
The Market Has Already Pivoted to Earnings
It increasingly looks like markets have already absorbed the supply shock and moved on. Oil disruptions have been digested, and the focus has clearly shifted back to corporate earnings—and on that front, the data supports the bulls.
FactSet’s April 17 Earnings Insight shows that 88% of S&P 500 companies reporting so far have beaten first-quarter EPS expectations, well above the 10-year average of 76%. In aggregate, earnings are exceeding forecasts by 10.8%, compared to a historical norm of 7.1%. Looking ahead, analysts are now projecting around 18% earnings growth for full-year 2026. Barclays strategist Venu Krishna has already raised his 2026 EPS estimate to $321 from $305, while FactSet sees net margins reaching 13.9%—a record high. Earlier, Goldman Sachs highlighted this shift, noting that future index gains are likely to be driven primarily by earnings growth rather than multiple expansion.
Beyond that, the trend isn’t limited to 2026. Analysts are also revising 2027 earnings estimates upward, and at a pace that significantly exceeds historical norms.
That’s a genuinely constructive backdrop. Over time, equities tend to track earnings, and the strong Q1 beat rate points to real operational resilience. This isn’t a rally built on optimism alone—it’s being supported by actual results.
There are two important caveats, however.
First, forward earnings estimates almost always trend upward—until they don’t. Rising forward EPS is the norm during an expansion, not a uniquely bullish signal. What really matters is the turning point, and revisions typically roll over with a lag. As Goldman Sachs’ Ben Snider recently highlighted, much of the upward revision driving the S&P 500’s record levels has been concentrated in a narrow group of stocks, such as Exxon Mobil and Micron Technology. The median company in the index has seen minimal upgrades, suggesting this is a rally carried by a handful of leaders rather than broad-based improvement.
Second, valuations leave little room for error. The forward 12-month P/E ratio stands at 20.9—above both the 5-year average of 19.9 and the 10-year average of 18.9. At these levels, even strong earnings beats tend to generate only modest upside, while any disappointment—especially in forward guidance—can trigger sharp declines.
That makes the real test less about Q1 results and more about Q2 outlooks. If sectors like retail, travel, and discretionary begin lowering guidance as the impact of $4+ gasoline filters through consumer spending, forward estimates could finally start to roll over.
Until then, the path of least resistance for equities still appears to be upward.
How to Position From Here
I know not everyone will agree—and that’s fine. Markets exist because of differing views. But after decades of managing portfolios through shocks like this, here’s a practical way to think about positioning given the Strait of Hormuz dynamics and elevated equity valuations:
Don’t chase the oil rally. Crude right now is being driven more by geopolitics than underlying fundamentals. At around $96, the risk/reward for going long looks unfavorable. If you’re already holding energy names that have rallied 40% or more, it may make sense to lock in gains rather than press further. Adding exposure here increases downside risk if the setup reverses.
Favor infrastructure over raw exposure. Instead of betting on oil prices directly, consider energy infrastructure—midstream operators and LNG exporters. These businesses are less sensitive to spot price swings and tend to benefit from a global shift toward energy security. Their cash flows are generally more stable, even if Brent pulls back toward $70.
Respect equities—but don’t overextend. With the S&P 500 trading around 20.9x forward earnings, markets are not pricing in much room for error. It’s reasonable to acknowledge the strength, but avoid chasing it. Rebalancing—trimming outsized winners back to target weights—can help manage risk without abandoning exposure.
Hold duration as a hedge. U.S. Treasuries are currently reflecting expectations of solid growth. But if oil prices fall sharply and demand weakens, it could give the Federal Reserve room to ease policy. In that case, intermediate-duration bonds (“the belly” of the yield curve) would likely rally, providing a natural offset to risk assets.
Keep some cash on hand. Markets across equities, oil, and credit seem to be pricing in a smooth resolution to the conflict. If that assumption proves wrong—whether due to a breakdown in ceasefire or a supply glut hitting before restocking demand builds—liquidity becomes a strategic advantage. Having dry powder allows you to respond when dislocations create better entry points.
Overall, this is less about making aggressive bets and more about managing asymmetry: limited upside in crowded trades versus potentially sharper downside if the narrative shifts.
Bottom line: The market’s calm around the Strait of Hormuz is justified, and the focus on earnings is warranted. But the risk hasn’t disappeared—it has shifted. Instead of an oil price spike, the bigger threat may now be an oil downturn, and instead of geopolitics, attention turns to equity valuations. Both sides of that equation require active management, not complacency, even if markets appear steady.
With ceasefire talks postponed for the second time in a week, tensions between the U.S. and Iran over the Strait of Hormuz remain unresolved. Although equity markets have rebounded this month—shifting focus to a more optimistic macro backdrop—and crude futures have retreated from their March peaks, investors may be underestimating the tightening in physical oil supply.
At the start of 2026, an oversupply of crude was expected to weigh on prices. However, damage to energy infrastructure and production cuts in the Middle East have heightened concerns about a supply crunch triggered by disruptions in the Strait of Hormuz. Typically, about one-fifth of global oil supply flows through this passage, yet since March 1, only around 23,000 kilobarrels have exited—equivalent to less than a day and a half of normal volumes based on the previous year’s average. While earlier oversupply has cushioned the initial impact, a full market rebalancing could take several months.
Much of the attention has been on futures prices in the “paper” market, but a growing disconnect with the physical market has gone largely unnoticed since mid-March. Signs of tightening supply are evident as futures continue to trade below dated Brent—the benchmark for physical oil—even as prices recover after briefly surging past $140 per barrel ahead of the U.S.–Iran ceasefire.
As the last shipments that left the Strait of Hormuz before the conflict only reached their destinations in the week of April 13, securing physical crude supplies is quickly becoming a top priority. Japanese refiners have increased purchases of U.S. oil, Chinese buyers have pushed imports from Vancouver to record levels, and India has ramped up acquisitions of Venezuelan crude. In some cases, traders at Asian refineries have reportedly been willing to pay almost any price to secure cargoes.
While oil futures could decline once credible news emerges of a sustained reopening of the Strait, the shape of the futures curve indicates that a higher price floor may now be in place. Ongoing tightness in the physical market could drive a longer-term shift in the energy landscape—from a just-in-time supply model toward one that places greater emphasis on holding strategic inventories.
What’s Driving the Buzz Around the Petrodollar?
A major theme tied to the recent squeeze in physical oil markets is renewed speculation about the “death” of the petrodollar. Still, that narrative appears overstated. The petrodollar system—rooted in a 1970s agreement between the U.S. and Saudi Arabia to price oil in dollars and recycle those revenues into U.S. assets—remains structurally intact.
Concerns were stirred when Iran reportedly accepted transit payments in Chinese yuan, fueling talk of a potential shift toward a “petroyuan.” However, such a transition would be gradual at best, unfolding over years or even decades—not in a matter of weeks. That said, the offshore petrodollar system may be less influential in the current shock compared to past cycles.
Several factors explain this shift. Gulf nations have increasingly diversified away from traditional reserve assets like U.S. Treasuries, favoring sovereign wealth funds and equity investments instead. Saudi Arabia, for example, has begun issuing dollar-denominated bonds rather than simply reinvesting in them. Additionally, the temporary decline in Middle Eastern oil flows due to disruptions in the Strait of Hormuz has reduced the scale of dollar recycling tied to energy exports.
At the same time, the U.S.’s position as a net energy exporter helps sustain strong dollar liquidity within North American oil markets, reinforcing the broader role of the dollar in global energy trade.
What About Equities?
As global markets have shown since late February, rising oil prices don’t impact all regions equally. The U.S., now firmly a net exporter of petroleum products, enjoys a degree of insulation. This status helps shield domestic equities, which also tend to rely less on overseas revenue than many international peers—reducing vulnerability to global spillovers.
In contrast, developed markets outside the U.S. appear more exposed. Europe’s relative underperformance during the conflict highlights how higher energy and raw material costs can squeeze corporate margins and cap earnings growth. At the same time, rising oil prices often translate into “imported” inflation, pushing expectations higher for rate hikes from central banks like the European Central Bank and the Bank of England this summer. Even if markets treat the shock as temporary, tighter monetary policy could weigh on European equities in the near term.
Japan is particularly sensitive, with roughly 88% of its oil imports coming from the Middle East. Still, Japanese stocks have shown some resilience, supported by a rebound in technology shares. A similar pattern is visible across emerging Asia: markets with strong tech sectors, such as South Korea and Taiwan, have held up better, while countries like Thailand and Indonesia—less driven by tech—have been more negatively affected by rising oil prices and supply constraints.
Conclusion
This unprecedented shock to global energy supply is something investors should keep a close eye on. Current market signals point to oil prices staying elevated, while tightness in the physical market could persist as supply takes time to normalize—potentially marking a more structural shift in how energy markets operate.
That said, the situation does not appear catastrophic for either the U.S. dollar or global equities. The dollar index has actually strengthened since the conflict began, reinforcing its role as the world’s primary reserve currency. Similarly, concerns about the collapse of the petrodollar system seem exaggerated.
With both Washington and Tehran signaling a willingness to maintain the temporary ceasefire and continue negotiations over the Strait of Hormuz, equity markets are likely to shift their focus back to underlying fundamentals. The disruption from the effective closure of the waterway may remain a background factor rather than a dominant driver.
In the near term, U.S. equities are expected to outperform both developed and emerging markets, as strong earnings—particularly from the technology sector—should more than offset the relatively limited drag from higher oil prices.
Oil remains supported as disruptions in the Strait continue and diplomatic efforts show little progress.
Geopolitical tensions keep the risk premium elevated amid tanker incidents and stalled U.S.–Iran negotiations.
Brent’s outlook stays bullish, with prices potentially pushing toward $110 unless supply conditions improve.
Crude oil pulled back from earlier highs by mid-morning in the London session as markets opened the week with uncertainty over the timing and outcome of the US–Iran standoff.
Reports from Axios suggested that Iran has proposed a potential reopening of the Strait of Hormuz, offering a tentative sign of progress in what has been a slow and uneven path toward any agreement. However, this falls short of a true breakthrough. Following last week’s strong rally, the balance of risks for oil prices still leans to the upside.
What’s Driving the Oil Market?
Over the weekend, Donald Trump said he had canceled plans to send Special Envoy Steve Witkoff and Jared Kushner to Pakistan for talks with Iran. This came after Iran’s Foreign Minister Hossein Amir-Abdollahian left Islamabad without agreeing to meet US officials—hardly a sign of easing tensions.
Looking ahead, the outlook remains unclear. Tehran appears unwilling to engage while the naval blockade persists, while Washington is holding back its negotiators. This leaves markets in a holding pattern. While broader risk assets try to anticipate a resolution, oil traders are focused on the tangible factor: the actual flow—or lack thereof—through the Strait of Hormuz.
In this environment, oil prices are likely to continue edging higher unless disrupted by an unexpected shift. Recent tanker seizures and increased military activity in the Strait have reinforced the geopolitical risk premium embedded in prices.
If tensions escalate into open conflict, there is clear room for a sharper upside move. For now, as long as access through the Strait remains constrained, that premium is unlikely to fade. Rhetoric alone—no matter how constructive—has limited impact without real changes on the ground.
Ultimately, oil’s direction depends heavily on how the US–Iran situation evolves. Until there is meaningful progress, the path of least resistance remains upward, with Brent approaching a potential test of $110.
All About Oil Flows: Demand Destruction Highly Unlikely
While additional supply from producers like the United States and Russia may offer some relief, the global economy still relies heavily on energy shipments from the Gulf—underscoring the critical role of the Strait of Hormuz. The longer disruptions persist, the more pronounced the supply imbalance becomes. Demand may soften at the margins through rationing or reduced consumption, but it is unlikely to fully offset the shortfall.
In simple terms, a meaningful decline in oil prices would likely require a full reopening of the Strait and a normalization of shipping flows. Until that happens, the balance of risks remains tilted to the upside.
Technical Analysis and Levels to Watch on Brent
From a technical perspective, Brent continues to trend higher, with steady gains over recent sessions and only shallow pullbacks along the way. The move back above the $100 per barrel mark—broken earlier last week—has reinforced a bullish bias, with prices finding support on short-term dips.
Dip-buying is likely to remain a dominant theme unless conditions around the Strait of Hormuz worsen significantly. Key downside levels to watch include $103.50 and the psychological $100 mark.
In the near term, Friday’s high at $107.45 and Thursday’s high at $107.35 form an important zone. The $107.35–$107.45 range now acts as the first support area to monitor.
On the upside, resistance remains relatively thin until the $110 level, which could be tested soon barring any unexpected geopolitical breakthrough. Beyond that, the next potential resistance levels are $111, followed by $115 and $120 if bullish momentum persists.
Overall, unless a clear lower low and reversal pattern emerges, the path of least resistance for oil prices continues to point upward.
WTI advances as the Strait of Hormuz remains mostly closed, constraining Middle East supply. Oil’s upside could be limited as markets evaluate ceasefire chances and a possible reopening following Iran’s latest proposal to the US. Meanwhile, six Iranian tankers have been turned back under the US blockade, while an ADNOC LNG vessel has passed through Hormuz and is approaching India.
West Texas Intermediate (WTI) crude extends its advance for a second straight day, trading near $95.20 per barrel during Tuesday’s Asian session. Prices are being supported as the Strait of Hormuz remains largely closed, tightening energy supplies from the Middle East.
Still, further upside may be limited as investors assess the chances of a durable ceasefire and a possible reopening of the waterway following Iran’s latest proposal to the United States. Tehran has reportedly conveyed via Pakistan that it could de-escalate if Washington lifts its naval blockade, adjusts transit rules through Hormuz, and provides assurances against future military action.
A US official said Monday that President Donald Trump is not satisfied with the proposal, while Iranian sources indicated that Tehran is holding off on addressing its nuclear program until hostilities end and shipping disputes in the Gulf are resolved.
Now in its ninth week, the conflict has driven energy prices higher and disrupted key supply chains, with the International Energy Agency (IEA) warning of a potential supply shock alongside slowing demand risks.
The standoff remains unresolved, with Iran restricting flows through the Strait—responsible for roughly 20% of global oil and gas transit—while the US continues its blockade of Iranian ports.
Ship-tracking data cited by Reuters highlights the disruption, showing six Iranian tankers forced to turn back amid the blockade. However, an LNG vessel operated by ADNOC has managed to pass through the Strait of Hormuz and is reportedly approaching India.
The U.S. dollar rose on Thursday, supported by increased demand for safe-haven assets as tensions in the Middle East escalated.
Although the U.S. and Iran agreed to extend their ceasefire, continued attacks on vessels near the strategic Strait of Hormuz, along with strong rhetoric from both Washington and Tehran, dampened investor risk appetite.
By 15:56 ET (19:57 GMT), the U.S. Dollar Index, which measures the greenback against a basket of six major currencies, had gained 0.3% to 98.77.
Trump orders U.S. forces to destroy boats laying mines in the Strait of Hormuz.
Former U.S. President Donald Trump on Thursday said he had instructed the U.S. Navy to “shoot and kill” any vessels attempting to lay mines in the Strait of Hormuz. He added that American mine-clearing operations were already underway and would be intensified threefold. Meanwhile, Axios reported, citing a U.S. official, that Iran had deployed additional mines in the area.
Trump’s remarks followed escalating activity around the Strait of Hormuz, a crucial shipping route that carries about one-fifth of the world’s oil and gas. Its effective closure since the onset of the Middle East conflict has triggered what is being described as the largest oil supply disruption in history.
The U.S. military also announced it had seized an Iran-linked oil tanker, releasing footage that allegedly showed American forces boarding the vessel in the Indian Ocean. At the same time, Iran published a video appearing to show its troops taking control of a cargo ship near the strait.
Earlier, Tehran reportedly attacked three ships on Wednesday and seized two of them. Tensions have been fueled further by the ongoing U.S. naval blockade of Iranian ports and coastline, with U.S. Central Command stating that 33 vessels had been redirected since the blockade began.
Uncertainty over future negotiations between Washington and Tehran continues to weigh on markets. While both sides remain deadlocked over the strait and the blockade, the Wall Street Journal reported that mediators from Pakistan, Turkey, and Egypt are attempting to arrange talks that could take place as early as Friday. Meanwhile, Israel’s N12 News reported that Iran’s Ghalibaf had stepped down from the negotiating team following pressure from the Islamic Revolutionary Guard Corps.
Strong economic data and shifting Fed rate expectations support the dollar.
The U.S. dollar also gained support from stronger-than-expected preliminary PMI data. According to S&P Global, business activity in the U.S. picked up in April after slowing to near stagnation in March following the outbreak of conflict in the Middle East.
José Torres, senior economist at Interactive Brokers, noted that economic conditions improved slightly, with consumer demand, production, employment, and business sentiment remaining resilient despite supply chain disruptions and rising prices that continue to weigh on performance and outlook.
He added that the manufacturing sector stood out, driven by proactive inventory building in response to the Strait of Hormuz closure, as well as policy incentives introduced last year, which helped push S&P Global’s Flash PMI above expectations.
At the same time, expectations that the Federal Reserve may keep interest rates unchanged this year have strengthened. A rebound in oil prices above $100 per barrel has heightened concerns about inflation, raising the possibility that central banks could even consider rate hikes instead of cuts.
Kevin Warsh, nominated by Donald Trump to lead the Fed, told lawmakers on Tuesday that he had made no promises to lower borrowing costs and stressed the importance of the central bank’s independence, despite Trump’s repeated calls for aggressive rate cuts to support economic growth.
Meanwhile, a Reuters poll indicated that investors expect the Fed to hold off on any rate cuts for at least six months.
Eurozone output hits a 17-month low, while South Korea records robust GDP growth.
Eurozone business activity fell to a 17-month low, pushing the euro down 0.2% to $1.1687 after S&P Global data showed the private sector slipping back into contraction in April, ending 15 months of expansion. According to Chris Williamson, the region is facing mounting economic strain from the Middle East conflict, which is both dragging growth and fueling inflation, while supply shortages risk worsening the outlook further.
Meanwhile, the British pound dropped 0.3% to $1.3467, and the Japanese yen weakened with USD/JPY edging up to 159.68. The South Korean won also declined, with USD/KRW rising 0.4% to 1,483.48, despite strong data showing South Korea’s economy recorded its fastest growth in nearly six years in Q1 2026, driven largely by a surge in AI-related chip exports.
Gold edged lower from around $4,750 in Thursday’s Asian session, giving back part of the previous day’s gains as renewed US–Iran tensions over the Strait of Hormuz kept the US Dollar supported and weighed on sentiment. However, expectations that the Federal Reserve may hold off on further rate hikes continued to limit downside pressure on the non-yielding metal.
Technical Analysis
Technically, XAU/USD shows a mildly bearish short-term bias as it remains below the 100-period SMA at $4,739.32, the 200-period SMA at $4,770.64, and the 20-period SMA at $4,776.89. The RSI, hovering near 44, points slightly lower, while the Momentum indicator also trends modestly below the midline, signaling weakening upside traction.
On the upside, immediate resistance is seen at the 100-period SMA, followed by stronger hurdles at the 200-period SMA and the 20-period SMA, creating a dense resistance cluster that bulls need to clear to neutralize bearish pressure. With limited nearby support from indicators, a further decline could expose gold to retesting recent lows around $4,668 if selling pressure intensifies.
On the daily timeframe, however, the broader outlook remains more constructive. Price continues to hold above the 20-day SMA at $4,693.12 and the 100-day SMA at $4,731.60, which acts as a key near-term support area. The much lower 200-day SMA at $4,236.91 underscores the longer-term uptrend. Meanwhile, the RSI near 48 and neutral Momentum readings suggest consolidation, with bullish momentum cooling rather than reversing decisively.
Fundamental Analysis
Spot Gold was little changed on the day, hovering near the $4,730 level as markets grappled with rising uncertainty stemming from fresh Middle East tensions that have pushed the situation into a stalemate.
After a series of back-and-forth developments, the United States and Iran failed to restart negotiations and missed the scheduled meeting in Pakistan. US President Donald Trump later said the ceasefire would remain in place until Iran presents a “unified proposal,” while Tehran dismissed the extension as “meaningless” and warned of a potential military response.
Meanwhile, tensions escalated around the Strait of Hormuz, with reports suggesting renewed disruptions to shipping routes, including vessel seizures and attacks on oil transport. Midweek, Trump indicated that talks with Iran could still take place next Friday, though Iranian media quickly denied any such plans, stating there were no current intentions to negotiate with Washington.
With both the ceasefire and diplomatic prospects in doubt, markets remain directionless, further complicated by anticipation of key central bank meetings next week.
In this environment, crude oil has strengthened notably, with West Texas Intermediate (WTI) climbing to around $92 per barrel, its highest level since last Friday. The rally reflects growing concerns over supply risks and skepticism that a swift resolution in the Middle East is forthcoming.
The conflict with Iran appears to be moving toward some kind of negotiated outcome, though the timing and specifics remain unclear. As the war drags on—and as the Iranian regime endures—the likelihood of a decisive US victory, understood as Tehran’s full capitulation, seems to diminish. This suggests a prolonged, uneven phase of de-escalation, with ongoing disruptions to the global economy likely in the meantime.
From this perspective, Iran is unlikely to win militarily. The US, on the other hand, has the capability to secure a decisive victory, but achieving unconditional surrender would almost certainly require a large-scale ground invasion—an option that appears improbable given the political costs, as seen in Afghanistan, Iraq, and Vietnam.
While the US can continue to intensify air and missile strikes, the impact of such tactics may be waning after weeks of sustained bombardment by US and Israeli forces. Expanding attacks on Iran’s infrastructure could inflict significant economic damage, but it remains uncertain whether this would compel the regime to fully concede, especially as it views the conflict as existential.
Given these dynamics, the most likely outcome is a gradual shift toward negotiations shaped by realities on the ground. The timing and structure of any agreement will depend on internal pressures—such as resource constraints and public sentiment—which create different breaking points for each side.
For the US, key concerns include maintaining its global credibility and influence in the Middle East, as well as managing economic repercussions. The closure of the Strait of Hormuz has already driven energy prices sharply higher, highlighting Iran’s ability to disrupt a critical global supply route and the limited options available to the US to fully counter such actions.
A critical vulnerability for Iran is the risk of economic exhaustion. While Tehran may be able to disrupt energy flows from the Gulf, the US has the capacity to tighten restrictions on Iran’s own oil exports—its primary source of income.
Ultimately, the situation may hinge on which side yields first.
China could emerge as a key, if understated, influence. As the largest buyer of Iranian oil—accounting for over 80% of its exports in 2025, and roughly 13–14% of China’s seaborne crude imports, according to Kpler—Beijing holds significant economic leverage. At the same time, China maintains extensive trade ties with the US, despite ongoing tariffs, giving it strong incentives to balance relations with both sides.
This dual positioning suggests China could quietly shape the path toward negotiations. One important dynamic to watch is whether Beijing uses its leverage to keep Iran engaged in talks, even as it continues to support Tehran’s capacity to withstand US pressure.
For the US, the key issue is when mounting political and economic pressures might convince President Trump that negotiation is the most viable option. Another open question is how far Washington is prepared to go in further weakening Iran’s economy. While escalation may be tempting, it comes with clear trade-offs. A renewed military push would likely keep energy exports constrained, sustaining higher inflation and dampening economic growth both domestically and globally.
In the end, neither side may achieve the outcome it seeks—only a compromise that both can ultimately accept.
Oil prices dropped by more than $1 on Tuesday, giving back the previous session’s gains, as expectations grew that U.S.–Iran peace talks this week could ease tensions and allow more crude supply from the Middle East.
Brent crude fell $1.04 (1.1%) to $94.44 per barrel by 0600 GMT. U.S. West Texas Intermediate (WTI) for May declined $1.66 (1.9%) to $87.95, with the contract expiring Tuesday, while the more active June contract slipped $1.24 (1.4%) to $86.18.
This pullback followed a sharp rally on Monday, when Brent jumped 5.6% and WTI surged 6.9% after Iran closed the Strait of Hormuz again and the U.S. seized an Iranian cargo vessel as part of its blockade.
Despite ongoing risks, market sentiment is being driven by optimism that negotiations could extend the current ceasefire or even produce a broader agreement, though disruptions to supply remain a concern.
ING analysts noted that while prices spiked after the Strait of Hormuz closure, trading patterns still reflect confidence in diplomatic progress, warning that markets may be underestimating the scale of supply disruptions.
Iran is considering joining peace talks in Pakistan, according to a senior official, as Islamabad works to mediate and end the U.S. blockade. However, the blockade continues to complicate Tehran’s participation, especially with the current two-week ceasefire nearing its expiry.
Citi analysts expect a memorandum of understanding or a ceasefire extension this week, potentially leading to a wider deal, but caution that prolonged disruptions remain possible if negotiations fail.
Uncertainty persists, as Iranian officials emphasized no final decision has been made. Foreign Minister Abbas Araqchi cited ongoing U.S. ceasefire violations as a barrier, while Parliament Speaker Mohammad Baqer Qalibaf reiterated that Iran will not negotiate under pressure.
Meanwhile, shipping through the Strait of Hormuz—responsible for roughly 20% of global oil flows—remained constrained. Citi estimates that if disruptions last another month, losses could reach 1.3 billion barrels, pushing prices toward $110 per barrel in Q2 2026.
Kuwait has declared force majeure on oil exports due to the blockade, while higher prices have already reduced global demand by about 3%, according to Societe Generale. The bank warned that risks skew toward greater losses the longer supply disruptions persist, with full normalization unlikely before late 2026.
Markets are increasingly betting that the conflict with Iran has come to an end. Yet even if that assumption holds, the economic repercussions are likely to persist for months—if not years.
While global attention tends to center on the immediate spectacle of war—airstrikes, blockades, and sanctions—the most disruptive consequences often emerge more slowly. In the Persian Gulf, the true impact is delayed, carried across the world through disrupted shipping routes and declining exports of oil, natural gas, and key agricultural inputs. Because of these lags, the global economy is only beginning to absorb the shock from reduced supply.
As Comfort Ero of the International Crisis Group observes, wars expose the fragile systems that quietly sustain everyday life. Strategic chokepoints like the Strait of Hormuz—normally overlooked—suddenly become critical when they falter.
Oil shipments from the Gulf typically take between 30 and 45 days to reach major markets. That delay means supply disruptions don’t show up immediately. Instead, countries draw down existing inventories while incoming supply gradually shrinks. By the time shortages become visible, the disruption has already been building for weeks.
Recent data underscores this dynamic. OPEC output plunged by 27% in March, signaling the first wave of global supply strain. Even under a sustained ceasefire, a rapid recovery appears unlikely. Industry leaders estimate it could take months for production in the region to return to normal levels.
At the same time, the easing of military tensions may create a false sense of stability. Beneath the surface, the economic damage continues to accumulate. Supply chain pressures are only now intensifying. Companies are beginning to feel the strain—illustrated by manufacturers halting orders due to shortages tied to disruptions in the energy supply chain.
The agricultural sector offers another clear example. With planting season nearing its end, rising fertilizer and fuel costs are forcing farmers to make difficult choices: cut back production or absorb significant financial losses. Many are already reporting deteriorating financial conditions.
Although limited shipping activity has resumed through the Strait of Hormuz, it remains uncertain how quickly normal export levels can be restored. Even if the passage reopens soon, the broader damage—to infrastructure, refining capacity, and logistics networks—will take far longer to repair, ensuring that the war’s economic aftershocks continue well into the future.
Oil isn’t the only export under threat. The Persian Gulf also supplies large volumes of natural gas liquids, ammonia, urea, and other petrochemical inputs that are vital to global fertilizer production. Prolonged disruptions to these flows could ripple through agricultural supply chains worldwide.
Even a short delay in shipments can trigger cascading effects—tightening fertilizer supplies, reducing crop yields, and driving up food prices months down the line.
In this sense, the war’s impact on oil and fertilizer inputs resembles a slow-building shockwave. For now, the global economy is cushioned by existing inventories and shipments made before the conflict. But as those buffers wear thin, declining exports from the Gulf are likely to place increasing strain on energy markets, food production, and overall economic stability.
The most significant consequences are not in the past—they are only starting to surface.
The U.S. dollar climbed to a one-week high against major currencies on Monday, as renewed tensions between the U.S. and Iran and fading hopes for a Middle East peace agreement pushed investors toward safe-haven assets.
Washington said it had seized an Iranian cargo vessel attempting to breach its blockade, while Tehran vowed retaliation, raising fears that hostilities could flare up again. Iran also announced it would not join a second round of talks the U.S. had aimed to begin before a two-week ceasefire expires on Tuesday.
According to Charu Chanana, chief investment strategist at Saxo, the weekend escalation has brought geopolitical risk back into focus just as markets had begun to price in a potential peace dividend. She added that rising oil prices are not only an energy concern but also have broader implications for economic growth and interest rates.
The euro slipped 0.14% to $1.1746, while the British pound dropped 0.29% to $1.3479. The Australian dollar, often seen as a risk-sensitive currency, declined 0.3% to $0.7145 in early trading.
The U.S. dollar index, which tracks the currency against six major peers, stood at 98.38, near a one-week high and recovering some recent losses. Despite this rebound, the index remains down 1.5% for April, as improving risk sentiment earlier in the month had weighed on the dollar. In contrast, it surged 2.3% in March amid strong safe-haven demand following the outbreak of war.
Barclays analysts noted that investor sentiment still favors the dollar, suggesting there may be room for further downside if Middle East tensions ease. They added that any short-term market volatility could present opportunities to rebuild short dollar positions, though uncertainty remains high.
Now in its eighth week, the conflict has triggered one of the most severe disruptions to global energy supply, driving oil prices sharply higher due to the effective closure of the Strait of Hormuz, a key route for roughly 20% of global oil shipments.
The U.S. has continued its blockade of Iranian ports, while Iran has alternated between lifting and reimposing restrictions on shipping through the strategic waterway. This uncertainty pushed oil prices higher on Monday, with Brent crude rising 7% to $96.8 per barrel and U.S. West Texas Intermediate gaining over 8% to $90.74.
Nick Twidale, chief market strategist at ATFX Global in Sydney, said the Strait of Hormuz remains the central concern, and hopes for renewed negotiations before the ceasefire ends now appear unlikely. He expects risk assets to face further downward pressure in the near term.
Elsewhere, the New Zealand dollar edged down slightly to $0.5876, while the Japanese yen weakened to 159.06 per dollar, approaching the key 160 level that could prompt intervention by authorities.
Attention is also turning to the Bank of Japan’s upcoming meeting later this month. Governor Kazuo Ueda has avoided firmly signaling an April rate hike due to uncertainty from the conflict but hinted at a more hawkish stance following last week’s IMF meetings, leaving open the possibility of policy tightening by June.
In cryptocurrency markets, bitcoin fell 0.56% to $74,229.65, while ether declined 0.2% to $2,276.04.
The United States came close to becoming a net crude exporter last week for the first time since World War II, as exports surged to near-record levels to satisfy demand from Asia and Europe, where buyers were scrambling to replace Middle Eastern supplies disrupted by the Iran conflict. The war involving the U.S., Israel, and Iran caused an unprecedented shock to global energy markets, with threats to shipping through the Strait of Hormuz halting roughly 20% of global oil and gas flows. As a result, refiners in affected regions turned to alternative sources, significantly increasing demand for U.S. crude, though analysts note exports are nearing capacity limits.
Net U.S. crude imports dropped to just 66,000 barrels per day last week—the lowest level since records began in 2001—while exports rose to 5.2 million bpd, a seven-month high. Historically, the U.S. was last a net crude exporter in 1943. Strong export growth reflects how buyers in Europe and Asia are reaching further afield for supply, with price differences offsetting shipping costs. Countries like Greece have recently begun importing U.S. crude for the first time, and major buyers include the Netherlands, Japan, France, Germany, and South Korea. Nearly half of U.S. exports went to Europe, while Asia’s share has grown significantly.
Meanwhile, U.S. imports fell sharply, partly because domestic refineries rely on heavier crude than what the U.S. typically produces. A widening price gap—driven by a surge in Brent crude relative to West Texas Intermediate—has made U.S. oil more attractive overseas while reducing domestic demand for imports. Spot prices for crude deliveries to Europe and Africa have also hit record highs.
Despite strong demand, U.S. export growth is approaching logistical limits. Exports may average around 5.2 million bpd in April, close to the estimated maximum capacity of about 6 million bpd, constrained by pipeline infrastructure and tanker availability. Although releasing medium sour crude from strategic reserves could free up more light crude for export, higher shipping costs and limited tanker supply could dampen further growth. About 80 empty supertankers were reportedly heading to the Gulf of Mexico, likely to load crude in the coming weeks.
Oil prices declined for a second consecutive day on Wednesday as expectations grew that peace talks between the U.S. and Iran could resume, potentially restoring supply from the Middle East that has been disrupted by the closure of the Strait of Hormuz.
Brent crude slipped 0.55% to $94.27 per barrel after a sharp 4.6% drop in the previous session, while U.S. West Texas Intermediate fell 1.1% to $90.24 following an even steeper 7.9% decline earlier.
Investor sentiment improved after President Donald Trump suggested that negotiations to end the conflict involving the U.S., Israel, and Iran could restart in Pakistan within days. The earlier breakdown in talks had led Washington to impose a blockade on Iranian ports, but renewed diplomatic hopes are raising expectations that oil and fuel flows could eventually resume.
The conflict has effectively shut down the Strait of Hormuz, a crucial route for transporting crude and refined products from the Gulf to global markets, particularly in Asia and Europe. Although a ceasefire has been in place for two weeks, shipping activity remains severely limited, with vessel traffic far below pre-war levels.
On Tuesday, a U.S. warship reportedly prevented two oil tankers from departing Iran, underscoring ongoing disruptions. Analysts at the Schork Group noted that while diplomatic developments hint at easing restrictions, actual conditions on the ground remain unstable, leaving markets focused on the risk of supply disruptions rather than a full recovery.
Further tightening supply concerns, U.S. officials indicated that sanctions waivers on Iranian oil shipments will not be renewed, and a similar waiver for Russian oil has already expired.
Later in the day, attention will turn to U.S. inventory data from the Energy Information Administration. Expectations are for a modest increase in crude stockpiles, alongside declines in gasoline and distillate inventories. Meanwhile, preliminary data from the American Petroleum Institute suggested that crude inventories rose for a third straight week.
The U.S. dollar declined on Tuesday as investors moved away from the safe-haven currency and shifted toward riskier equities, supported by optimism over potential ceasefire progress between the U.S. and Iran, despite the ongoing naval blockade in the Persian Gulf.
Risk sentiment was further strengthened by a much weaker-than-expected U.S. producer inflation report, easing concerns that the Iran-related energy shock could fuel inflation—especially after a recent surge in consumer prices.
By 17:20 ET (21:20 GMT), the U.S. Dollar Index, which measures the greenback against six major currencies, had dropped 0.3% to 98.12.
The Hormuz blockade continued into its second day, even as Donald Trump signaled that potential negotiations could be on the horizon.
The blockade of the Strait of Hormuz entered its second day even as President Donald Trump highlighted the possibility of renewed negotiations.
The U.S. dollar, which had initially strengthened as a safe-haven asset following the outbreak of the Iran conflict in late February, has recently weakened amid growing optimism that tensions could ease.
This optimism increased on Tuesday after Trump told the New York Post that additional talks “could take place within the next two days” in Pakistan. According to earlier reports, the U.S. and Iran have remained in contact and made some progress toward a lasting ceasefire agreement.
Trump also stated that Iranian officials had reached out to the White House expressing interest in striking a deal, while reiterating that Iran would not be allowed to develop nuclear weapons. The U.S. is reportedly insisting that Iran halt uranium enrichment for 20 years, a key step in nuclear weapons development.
At the same time, the U.S. naval blockade of vessels entering and leaving Iranian ports continued into its second day. The U.S. Central Command said the operation involves over 10,000 personnel, more than a dozen warships, and dozens of aircraft to enforce the restrictions.
CENTCOM reported that within the first 24 hours, no ships managed to pass through the blockade, and six commercial vessels complied with U.S. directives to turn back toward ports in the Gulf of Oman.
British maritime authorities also confirmed that access has been limited for ships attempting to enter or exit Iranian ports, as well as in nearby waters including the Persian Gulf, Gulf of Oman, and parts of the Arabian Sea.
Trump noted that the blockade began on Monday after weekend ceasefire negotiations failed to produce immediate results. The move risks further disrupting already reduced oil flows through the Strait of Hormuz, a critical route that carries about one-fifth of the world’s oil supply.
U.S. producer inflation came in weaker than expected.
U.S. producer inflation came in less severe than expected, drawing significant market attention on Tuesday. The March producer price index (PPI) rose 0.5% month-on-month and 4.0% year-on-year, falling short of forecasts of 1.1% and 4.6%. Meanwhile, core PPI increased by 0.1% over the month and 3.8% compared to a year earlier.
Despite the softer-than-expected overall figures, the annual rise in headline PPI marked the largest increase since February 2023, largely driven by a sharp 8.5% monthly surge in energy prices for final demand.
Even so, the weaker headline data helped ease investor concerns.
Guy LeBas, chief fixed income strategist at Janney, noted on X that expectations had been elevated due to fears of rising energy input costs, which were not fully reflected in the data.
He added that although gas prices are clearly higher, these cost increases may take several months to filter through the economy rather than appearing all at once. This gradual pass-through could complicate monetary policy, as it may delay the Federal Reserve’s confidence that inflation pressures are not spreading beyond the energy sector.
The euro and British pound strengthened, while the yen also gained despite weak economic data.
Among major currencies, both the euro (EUR/USD) and the British pound (GBP/USD) moved higher, supported by the softer U.S. dollar. The euro rose 0.2% to $1.1795, while the pound gained 0.4% to $1.3567.
The Japanese yen also strengthened, with USD/JPY slipping 0.3% to 158.80, despite data showing Japan’s industrial production fell 2% month-on-month in February after a 4.3% increase in January.
In other markets, the Australian dollar (AUD/USD) increased 0.3% to $0.7122, even though economic indicators were weak. According to National Australia Bank, business confidence dropped sharply in March following the Iran conflict, while the Westpac–Melbourne Institute survey showed a steep decline in consumer sentiment in April.
U.S. President Donald Trump said Sunday evening that he was unconcerned about whether Iran would return to negotiations after ceasefire talks over the weekend failed to produce an agreement.
He also confirmed that the United States intends to impose a blockade on the Strait of Hormuz starting Monday morning, accusing Iran of failing to honor its commitment to reopen the vital shipping route. Speaking to reporters at Joint Base Andrews, Trump stated that the U.S. would be fine even if Iran chose not to resume talks.
His remarks followed a report indicating that several countries are attempting to restart diplomatic efforts after lengthy discussions in Islamabad ended without a deal. Despite the breakdown, sources suggested that further negotiations could take place within days, while regional governments are working with Washington to extend a fragile two-week ceasefire.
The Islamabad meeting represented the highest-level direct engagement between U.S. and Iranian officials since 1979, with 21 hours of talks concluding without progress. Vice President JD Vance said the U.S. had clearly outlined its conditions, but Iran declined to accept them.
U.S. demands reportedly included ending uranium enrichment entirely, dismantling key nuclear facilities, surrendering enriched materials, reopening the Strait of Hormuz without fees, promoting broader regional stability, and ceasing support for groups such as Hezbollah and the Houthis. Iran, however, proposed limited enrichment or reducing its stockpile, but the two sides failed to reach a compromise.
In response to Trump’s blockade announcement, Iranian Parliament Speaker Mohammad Bagher Qalibaf warned that Iran would not back down under pressure, stating that any confrontation would be met with force.
The U.S. plans to enforce the blockade on all vessels entering or leaving Iranian ports from 10 a.m. ET on April 13, covering areas along the Arabian Gulf and Gulf of Oman. It remains unclear whether U.S. allies will participate. Trump also criticized NATO for its lack of involvement and said Washington is reassessing its relationship with the alliance.
Oil prices rose on Friday amid renewed concerns over supply disruptions from Saudi Arabia and continued minimal tanker movement through the strategically vital Strait of Hormuz.
Despite the gains, crude was still on track for a weekly decline as market fears eased slightly following a fragile two-week ceasefire between the United States and Iran. At the same time, Israel indicated a possible diplomatic shift, expressing readiness to start direct negotiations with Lebanon soon.
Brent crude increased by $0.96, or 1%, to $96.88 per barrel at 0604 GMT, while West Texas Intermediate (WTI) gained $0.78, or 0.80%, reaching $98.65 per barrel.
Both benchmarks are down roughly 11% so far this week, marking their steepest weekly drop since June 2025, when earlier Israeli-U.S. strikes on Iran were paused.
According to Saudi Arabia’s state news agency SPA, citing the Ministry of Energy, attacks on key energy infrastructure have reduced the kingdom’s oil output capacity by about 600,000 barrels per day and cut throughput on the East-West Pipeline by approximately 700,000 barrels per day.
Analysts at ANZ noted that these developments have intensified concerns about further supply disruptions.
Shipping activity through the Strait of Hormuz remained below 10% of normal levels on Thursday, despite the ceasefire, as Iran asserted control by instructing vessels to stay within its territorial waters.
Although Iran and the U.S. agreed to a two-week ceasefire mediated by Pakistan, clashes reportedly continued afterward.
Experts suggest Pakistan may attempt to broker a longer-term agreement, but its ability to enforce the reopening of the waterway remains limited.
A Tehran official also told Reuters that Iran is seeking to impose transit fees on ships passing through the Strait under any peace arrangement, an idea opposed by Western governments and the U.N. shipping agency.
The conflict, which began on February 28 following U.S. and Israeli airstrikes on Iran, has effectively disrupted one of the world’s most important energy corridors.
Energy consultant John Paisie of Stratas Advisors warned that Brent crude could surge to $190 per barrel if current shipping constraints persist, though prices would be more contained if flows improve, albeit still above pre-war levels.
Mukesh Sahdev, CEO of XAnalysts, emphasized that the critical issue is not whether the Strait of Hormuz reopens, but how quickly normal oil flows can resume.
Meanwhile, JPMorgan estimated that around 50 energy infrastructure sites across the Gulf have been damaged by drone and missile attacks since the conflict began, with approximately 2.4 million barrels per day of refining capacity taken offline.
The dollar stayed fragile on Thursday following broad losses, as investors closely watched whether the uneasy ceasefire between the U.S. and Iran would hold. The truce appeared uncertain, with Israel continuing its conflict with Hezbollah in Lebanon and Tehran accusing both Washington and Tel Aviv of breaching the agreement, calling further peace talks unreasonable. Meanwhile, the Strait of Hormuz remained restricted, with ships requiring permits to pass, prompting higher oil prices as traders awaited clearer conditions.
U.S. President Donald Trump said American military forces would remain deployed around Iran until the terms of the deal were fully met. Analysts noted growing skepticism over whether the ceasefire could last or even be finalized. The dollar index was largely unchanged at 99.07, while the euro dipped slightly, sterling edged higher, and the yen weakened after giving back earlier gains.
The prolonged Middle East tensions have fueled expectations of more expansionary fiscal policy, contributing to yen weakness. Markets are currently pricing in a moderate chance of a Bank of Japan rate hike later this month, though this outlook could shift if the ceasefire collapses. Japan’s weakening consumer confidence and ongoing economic concerns tied to the conflict further complicate the central bank’s decision.
BOJ Governor Kazuo Ueda reiterated that real interest rates remain negative, keeping financial conditions loose. The dollar has benefited overall from the conflict, partly because the U.S. is a net energy exporter, unlike many oil-importing economies such as Japan and parts of Europe.
The five-week conflict has disrupted global energy supplies significantly, and despite the ceasefire, Iran retains increased influence over shipping through the Strait of Hormuz. Upcoming U.S. economic data, including personal spending and inflation measures, could influence the dollar’s direction, with strong figures potentially supporting a rebound.
Elsewhere, the Australian dollar edged lower, the New Zealand dollar gained slightly, and cryptocurrencies declined, with bitcoin and Ethereum both posting losses.
Bitcoin edged higher on Tuesday, recovering from earlier losses as risk appetite improved after Pakistan urged President Donald Trump to extend his deadline for Iran to reopen the vital Strait of Hormuz.
Market sentiment had previously been weighed down by stalled U.S.-Iran negotiations and Trump’s warning that Iran could face severe consequences if no agreement was reached by his deadline.
The world’s largest cryptocurrency was last trading 0.5% higher at $69,845.4 as of 17:43 ET (21:43 GMT).
Pakistan calls for a deadline extension and proposes a two-week ceasefire.
Pakistan, now a key intermediary between the U.S. and Iran, said diplomatic efforts to end the Middle East conflict are advancing steadily and could yield meaningful results in the near term.
Prime Minister Shehbaz Sharif urged President Trump to extend his deadline by two weeks to give negotiations more time, while also calling on Iran to reopen the Strait of Hormuz for the same period as a goodwill gesture. He further appealed to all sides to observe a two-week ceasefire to create space for diplomacy and work toward a lasting resolution.
According to Reuters, Tehran is responding positively to the proposal, while Axios reported that Trump has been informed of Pakistan’s initiative, citing the White House press secretary.
Trump’s Tuesday night deadline approaches.
Earlier on Tuesday, Trump warned that “a whole civilization will die tonight,” while expressing reluctance but suggesting the outcome seemed likely. He had already threatened to strike Iran’s bridges and power infrastructure if no deal was reached by his 20:00 ET deadline.
He also insisted that any ceasefire must include Iran reopening the Strait of Hormuz, which has effectively been closed since the conflict began, pushing global oil prices higher.
Reuters reported that Iran denied any negotiations with the U.S., accusing Washington of seeking surrender under pressure. Meanwhile, Iran’s Tasnim news agency said Tehran could target additional oil facilities, including those linked to Saudi Aramco, if U.S. attacks on energy infrastructure proceed.
An analyst at Nexo Dispatch noted that markets remain cautious rather than panicked, with investors waiting for the deadline to pass before taking a clearer stance.
Inflation data due later this week is in focus.
Bitcoin has increasingly moved in line with overall risk sentiment, as geopolitical tensions overshadow earlier optimism about diplomatic progress.
Attention is now shifting to upcoming U.S. economic data, particularly the March consumer price index due Friday. Rising energy costs tied to the Middle East conflict are expected to lift inflation, which could strengthen expectations that interest rates will stay higher for longer.
Such a backdrop may weigh on Bitcoin, as the asset typically underperforms in a high-rate environment.
According to Nexo’s Kalchev, ongoing energy-driven price pressures mean each inflation reading this week carries outsized importance for crypto—cooler data could revive hopes for rate cuts, while stronger figures would reinforce the higher-for-longer outlook.
Bitcoin ETFs record their largest daily inflows since February.
Bitcoin exchange-traded funds (ETFs) recorded their largest daily inflows since late February on Monday, as investors positioned ahead of the Iran deadline.
The funds saw a total of $471.3 million in inflows, led by BlackRock’s IBIT with $181.9 million. Fidelity’s FBTC and ARKB followed, attracting $147.3 million and $118.8 million, respectively, according to SoSoValue. Notably, no ETF reported any outflows during the session.
Most altcoins also rebounded on Tuesday, moving in line with Bitcoin’s gains.
Ethereum edged up 0.1% to $2,141.62, while XRP rose slightly by 0.1% to $1.3366. Solana gained 1.7%, and Cardano increased 0.4%. Among meme tokens, Dogecoin advanced 1.6%.
Bitcoin slipped below $69,000 on Tuesday as risk sentiment weakened ahead of a deadline set by U.S. President Donald Trump for Iran to reopen the Strait of Hormuz or risk military action.
The cryptocurrency was last down 0.8% at $68,525.1 as of 03:06 ET (07:06 GMT).
It had briefly climbed above $70,000 on Monday on hopes of a ceasefire, but was unable to sustain the gains.
Traders on edge as Trump’s deadline for Iran draws near, stoking fears of U.S. strikes and market volatility.
Markets are bracing for possible U.S. strikes on Iran as a deadline set by President Donald Trump approaches.
Sentiment worsened after Iran rejected a U.S.-backed ceasefire plan, instead calling for broader terms, increasing fears of escalation.
Trump has warned Iran could be “taken out” if it fails to comply by his 8 p.m. ET deadline, including potential strikes on critical infrastructure such as power plants and bridges.
The standoff has rattled global markets, pushing oil above $110 per barrel as concerns grow over disruptions in the Strait of Hormuz, a key route for global crude supply.
Rising energy prices have intensified inflation worries and boosted demand for safe-haven assets like the U.S. dollar.
Bitcoin has been trading more closely with overall risk sentiment, with geopolitical tensions outweighing earlier hopes for diplomatic progress.
Attention is now shifting to upcoming U.S. inflation data, especially Friday’s CPI report, which is expected to show upward pressure from higher energy costs—potentially keeping interest rates elevated for longer, a backdrop that could weigh further on Bitcoin.
Most altcoins extended losses on Tuesday as risk-off sentiment persisted in crypto markets.
Ethereum, the second-largest cryptocurrency, fell 1.5% to $2,103.92, while XRP dropped 2.4% to $1.31.
Solana and Polygon each declined about 3%, and Cardano lost more than 4%.
Iran has prepared its reply to the proposed ceasefire terms, according to a foreign ministry spokesperson.
Iran has outlined its positions and demands in response to recent ceasefire proposals delivered through intermediaries, a foreign ministry spokesperson said Monday, stressing that negotiations cannot proceed under ultimatums or threats of war crimes.
Spokesperson Esmaeil Baghaei noted that Tehran’s requirements—based on national interests—have already been communicated via intermediary channels, while earlier U.S. proposals, including a 15-point plan, were rejected as excessive.
He emphasized that clearly stating Iran’s legitimate demands should not be seen as compromise, but as confidence in defending its stance. Baghaei added that Iran has prepared its responses and will disclose further details in due course.
US and Iran consider a peace proposal as Trump warns of severe retaliation if the Strait remains closed.
The United States and Iran have received an outline for ending the conflict, but Tehran has refused to immediately reopen the Strait of Hormuz, even after Donald Trump warned of severe consequences if no deal is reached by Tuesday.
According to a source, the proposal follows a two-stage plan: an immediate ceasefire, followed by a broader agreement to be finalized within 15–20 days. Pakistan’s army chief, Asim Munir, has reportedly been in continuous contact with U.S. Vice President JD Vance, envoy Steve Witkoff, and Iran’s foreign minister Abbas Araqchi.
Iran, however, has rejected reopening the Strait under a temporary truce and dismissed imposed deadlines, while also expressing doubts about Washington’s commitment to a lasting ceasefire.
Earlier, Axios reported that the U.S., Iran, and regional mediators were exploring a potential 45-day ceasefire as part of a phased deal toward ending the war.
Trump, posting on Truth Social, issued a deadline of Tuesday evening, threatening further strikes on Iran’s infrastructure if the Strait remains closed.
Meanwhile, airstrikes continued across the region, more than five weeks into the conflict involving the U.S., Israel, and Iran. Tehran has responded by effectively shutting the Strait—through which about 20% of global oil and gas flows—and launching attacks on Israel, U.S. bases, and energy sites in the Gulf.
Officials in the UAE emphasized that any agreement must ensure free passage through the Strait, warning that failing to curb Iran’s nuclear and missile capabilities could lead to greater regional instability.
Despite repeated U.S. claims of weakening Iran’s military capacity, recent Iranian strikes on petrochemical facilities and vessels in Kuwait, Bahrain, and the UAE highlight its continued ability to retaliate.
The conflict has caused heavy casualties: thousands have died in Iran, including many civilians, while Israel and Lebanon have also suffered significant losses as fighting spreads, including clashes with Iran-backed Hezbollah forces.
Gold prices declined in Asian trading on Thursday, ending a four-session rally as markets responded to renewed escalation signals from U.S. President Donald Trump regarding the Iran conflict.
Spot gold was last down 1.4% at $4,693.12 per ounce as of 22:21 ET (02:21 GMT), after briefly reaching an intraday high of $4,800.58. U.S. gold futures also fell nearly 2% to $4,721.80 per ounce.
Market sentiment shifted after Trump stated in a televised address that the U.S. would intensify military action against Iran over the next “two to three weeks,” reaffirming Washington’s position on blocking Iran from acquiring nuclear weapons. He added, “We’re going to hit them extremely hard over the next two to three weeks. We’re going to bring them back to the Stone Ages where they belong.”
The comments contrasted with earlier remarks this week suggesting the U.S. could withdraw from the conflict within a similar timeframe, even without a formal agreement.
Financial markets have remained highly reactive to changing rhetoric on the conflict as investors reassess geopolitical risk. Oil prices rebounded following Trump’s remarks, raising concerns about inflationary pressures that could keep interest rates higher for longer and reduce demand for non-yielding assets like gold.
The U.S. dollar also strengthened after two consecutive losing sessions, further weighing on gold by making it more expensive for foreign buyers.
Investors are now focused on upcoming U.S. jobs data due Friday for signals on the Federal Reserve’s policy direction, a key driver for precious metals.
Elsewhere in metals, silver dropped 3.2% to $72.77 per ounce, while platinum slipped 1.7% to $1,934.60 per ounce.
Oil jumped over 4% on escalation fears.
Oil prices surged by more than $4 on Thursday after U.S. President Donald Trump said the United States would continue military strikes against Iran, including energy and oil infrastructure, over the coming weeks, while offering no clear timeline for ending the conflict.
Brent crude futures jumped $4.88, or 4.8%, to $106.04 per barrel at 0200 GMT, while U.S. West Texas Intermediate (WTI) crude rose $4.17, or 4.2%, to $104.29 per barrel.
The rally followed earlier weakness, as both benchmarks had dropped by more than $1 earlier in the session ahead of Trump’s address and closed lower in the prior trading day.
In his televised national speech, Trump said U.S. forces had nearly achieved their objectives in the conflict with Iran and that the war was approaching its conclusion, though he did not specify a timeframe. “We are going to finish the job, and we’re going to finish it very fast. We’re getting very close,” he said.
Geopolitical risks in the region have escalated, with threats to maritime shipping increasing. On Wednesday, an oil tanker chartered by QatarEnergy was struck by an Iranian cruise missile in Qatari waters, according to the country’s defence ministry.
Meanwhile, the head of the International Energy Agency warned that supply disruptions are beginning to affect Europe’s economy, with the region having previously relied on pre-war contracted oil shipments.
The U.S. dollar fell on Wednesday, touching a one-week low, as expectations of a possible de-escalation in the Middle East conflict reduced demand for the currency’s safe-haven appeal.
At 17:10 ET (21:10 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.4% at 99.65.
Trump says Iran has requested a cease-fire and hints at a possible U.S. withdrawal, but ties any pause in fighting to conditions on the ground.
On Wednesday, Trump stated on Truth Social that Iran’s newly installed president had requested a ceasefire, describing him as “less radical and more intelligent” than his predecessors. He claimed the United States would only consider the request once the Strait of Hormuz is fully reopened and secure, adding that U.S. forces would continue striking Iran until then.
He also said that if Iran’s request is confirmed, it could signal a further step toward de-escalation, though uncertainty remains over the status of the Strait of Hormuz, a key global energy route that carries roughly one-fifth of the world’s oil and gas supply and has reportedly been disrupted since the conflict began, contributing to higher oil prices.
In earlier remarks from the Oval Office, Trump suggested the U.S. could begin withdrawing forces within two to three weeks, arguing that the objective of eliminating Iran’s nuclear threat had already been achieved and that no formal agreement would be necessary to end the conflict.
The White House also announced that Trump is scheduled to address the nation at 21:00 ET (01:00 GMT) with an “important update on Iran.”
The dollar posts its strongest monthly performance since July 2025.
The greenback ended Tuesday, closing out March with its strongest monthly performance since July last year.
Rising oil prices, driven by supply disruptions following the closure of the Strait of Hormuz, have raised concerns about a potential inflation shock. This has prompted investors to reassess expectations for central bank rate cuts and, in some cases, price in a higher likelihood of rate hikes.
A “higher-for-longer” interest rate outlook typically supports the U.S. dollar, enhancing its appeal as a safe-haven asset amid ongoing Middle East tensions. The currency has also benefited from the U.S. position as a net energy exporter, as well as a broader shift toward cash holdings.
According to David Morrison, senior market analyst at Trade Nation, the Dollar Index has been a key beneficiary of regional instability. He noted that the dollar surged last month as investors moved into the currency in a classic flight to safety, at the expense of traditional havens such as precious metals, U.S. Treasuries, and currencies like the Japanese yen and Swiss franc.
Morrison added that the index appeared to have broken above long-term resistance near the 100 level, suggesting a potential bottom after a weak year. However, he cautioned that momentum may now be stalling, implying that dollar bulls may need to wait for clearer signals before expecting further sustained gains.
Euro, yen, and sterling end the month lower.
The euro (EUR/USD), sterling (GBP/USD), and Japanese yen (USD/JPY) were largely unchanged on Wednesday.
However, developed market currencies underperformed the U.S. dollar over March. The euro and British pound recorded their weakest monthly results since July and October 2025, respectively, while the yen also posted its worst month since October.
Europe and Japan, both heavily dependent on Middle Eastern supplies of liquefied natural gas and fuel, have been more exposed to the impact of rising oil prices than the United States.
The inflationary pressure from higher oil costs linked to the Iran conflict is already beginning to appear in economic data. Preliminary Eurostat figures showed eurozone inflation is expected to rise to 2.5% in March from 1.9% in February. Energy prices are projected to be the main driver, with annual energy inflation accelerating to 4.9% after a 3.1% decline in the previous month.
In the UK, which is experiencing its fifth oil supply shock in roughly a decade, concerns are growing that rising energy costs could tip the economy toward recession, according to Deutsche Bank economist Sanjay Raja.
Bitcoin edged slightly higher on Wednesday, trimming earlier gains but still holding just above flat as risk assets benefited from optimism over de-escalation in the Middle East. President Donald Trump stated that Iran’s new leadership had reportedly requested a ceasefire.
The world’s largest cryptocurrency had finished March in the prior session with a gain of nearly 2%, ending a five-month losing streak marked by significant declines.
Bitcoin was up 0.3% at $68,478.6 as of 17:26 ET (21:26 GMT).
Trump says Iran has asked for a ceasefire, but U.S. will only consider it once the Strait of Hormuz reopens.
Trump suggested a possible end to the conflict, claiming on Truth Social that “Iran’s New Regime President, much less radicalized and far more intelligent than his predecessors, has just asked the United States of America for a CEASEFIRE!”
He added that the U.S. would “consider” the request once the Strait of Hormuz is “open, free, and clear,” warning that until then, “we are blasting Iran into oblivion or, as they say, back to the Stone Ages.”
If verified by Iran, the statement would signal a notable step toward de-escalation, though uncertainty remains over the Strait of Hormuz—a key energy route handling about one-fifth of global oil and gas flows—which has been effectively disrupted since the conflict began, driving global oil prices higher.
The remarks followed Trump’s earlier comments on Tuesday that the U.S. planned to wind down military operations against Iran within two to three weeks, arguing that Washington had already met its objectives, including damaging Iran’s nuclear ambitions and contributing to regime change in Tehran.
He also suggested that Iran would not need to formally agree to a deal to end the war, leaving markets uncertain about the reopening of the Strait of Hormuz. Reports this week indicated the U.S. may leave any reopening effort to European and Gulf allies rather than take direct action.
Rising energy prices tied to the conflict have been a key inflation concern for markets throughout March, fueling expectations of a more hawkish stance from global central banks—an outcome typically negative for speculative assets such as cryptocurrencies.
Google research highlights potential cryptocurrency vulnerabilities linked to quantum computing.
In a recent white paper, Google researchers warned that cryptocurrencies may be more exposed to advances in quantum computing than previously believed. They noted that quantum machines could potentially undermine elliptic curve cryptography—the encryption method underlying Bitcoin.
Their analysis suggests that breaking this cryptographic system could require fewer than 500,000 physical qubits on a superconducting quantum computer, about 20 times lower than earlier estimates. Although such hardware does not yet exist in practice, the researchers cautioned it could become feasible by around 2029.
They also encouraged the crypto industry to begin preparing a shift toward post-quantum cryptographic systems to safeguard blockchain networks. The study included contributions from organizations such as Coinbase, the Stanford Institute for Blockchain Research, and the Ethereum Foundation.
Altcoins gain ground today as hopes of de-escalation in Iran tensions lift market sentiment.
Broader crypto markets climbed on expectations that the conflict could be winding down.
Ethereum (Ether) rose 2.7% to $2,159.79, while XRP gained 1.1% to $1.3550.
Solana traded slightly higher, and Cardano advanced 3.6%, while BNB slipped 0.4%.
In memecoins, Dogecoin added 0.8%, whereas $TRUMP declined 0.6%.
Despite a broadly flat-to-weaker March driven by war-related risk aversion, altcoins generally held up better than many other speculative assets.
Bitcoin edged higher on Monday as investors digested mixed signals from both the U.S. and Iran regarding the ongoing Middle East conflict.
The world’s largest cryptocurrency had logged a two-week losing streak by Friday, with broader risk assets under pressure since the war began.
As of 18:13 ET (22:13 GMT), Bitcoin was up 1.4% at $66,734.8.
Iran escalation in focus
Markets on Monday signaled a worsening conflict in Iran, particularly after Yemen’s Iran-backed Houthi group entered the fray by launching missiles at Israel over the weekend.
Their involvement risks opening a new front, given their ability to carry out attacks in the Red Sea.
Separately, President Donald Trump warned he could target key Iranian energy infrastructure, including Kharg Island, if Tehran fails to reach an agreement with the U.S.
Trump said Washington was engaged in “serious discussions with a new, and more reasonable, regime,” though he added that failure to strike a deal—and reopen the Strait of Hormuz—could lead to sweeping attacks on Iran’s power plants, oil fields, and desalination facilities.
Iran has denied any direct negotiations. State media reported that while messages had been relayed through intermediaries, Tehran rejected U.S. demands as “excessive” and “illogical,” citing foreign ministry spokesperson Esmaeil Baqaei.
The White House later said public statements differed significantly from private communications, maintaining that talks were still ongoing.
Meanwhile, crypto markets began the week on a steadier note. Total market capitalization rose 1% over the past 24 hours to $2.32 trillion, despite renewed concerns over Middle East tensions, according to Dessislava Ianeva of Nexo Dispatch. She noted that geopolitical developments continue to drive short-term volatility and heighten the importance of upcoming macroeconomic data.
Strategy may pause Bitcoin buying streak
Strategy (NASDAQ:MSTR), the world’s largest corporate holder of Bitcoin, may have skipped adding to its holdings last week, according to a Coindesk report.
Executive Chair Michael Saylor typically hints at upcoming purchases in a Sunday post on X, followed by a formal announcement on Monday. This time, however, his post focused on promoting Strategy’s preferred equity offerings instead.
If confirmed, the pause would break a 13-week buying streak dating back to late December, during which the company accumulated a total of 90,831 Bitcoin, Coindesk said.
Crypto prices moved higher on Monday, with altcoins following Bitcoin’s upward trend.
The second-largest cryptocurrency, Ether, gained 3.1% to $2,034.71, while XRP rose 0.8% to $1.3282. BNB, Solana, and Cardano posted increases of 1.2%, 2.6%, and 2.7%, respectively.
Among meme coins, Dogecoin edged up 1.2%, and $TRUMP jumped 2.9%.
A massive oil tanker near Dubai was struck by an Iranian attack following the latest threats from Trump.
Iran struck and set fire to a fully laden crude tanker near Dubai on Monday, as President Donald Trump warned Washington would destroy Iran’s energy infrastructure if Tehran failed to reopen the Strait of Hormuz. The targeted vessel, the Kuwait-flagged Al-Salmi, is the latest in a series of attacks on commercial shipping using missiles and drone strikes in the Gulf since U.S. and Israeli forces hit Iran on February 28.
The conflict, now a month old, has expanded across the Middle East, causing heavy casualties, disrupting energy flows, and raising fears of a global economic downturn. Oil prices briefly surged again following the attack on the tanker, which has a capacity of roughly 2 million barrels valued at over $200 million. Its owner, Kuwait Petroleum Corp, said the strike occurred early Tuesday, igniting a fire and damaging the hull, though no injuries were reported. Dubai authorities later confirmed the blaze had been contained after what they described as a drone strike.
Rising oil and fuel costs are beginning to strain U.S. households and pose a political challenge for Trump and Republicans ahead of November’s midterm elections, particularly after pledges to cut energy prices and boost domestic production. Gasoline prices in the U.S. climbed above $4 per gallon for the first time in more than three years, according to GasBuddy, as tighter global supply pushed crude above $101 per barrel.
Meanwhile, hostilities show no sign of easing, with concerns mounting over a broader regional war. Iran-aligned Houthi forces have launched missiles and drones at Israel, while Turkey reported intercepting a ballistic missile from Iran that briefly entered its airspace. Israel has carried out strikes on targets in Tehran and Hezbollah-linked sites in Beirut, with explosions reported across parts of the Iranian capital and power outages affecting some districts.
The Israeli military said four of its soldiers were killed in southern Lebanon, where recent incidents have also claimed the lives of UN peacekeepers. Iran’s military stated its latest wave of attacks targeted U.S. bases and Israeli positions across the region.
The U.S. has begun deploying thousands of troops from the 82nd Airborne Division to the Middle East, signaling potential escalation even as diplomatic efforts continue. The White House said Trump aims to secure a deal with Iran before an April 6 deadline to reopen the Strait of Hormuz, a key route for roughly one-fifth of global oil and LNG shipments.
While U.S. officials say talks are progressing, Iran has dismissed proposed terms as unrealistic, insisting it is focused on defense amid ongoing attacks. Trump reiterated both optimism for a deal and a renewed threat to destroy Iran’s energy facilities if no agreement is reached, though reports suggest he may be open to ending military operations even if the strait remains partially closed.
Oil prices later eased and equities recovered on hopes of de-escalation. Still, the administration is weighing further steps, including seeking financial contributions from Arab allies, as it requests an additional $200 billion in war funding—an effort likely to face resistance in Congress.
Oil and war fears dominate markets heading into an uncertain Q2.
Financial markets enter the second quarter on shaky ground, highly sensitive to war-related headlines. This environment raises the risk of deeper equity declines, while the sharp selloff in bonds may start to attract buyers.
Even if the conflict eases soon, investors believe lasting damage to Middle East energy infrastructure and persistently high oil prices will weigh on growth and keep inflation elevated. That combination could further pressure stocks, though if growth fears begin to outweigh inflation concerns, bonds may stage a recovery.
Seema Shah, chief global strategist at Principal Asset Management, noted that uncertainty dominates: it’s hard for investors to see beyond the constant flow of geopolitical news. While diversification into international equities remains appealing, she emphasized that U.S. exposure still plays an important role.
The Middle East conflict caps a volatile first quarter also shaped by U.S. geopolitical moves and rapid AI-driven disruption. Oil has been the standout performer, surging about 90% to above $100 a barrel, which has shaken bond markets and pushed expectations for higher interest rates.
Analysts surveyed by Reuters see oil ranging from $100 to $190 if supply disruptions persist, with an average forecast around $134. Meanwhile, prediction platform Polymarket assigns roughly a one-third chance of the war ending by mid-May and a 60% likelihood by late June.
Echoing the inflation surge of 2022, short-term borrowing costs in countries like Britain and Italy have jumped sharply, with notable moves also seen in U.S., German, and Japanese bonds. According to Societe Generale strategist Manish Kabra, the key factors for markets are how long the oil shock lasts and how central banks respond.
Since the war began, expectations for U.S. rate cuts this year have largely disappeared. In Europe and the UK, investors now anticipate rate hikes instead of easing, while hopes for monetary loosening in emerging markets have faded.
Kabra highlighted the upcoming U.S. Memorial Day weekend as a potential pressure point, as rising travel demand could intensify public and political focus on energy prices. Reflecting this backdrop, he has increased exposure to commodities in portfolios.
Bond markets have taken a hit, with yields rising sharply, but some investors see value emerging. Amundi, for instance, has added short-term eurozone government bonds and maintained positions in U.S. Treasuries, expecting central banks to look past short-term inflation spikes once the crisis stabilizes.
Similarly, Russell Investments sees bonds as more attractive than a few months ago and expects the dollar’s recent strength—up over 2% in March—to fade over time. Before the conflict, investors had been rotating away from U.S. assets, a trend that could resume if tensions ease.
Gold has slipped about 4% in March, as investors sell profitable positions to offset losses elsewhere, despite its usual role as an inflation hedge.
Equities, while initially resilient thanks to strong earnings and the tech sector, are now under pressure. The S&P 500 and Europe’s STOXX 600 have fallen roughly 9–10% from recent highs, and Japan’s Nikkei has dropped nearly 13% from its February peak.
Zurich Insurance strategist Guy Miller said his firm has shifted to an underweight position in equities as the economic outlook deteriorates. Data already points to weakening momentum, with U.S. consumer sentiment declining, German investor confidence dropping sharply, and business activity indicators hitting multi-month lows.
Although the U.S. benefits from a relatively strong economy and its status as an energy exporter, it is not immune. Prolonged high energy prices would still weigh on growth. The OECD has already warned that the global economy has been knocked off a stronger growth trajectory.
Miller concluded that this conflict differs from recent geopolitical shocks, which had limited market impact—this time, the implications for earnings, margins, and valuations are far more significant.
Gold prices edged up slightly as attention remains on the escalating Iran conflict.
Gold edged higher in Asian trading on Monday, recovering modestly after a volatile week, as investors continued to watch the risk of escalation in the U.S.–Israel conflict with Iran.
Spot gold gained 0.4% to $4,509.51 an ounce, with futures rising similarly to $4,537.40. Prices had swung sharply last week, dropping to around $4,000 before rebounding close to $4,500 by Friday.
Other precious metals were mixed, with silver slipping 0.9% while platinum advanced 1.8%.
Analysts at OCBC said the recent rebound in gold appears largely technical, following a steep decline of about 20% since the conflict began. While bearish pressure is easing and momentum indicators are improving, they cautioned that the recovery may struggle to hold unless prices break above key resistance levels at $4,624, $4,670, and $4,850 per ounce.
They also warned that persistently high energy prices could keep inflation elevated, potentially pushing Treasury yields higher and creating a less favorable environment for gold in the near term.
Meanwhile, geopolitical tensions remained high after Iran-backed Houthi forces in Yemen launched attacks on Israel over the weekend, raising fears of a broader conflict. Iran signaled readiness for a possible U.S. ground invasion, amid reports that Washington is deploying additional troops to the Middle East.
U.S. President Donald Trump said negotiations with Iran were progressing and a deal could be near, though he provided no clear timeline and warned that further strikes on Tehran remain possible. He also recently extended a deadline for potential attacks on Iran’s energy infrastructure into early April.
Oil prices jumped above $115 per barrel after Yemen’s Houthi forces launched an attack on Israel.
Oil prices surged in early Monday trading after Yemen’s Houthi group launched attacks on Israel, raising fears of a wider Middle East conflict.
Brent crude jumped 2.2% to $115.08 a barrel, after briefly spiking as high as $116.43.
The Iran-backed Houthis said they had fired multiple missiles at Israel and warned of further strikes, heightening concerns about escalation—especially given their ability to target vessels in the Red Sea.
Tensions remained elevated as Israeli forces struck targets in Tehran, while the U.S. deployed 3,500 troops to the region aboard the USS Tripoli. Iran also signaled readiness for a potential U.S. ground operation.
Oil prices have rallied sharply in March, with Brent up nearly 60%, driven by severe supply disruptions. Iran’s effective blockade of the Strait of Hormuz—a route carrying about 20% of global oil supply—has intensified market fears.
While Pakistan has offered to host talks between Washington and Tehran following a U.S. ceasefire proposal, Iran has largely rejected direct negotiations and accused the U.S. of preparing for a ground invasion.
Donald Trump said the United States and Iran have been engaging both directly and through intermediaries, describing Iran’s new leadership as “very reasonable,” even as additional U.S. troops deployed to the region and Tehran warned it would not accept humiliation.
His comments came after Pakistan announced it was preparing to host potential talks between Washington and Tehran aimed at ending the month-long conflict. Trump expressed confidence a deal could be reached, though he acknowledged uncertainty.
He also suggested that recent strikes, including one that killed Ali Khamenei, had effectively resulted in regime change, noting that the new leadership appears more pragmatic.
The conflict, which began with an Israeli strike on February 28, has spread across the Middle East, causing heavy casualties, disrupting global energy supplies, and weighing on the world economy.
Pakistan’s Foreign Minister Ishaq Dar said regional discussions had focused on ending the war and possibly hosting U.S.-Iran negotiations in Islamabad, though it remains unclear if both sides will attend.
Meanwhile, Iran’s parliamentary speaker Mohammad Baqer Qalibaf accused the U.S. of signaling negotiations while preparing for a potential ground invasion, warning that Iran would resist any attempt at forced submission.
The Pentagon has sent thousands of additional troops to the region, giving Washington the option of launching a ground offensive, while Israel has indicated it will continue strikes against Iranian military targets regardless of diplomatic efforts.
Recent Israeli airstrikes have targeted missile facilities and infrastructure across Iran, while Iranian retaliation has struck sites in Israel. The conflict has also disrupted key shipping routes, including the Strait of Hormuz, driving oil prices sharply higher and rattling global markets.
As tensions escalate, the arrival of more U.S. forces and the possibility of broader regional involvement—including attacks linked to Yemen’s Houthi forces—raise the risk of a prolonged and wider war.
The U.S. dollar rose on Friday, positioning itself for its strongest monthly performance since July, as investors turned to the currency as a safe haven amid uncertainty surrounding the Iran conflict.
By 17:28 ET (21:28 GMT), the U.S. Dollar Index—which measures the greenback against six major currencies—had increased by 0.3% to 100.18.
The U.S. dollar is on track for its strongest monthly performance since July 2025.
The U.S. dollar is on track for its strongest monthly gain since July 2025, with the Dollar Index rising 2.6% in March—its biggest increase since a 3.2% climb last July.
This strength has been driven by growing safe-haven demand amid geopolitical tensions, along with expectations that interest rates will stay higher for longer due to inflation pressures from rising energy prices. Markets have largely abandoned bets on Federal Reserve rate cuts this year, and are even starting to price in potential rate hikes.
At the same time, investors have been selling off bonds, pushing U.S. Treasury yields sharply higher, with the 10-year yield reaching its highest level since July.
According to Macquarie strategist Thierry Wizman, while safe-haven flows have played a role, the dollar’s strength is more fundamentally driven—particularly by the U.S.’s lower reliance on imported oil compared to other regions. He noted that unlike past periods of uncertainty, the current environment may have a less severe impact on U.S. incomes, helping support the dollar despite global economic disruptions.
Trump pushed back a critical deadline, while Iran reported that its infrastructure had been struck.
Risk assets fell sharply on Friday as tensions in the Middle East intensified, while oil prices surged past $110 per barrel. Although President Donald Trump extended a deadline for Iran to reopen the Strait of Hormuz, the move did little to reassure markets.
Iran’s foreign minister, Abbas Araghchi, stated that Israeli strikes had already hit key infrastructure, including steel plants, a power station, and civilian nuclear facilities, calling the attacks inconsistent with Trump’s extended timeline.
Earlier, Trump had warned Iran to unblock the strategic waterway—through which about 20% of global oil supply passes—or face U.S. strikes on its energy infrastructure. He later delayed potential action until Friday following what he described as “very strong” talks with Iran. However, Tehran has denied that any negotiations with Washington are taking place.
The euro and British pound weakened, while the yen surged to 160 against the dollar.
The euro and British pound weakened against the U.S. dollar, with EUR/USD falling 0.2% to 1.1510 and GBP/USD dropping 0.5% to 1.3259, as Europe continues to face energy supply disruptions—especially in natural gas—linked to the Iran conflict.
G7 diplomats met in France, where U.S. Secretary of State Marco Rubio highlighted the Strait of Hormuz as a key issue, warning that any attempt by Iran to impose tolls on the passage would be unacceptable.
Meanwhile, the Japanese yen slid further, with USD/JPY rising 0.4% to 160.25. Reports suggest that breaching the 160 level could prompt intervention by Japanese authorities. The Australian dollar, often seen as a risk-sensitive currency, remained broadly stable after earlier falling to a two-month low.
Analysts at MUFG expect the U.S.–Iran conflict to be relatively short-lived, with geopolitical risk premiums eventually easing. However, they caution that a prolonged conflict could keep energy prices elevated, putting additional pressure on currencies in Asia that rely heavily on energy imports—particularly the South Korean won and the Japanese yen.
Cuba seeks Vatican help to ease the U.S. oil embargo, the Washington Post reports.
Cuban officials have asked the Vatican to help convince the administration of U.S. President Donald Trump to relax its oil embargo, raising the issue in high-level meetings with Vatican representatives, including Pope Leo, the Washington Post reported Friday, citing sources familiar with the discussions.
Reuters said it could not immediately confirm the report, and the Vatican, the White House, and the Cuban government did not respond to requests for comment.
Havana and Washington began talks earlier this month as the embargo intensifies economic pressures on the Communist-led country, with some reports indicating the Trump administration may be aiming to remove President Miguel Díaz-Canel from power.
Oil edges higher but is still on track for its first weekly drop since the Iran conflict began.
Oil prices rose on Friday but were still set for their first weekly decline since February 9, after U.S. President Donald Trump extended a pause on strikes against Iran’s energy facilities. Despite the temporary restraint, investors remain cautious about the chances of a ceasefire in the month-long conflict.
Brent crude climbed $1.87 (1.73%) to $109.88 a barrel, while U.S. West Texas Intermediate (WTI) gained $1.57 (1.66%) to $96.05. Even so, both benchmarks were down on the week, with Brent slipping 2.1% and WTI losing 2.3%, though they have surged sharply since the conflict began.
Analysts noted that oil markets are being driven more by the potential duration of the war than short-term headlines, warning that any damage to infrastructure or prolonged fighting could push prices significantly higher. Trump has extended a deadline to April 6 for Iran to reopen the Strait of Hormuz or face further action, while the U.S. continues to build up military presence in the region and considers targeting key Iranian oil assets.
Iran has rejected a U.S. proposal relayed via Pakistan, calling it unfair. Meanwhile, the conflict has removed around 11 million barrels per day from global supply, worsening an already tight market. Analysts say prices could fall quickly if tensions ease, but remain elevated overall—or even spike to $200—if the war drags on into late June, as countries increasingly draw on reserves and adjust demand.
Oil prices inched up as Iran considers the U.S. plan to end the conflict.
Oil prices in Asia inched up on Thursday as mixed signals over Middle East de-escalation kept markets cautious, while Iran considered a U.S. proposal to end the conflict.
By 20:31 ET (00:31 GMT), May Brent crude rose 0.8% to $103.02 per barrel and WTI crude gained 1% to $91.20, after both benchmarks dropped more than 2% in the previous session.
Traders assessed tentative diplomatic developments from Tehran, where authorities are said to be reviewing a U.S.-supported plan to stop the fighting. Although Iran has yet to accept the proposal, it has not rejected it outright, fueling guarded optimism for easing tensions.
However, uncertainty remains high. Tehran has denied direct talks with Washington and signaled that major disagreements persist, leaving markets uneasy and price moves relatively muted.
Crude has seen sharp swings in recent weeks as the conflict disrupted supply flows from the Gulf, a key global oil hub. Earlier this month, Brent surged past $119 per barrel on concerns over potential supply outages.
The Strait of Hormuz—through which about one-fifth of global oil passes—remains a critical risk point, with any disruption likely to drive prices higher.
On Wednesday, prices fell as reports of possible negotiations eased some geopolitical risk premium. Meanwhile, investors are monitoring Washington’s stance, as officials warn of tougher action if Iran fails to engage, adding further uncertainty to the outlook.
Gold holds steady as markets weigh conflicting signals over potential de-escalation between the U.S. and Iran.
Gold prices were mostly stable in Asian trading on Thursday as investors navigated mixed signals surrounding the Iran conflict, while Tehran continued to assess a U.S. proposal to end the war.
Spot gold edged up 0.1% to $4,509.06 an ounce by 22:57 ET (02:57 GMT), while U.S. gold futures declined 1.1% to $4,536.10.
Bullion had recovered earlier in the week, climbing back above $4,500 after a sharp pullback, supported by a weaker dollar and cautious optimism over potential U.S.-Iran diplomacy.
Still, gains were limited as uncertainty persisted. Iran is reviewing a U.S.-backed plan to halt hostilities, but unclear signals on whether talks will advance have kept investors wary.
Although Tehran has not formally accepted the proposal, it has avoided rejecting it outright, fueling guarded hopes for de-escalation. At the same time, Iran has denied direct negotiations with Washington and emphasized that key differences remain unresolved, leaving markets uneasy.
The U.S. has also warned of tougher action if Iran fails to engage constructively, adding another layer of tension.
Gold—traditionally a safe-haven asset—has shown unusual volatility in recent weeks. Prices dropped sharply earlier this month despite rising geopolitical risks, as expectations of prolonged high interest rates and a stronger dollar weighed on demand.
Movements in oil prices have also influenced sentiment. Rising crude has heightened inflation concerns, reinforcing expectations that central banks may keep rates elevated, which tends to pressure non-yielding assets like gold.
Wider financial markets reflected a cautious tone, with investors seeking clearer direction on both geopolitical developments and global monetary policy.
Among other precious metals, silver gained 0.1% to $71.32 an ounce, while platinum slipped 0.6% to $1,918.60.
The U.S. dollar rose slightly on Wednesday, rebounding from earlier losses as hopes for Middle East de-escalation faded after Iran rejected a U.S. ceasefire proposal.
At 17:45 ET (21:45 GMT), the U.S. Dollar Index—tracking the greenback against six major currencies—gained 0.2% to 99.62.
The United States has put forward a ceasefire proposal.
While there is some optimism that Washington and Tehran may be exploring ways to end the conflict, markets remain cautious as both sides continue to offer conflicting accounts of how negotiations are progressing.
Reportedly eager to find an exit from the war, President Donald Trump has backed a U.S. proposal outlining a 15-point peace plan to Iran. The plan not only calls for Tehran to dismantle its primary nuclear facilities but also urges the reopening of the Strait of Hormuz — a critical shipping route south of Iran that has been largely shut to tanker traffic in recent weeks. This disruption has pushed energy prices higher and raised concerns about global inflation.
According to Thierry Wizman, global FX and rates strategist at Macquarie, investor optimism was revived by news that the U.S. had presented concrete terms to Iran. However, he cautioned that a ceasefire is unlikely in the near term. Instead, the U.S. may escalate military pressure over the next couple of weeks to push Iran toward meaningful concessions, with major combat potentially reaching a turning point by mid-April. He described the situation as entering a third phase — one defined by both negotiation and conflict, rather than purely one or the other.
Wizman added that the possibility of renewed negotiations signals a more critical stage in the U.S.-Iran conflict. Initially driven by diplomacy, then by direct confrontation, the situation may now evolve into a blend of both. While this dual-track approach could help stabilize market sentiment compared to outright war, it also carries the risk of sharper downside if it fails to deliver lasting stability and security.
Iran has pushed back against the proposal.
On Wednesday morning, the Fars News Agency reported that Tehran does not accept a ceasefire, emphasizing that it seeks a complete end to the conflict rather than a temporary halt in fighting.
Later, Press TV stated that Iran would not allow the United States to dictate when the war should end, citing a senior political figure. According to the report, the official outlined five key demands from Tehran, including a full cessation of attacks as well as international recognition and guarantees of Iran’s authority over the Strait of Hormuz.
However, Axios later cited a U.S. official saying Washington had not received any formal communication from Iran rejecting the ceasefire plan.
Iranian Foreign Minister Abbas Araghchi also denied that negotiations with the U.S. were taking place, according to Reuters. While acknowledging that messages were being passed through intermediaries, he stressed that such exchanges should not be interpreted as formal talks.
In the energy market, Brent crude — the global benchmark — briefly dipped below $100 per barrel on Wednesday, though it remains significantly higher than the roughly $70 level seen before the conflict began in late February.
Rising concerns over energy-driven inflation have strengthened expectations that central banks worldwide may need to adopt a more hawkish policy stance. In Germany, ECB President Christine Lagarde indicated that further tightening could be justified even if the inflation spike proves temporary.
The euro and yen edged higher on Wednesday, while sterling drew attention following the latest UK inflation figures.
The euro saw a slight uptick, with EUR/USD hovering around 1.1560. At the same time, the Japanese yen strengthened, pushing USD/JPY down to 159.33.
Sterling remained largely flat, trading near 1.3365 against the dollar, but came into focus after the release of new consumer inflation data. The UK’s consumer price index rose 3% year-on-year in March, unchanged from February. Notably, the data does not yet reflect the impact of rising oil prices triggered by the Middle East conflict.
According to Sanjay Raja, chief UK economist at Deutsche Bank, the UK’s disinflation trend may be approaching a pause. He noted that February’s inflation reading is already outdated, as households and businesses are beginning to feel the effects of the Iran conflict, particularly through higher fuel costs. Further increases in fuel prices are expected, and even if the conflict ends quickly, energy bills — including electricity and gas — could still climb by double digits over the summer.
Gold rises on softer dollar, lower oil after U.S. proposal.
Gold surged more than 2% during Asian trading on Wednesday, driven by falling oil prices and a softer U.S. dollar. Hopes of a potential Middle East ceasefire eased inflation concerns, increasing the appeal of the metal.
Spot gold rose 2.3% to $4,577.55 per ounce, while U.S. gold futures climbed 4% to $4,611.70.
The move came as reports emerged that the United States had proposed a 15-point plan to Iran aimed at ending the conflict. President Donald Trump said negotiations were ongoing and noted that Iran appeared willing to reach a deal. However, Iranian officials denied any talks, underscoring continued uncertainty.
Oil prices dropped sharply after earlier gains fueled by supply disruption fears, with Brent crude slipping below $100 per barrel. This decline helped ease inflation expectations, reducing pressure on central banks to maintain high interest rates.
Lower energy prices also weighed on bond yields and the dollar—factors that typically support gold, which does not yield interest. The U.S. Dollar Index slipped 0.2% in early trading.
Gold had recently been under pressure due to rising oil prices and bond yields, which strengthened the dollar and triggered a broader selloff in precious metals.
Despite the rebound, analysts warned that volatility is likely to continue, as markets remain highly sensitive to developments in the Middle East.
Elsewhere, silver jumped 3.3% to $73.60 per ounce, and platinum rose 2.2% to $1,977.60.
Oil drops on Middle East ceasefire hopes.
Oil prices dropped about 4% on Wednesday as hopes of a potential ceasefire in the Middle East raised expectations that supply disruptions from the region could ease. The decline followed reports that the U.S. had delivered a 15-point proposal to Iran aimed at ending the conflict.
Brent crude fell $4.89 (4.7%) to $99.60 per barrel, after hitting a low of $97.57. U.S. West Texas Intermediate (WTI) slipped $3.54 (3.8%) to $88.81, touching as low as $86.72. This came after both benchmarks had surged nearly 5% in the previous session before trimming gains amid volatile trading.
Analysts said growing optimism over a ceasefire, along with profit-taking, pressured prices. However, uncertainty over whether negotiations will succeed continues to limit further declines.
U.S. President Donald Trump stated that progress was being made in talks with Iran, while sources confirmed Washington had sent a detailed settlement plan. Reports also suggested the U.S. is pushing for a temporary ceasefire to facilitate discussions, including measures such as curbing Iran’s nuclear program and reopening the Strait of Hormuz.
Despite this, some analysts remain cautious, warning that Middle East developments will continue to drive price swings in the near term.
The conflict has severely disrupted oil and LNG shipments through the Strait of Hormuz—responsible for roughly one-fifth of global supply—creating what the International Energy Agency has described as an unprecedented supply shock.
Even if a ceasefire is reached and flows resume, experts say it is unclear how quickly production will fully recover, especially without confidence in a lasting agreement.
Meanwhile, diplomatic efforts continue, with Pakistan offering to host negotiations, and Iran indicating that non-hostile vessels may pass through the Strait if coordinated with its authorities. Still, military activity in the region persists, and the U.S. is reportedly preparing to deploy additional troops.
To offset disruptions, Saudi Arabia has ramped up exports via its Red Sea Yanbu port to nearly 4 million barrels per day.
In the U.S., inventory data added further pressure to prices, with crude stocks rising by 2.35 million barrels, gasoline up 528,000 barrels, and distillates increasing by 1.39 million barrels last week, according to industry estimates.
The dollar climbed on Tuesday, recovering from the previous session’s decline as uncertainty surrounding U.S.–Iran peace negotiations dampened sentiment and boosted demand for safe-haven assets.
The greenback showed little response to an unverified media report released after the Wall Street close, which suggested a potential ceasefire between the two countries.
As of 17:49 ET (21:49 GMT), the U.S. Dollar Index—measuring the currency against a basket of six major peers—rose 0.3% to 99.23.
Dollar rebounds amid persistent uncertainty
The dollar regained ground as uncertainty continued to dominate market sentiment. On Monday, Donald Trump stated that he would postpone potential strikes on Iran’s energy facilities for five days following what he described as “very positive and productive” discussions aimed at ending the nearly month-long conflict. His remarks initially pressured the dollar, pushing it to its lowest level in almost two weeks.
However, sentiment shifted on Tuesday as conflicting media reports emerged regarding developments in the Middle East. Iran’s parliamentary speaker dismissed Trump’s claims, accusing him of fabricating the talks to calm volatile financial markets.
Later, Trump told reporters that negotiations were still underway and asserted that Iran had agreed to forgo developing nuclear weapons. He also noted that U.S. Secretary of State Marco Rubio and Vice President JD Vance were involved in the discussions.
Following the close of Wall Street, Israel’s Channel 12 reported that U.S. Middle East envoy Steve Witkoff and businessman Jared Kushner were working on a framework to establish a ceasefire and initiate negotiations based on a 15-point plan. Meanwhile, The New York Times reported that the U.S. had already delivered a proposal to Iran aimed at ending the conflict.
Despite these developments, hostilities in the Middle East continue, with the Strait of Hormuz—a crucial passage south of Iran through which roughly 20% of global oil supply flows—effectively closed. The strait remains a major flashpoint, as the risk of Iranian attacks on vessels threatens to disrupt vital energy shipments, particularly to key Asian importers.
Analysts at ING noted that the dollar remains highly sensitive to evolving headlines surrounding the conflict. They added that markets are closely watching for signals—especially from Iran—on whether meaningful ceasefire negotiations could begin. Until clearer progress emerges, any sustained rally in risk assets or significant decline in the dollar is likely to remain limited.
Euro and sterling steady; yen in spotlight after Japan inflation data
The euro and British pound remained largely stable on Tuesday, with EUR/USD edging slightly higher to 1.1607 and GBP/USD ticking up to 1.3409.
Meanwhile, the dollar posted modest gains against the Japanese yen after fresh data showed Japan’s inflation slowed more than expected in February. Core inflation dropped below the central bank’s target for the first time in four years, reinforcing expectations that the Bank of Japan may adopt a more cautious approach toward further monetary tightening.
Analysts at ING noted that the central bank is likely to look past the recent slowdown in inflation and instead focus on potential upside risks to prices.
They added that strong wage negotiation outcomes and firmer-than-expected PMI readings could still support the case for an interest rate hike as early as April. However, the exact timing remains uncertain and may depend on evolving geopolitical developments, particularly in the Middle East.
Bitcoin surged on Monday as investor appetite for risk improved amid hopes of easing tensions in the Middle East.
Donald Trump highlighted “productive” discussions with Iran and announced that the U.S. would delay planned strikes on Iranian energy facilities for five days. Following these remarks, Bitcoin climbed 4.5% to $70,947.6 after previously trading lower.
However, Iran’s Fars News Agency denied any form of communication with the U.S., stating that no direct or indirect talks had taken place. The report also suggested that Washington’s decision to postpone strikes came after Iran warned it would retaliate by targeting energy infrastructure across West Asia.
Donald Trump highlights “productive” talks, raising hopes for a potential end to the conflict.
Donald Trump claimed that the U.S. had held “productive” discussions with Iran, suggesting a potential path toward ending the conflict. In a social media post, he said both sides had made progress toward a “complete and total resolution” and announced a five-day delay in planned strikes on Iran’s energy infrastructure.
However, officials in Tehran denied that any talks had taken place. Iran’s foreign ministry reiterated that its stance on the Strait of Hormuz and the conditions for ending the conflict remain unchanged.
Reports from The Wall Street Journal, citing Fars News Agency, also stated there had been no direct or indirect communication between the two sides. According to Fars, the U.S. decision to hold off on strikes came after Iran warned it would retaliate by targeting similar infrastructure across West Asia.
Trump later told reporters that the discussions had gone very well and that there was a strong possibility of reaching an agreement, though he emphasized that no outcome was guaranteed.
Meanwhile, Justin Wolfers from the University of Michigan highlighted the uncertainty facing financial markets—whether to trust U.S. statements about negotiations or Iran’s denials.
Earlier, Trump had warned that Iran must reopen the Strait of Hormuz within 48 hours or face military action. In response, Tehran threatened to shut down the waterway entirely and target key energy and water infrastructure in Gulf countries if attacked.
Bitcoin outperforms gold as geopolitical tensions and interest rate concerns weigh more heavily on the precious metal.
Bitcoin has outperformed gold and other precious metals this month since the conflict began, with bullion attracting limited demand despite rising geopolitical tensions.
Bitcoin has gained nearly 6% in March, while spot gold has dropped around 17%. The precious metal came under pressure after hitting a record high in late January, triggering profit-taking and a broader unwinding of long positions.
Even with the escalation involving Iran, gold failed to see strong safe-haven inflows, as concerns over persistent inflation and higher interest rates outweighed its appeal. In contrast, Bitcoin benefited from improving U.S. regulatory sentiment and renewed buying interest after previously falling as much as 50% from its October peak.
However, on a year-to-date basis, gold still leads, rising about 2% compared to Bitcoin’s roughly 19% decline.
Across the broader crypto market, gains followed Bitcoin’s move higher after Donald Trump’s announcement. Ethereum climbed 5.6%, while XRP rose 4.3%. Other major tokens including BNB, Solana, and Cardano also posted gains, alongside memecoins like Dogecoin.
The U.S. dollar declined on Monday, giving up earlier gains as investors reacted to President Donald Trump’s remarks about “productive” discussions with Iran. By 17:15 ET (21:15 GMT), the dollar index—measuring the greenback against six major currencies—had dropped 0.5% to 99.13.
Optimism over easing tensions spreads across global markets.
Hopes of easing tensions spread across global markets. Wall Street posted strong gains, while oil prices plunged after Trump decided to delay missile strikes on key Iranian infrastructure, citing progress in talks with Tehran. In a social media update, he said discussions aimed at achieving a “complete and total resolution” to the conflict.
Trump noted that, based on the positive tone of the talks—which are expected to continue—he had ordered the Pentagon to postpone any military action against Iranian energy facilities for five days. However, Iranian state media denied that any direct negotiations had taken place with the U.S. Officials in Tehran maintained their stance on the Strait of Hormuz and reiterated that their conditions for ending the conflict remain unchanged.
Reports from the The Wall Street Journal, citing Iran’s Fars news agency, also indicated there had been no communication between the two sides. According to Fars, the U.S. decision to step back from targeting Iranian energy sites followed warnings from Iran about potential retaliation across West Asia.
Speaking to reporters, Trump said the talks had gone “very well” and suggested there was a serious chance of reaching an agreement, though he stopped short of making any guarantees.
Market analysts expressed uncertainty over how to interpret the situation. David Morrison from Trade Nation noted that the developments add volatility to trading, especially given the high stakes involved. He also suggested that the lack of clearly defined war objectives may allow the U.S. to step back while claiming success—though Iran has framed the move as a retreat following its warnings.
The euro, pound, and yen showed little movement.
In currency markets, the euro and pound showed little movement, while the yen remained steady. European markets ended higher, supported by optimism that reduced tensions could stabilize energy supplies. This is particularly important for Europe, which depends heavily on oil and gas from the Middle East.
Disruptions to the Strait of Hormuz—through which about 20% of global energy supply passes—as well as attacks on gas infrastructure in Qatar, have recently weighed on the region. Meanwhile, Japan’s currency has also been pressured by rising oil prices, as the country relies on crude imports passing through the same route.
The U.S. President, Donald Trump, intensified his administration’s military stance on Saturday by giving Tehran a 48-hour deadline to fully reopen the Strait of Hormuz. In a social media post, he warned that if Iran failed to eliminate threats to the vital waterway, it would face the “obliteration” of its power infrastructure, with a particular focus on its largest power plants.
This move comes after weeks of maritime disruption that have effectively brought shipping to a standstill in the world’s most critical oil chokepoint, where roughly 20% of global crude oil and liquefied natural gas (LNG) typically passes.
Strategic infrastructure in focus
The latest warning from Donald Trump signals a shift in targeting strategy, expanding beyond military assets to include Iran’s domestic power grid in an effort to maximize pressure on its leadership.
Trump also pushed back against claims that the U.S. has fallen short of its initial objectives, asserting that the campaign is “weeks ahead of schedule” and has already significantly weakened Iran’s naval and air capabilities.
While the White House has indicated that Tehran may be open to negotiations, the President has publicly ruled out talks for now, instead insisting on the unconditional reopening of the Strait of Hormuz.
A strike on Iran’s power plants would likely have consequences far beyond energy shortages at home. Such a move would point to a broader disruption of regional industrial capacity, making any diplomatic resolution increasingly difficult to achieve.
The “Hormuz chokepoint” and market volatility
The effective shutdown of the Strait of Hormuz has unleashed a major shock to global energy supply, as tanker movements have nearly halted and key Persian Gulf producers have been forced to cut output.
The 48-hour deadline set by Donald Trump has injected fresh urgency into global commodities markets. If no change occurs before it expires, a potential shift toward targeting civilian energy infrastructure could significantly alter the region’s risk premium for the rest of 2026.
Bitcoin held above $70,000 on Friday after dipping below $69,000 the previous day, ending a nearly two-week winning streak as risk assets faced pressure.
Initially unaffected by the Middle East conflict, cryptocurrencies have recently felt the impact of rising oil prices, while cautious central bank commentary suggesting sustained higher interest rates also weighed on sentiment. By 18:17 ET (22:17 GMT), Bitcoin was up 1% at $70,843.9, having hit a low of $68,814.4 on Thursday.
Analyst Iliya Kalchev of Nexo Dispatch noted that $70,000 is a key level—holding it could stabilize prices and relieve pressure on leveraged positions, while a break could open the path to the next support zone. On-chain data show long-term holders are selling less, indicating a slowdown in distribution. However, miners remain a vulnerable segment, and overall on-chain activity is down, with trading shifting toward derivatives and ETFs, making price discovery more influenced by macro factors than direct demand.
Equities and other risk assets have been hit hard this week amid escalating Middle East tensions, dragging crypto down with them. Reports indicate the U.S. is exploring troop options in Iran. CBS News reported that Pentagon officials have detailed plans for potential ground deployments, while Reuters noted additional Marines and sailors are being sent to the region.
Oil prices surged, with Brent crude reaching $119 on Thursday, after Israel attacked Iran’s South Pars gas field and Tehran retaliated against regional energy infrastructure. Although the U.S. and allies have sought to ease supply concerns near the Strait of Hormuz, Treasury Secretary Scott Bessent indicated sanctioned Iranian oil already at sea may be allowed into markets, and further Strategic Petroleum Reserve releases remain possible. Israeli Prime Minister Benjamin Netanyahu also pledged to refrain from further strikes on Iranian energy sites.
Federal Reserve signals also influenced crypto sentiment. While the Fed kept rates unchanged, higher energy costs fueling inflation expectations pushed back the timing of potential rate cuts. The European Central Bank and Bank of England similarly maintained rates, taking a wait-and-see approach amid the Middle East crisis.
Most altcoins mirrored Bitcoin’s recovery. Ethereum gained 1% to $2,160, XRP fell slightly to $1.4483, Solana rose 1.4%, Cardano edged up 0.2%, and Dogecoin climbed 1.5%.
On Saturday, Israel struck targets in Iran and Beirut as the U.S. sent thousands more Marines to the Middle East. President Donald Trump criticized NATO allies as “cowards” for hesitating to help reopen the Strait of Hormuz.
Since the U.S. and Israel began attacks on Iran on February 28, over 2,000 people have died, and Americans are growing concerned the conflict could expand further in its fourth week. Israel said it targeted Hezbollah in Beirut while intensifying airstrikes against Iran-backed militias, marking the deadliest spillover since Hezbollah fired on Israel on March 2. Israel also launched new attacks on Tehran.
Key energy infrastructure in Iran and the Gulf has been hit, pushing oil prices up 50%, prompting companies like United Airlines to cut planned flights by 5% due to expected prolonged high fuel costs. The Strait of Hormuz, critical for a fifth of global oil and LNG, is largely closed to shipping. Allies have pledged “appropriate efforts” to ensure safe passage, but Germany and France insist fighting must stop first. Iran indicated it will allow Japanese-related vessels to pass.
To ease supply, the U.S. will temporarily waive sanctions to sell 140 million barrels of Iranian oil stranded by the conflict. In Beirut, Israel issued evacuation warnings before its attacks; over 1,000 people have been killed and more than a million displaced.
Israel launched multiple airstrikes on Tehran and central Iran, while Iran fired missiles in retaliation. As Muslims celebrated Eid al-Fitr and Iranians observed Nowruz, Iran’s Supreme Leader Mojtaba Khamenei praised unity and resistance, raising questions about his condition following the death of his father, Ayatollah Ali Khamenei, in the early days of the war.
The U.S. plans to deploy 2,500 Marines with the amphibious ship Boxer, though the mission remains unclear. Polls show nearly two-thirds of Americans expect a large-scale U.S. ground war, yet only 7% support it. No decision has been made on deploying troops into Iran, though potential targets could include Iran’s coast or Kharg Island oil facilities. Trump has said the U.S. is close to achieving its goals of weakening Iran’s military and halting its nuclear ambitions and may scale back military operations.
The market is taking a breather on recent headlines, but the fundamental energy system is still disrupted, constrained, and far from normal. Interruptions in LNG and damage to infrastructure have turned what might have been a temporary flow shock into a long-term supply issue, likely keeping both oil and LNG prices elevated. Current relief rallies are fueled by short-term positioning and changing narratives rather than a lasting recovery, making this market one to trade actively rather than commit to for the long term.
The market is taking a breather. Netanyahu’s comments—talking about securing the Strait and neutralizing Iran’s nuclear and missile capabilities—have soothed sentiment, suggesting the conflict might burn out sooner than feared. But even if the geopolitical chapter closes, the energy system doesn’t reset instantly. Repairing refineries, export terminals, and LNG infrastructure takes time, and confidence in shipping lanes cannot be rebuilt with statements alone. Brent remains above $105; calm on the surface, but the underlying disruption persists.
Oil dipped, sparking reflex rallies in equities, bonds, and volatility, as markets embraced the idea that the Strait might reopen and Iran’s enrichment and missile capacities are weakened. Relief rallies are thus more about positioning than a lasting recovery. Traders are playing the tape, not committing to the story.
The Gulf’s energy infrastructure has been directly hit. LNG outages aren’t temporary—they’re structural, keeping prices elevated even after headlines fade. The IRGC still has enough capability to cause damage, so the market remains tight. Brent dropping below $90 next month seems overly optimistic; elevated oil prices could persist for months.
Equities face a dilemma: hoping for normalization while input costs remain high and central banks stay firm. The bounce from lows is likely headline-driven short covering, not genuine repricing of risk.
Complicating matters, traders are entering one of the largest options expiries ever. With narratives unstable, any headline can trigger outsized moves as positioning resets in real time. Oil charts reflect this chaos: Brent spiked toward $119 on export rumors, then fell below $110 when denied, then drifted lower again on de-escalation headlines. It’s a market still on edge.
Yes, volatility eased, and the market can breathe for now. But the barrel remembers the fire, and the underlying disruptions remain.
What would happen if the U.S. stopped exporting WTI and Brent crude became available only through bids?
Yesterday, the Brent-WTI spread was the headline, and it set the tone for a conversation I had with a few veteran oil traders just before Washington denied any plans to ban U.S. crude exports. These are the people who’ve seen enough market cycles to distinguish a normal move from a market that’s beginning to think. As we ran through tail-risk scenarios, the discussion drifted into territory that felt increasingly uncomfortable.
This wasn’t the usual chatter about positioning, freight, or refinery runs. It was the kind of conversation where the scenario branches began to converge on outcomes that felt plausible—but alarming. I’m not sharing this to shock anyone, but it’s worth understanding what was being analyzed in the world of constant motion we call capital markets. The Brent-WTI blowout wasn’t just a price swing; it was the market quietly testing what could happen if the system itself started to fragment.
On the surface, it looked like a classic geopolitical squeeze: Middle East disruptions lifted Brent, while rising U.S. output weighed on WTI. Beneath the surface, though, a more structural concern emerged. What if the U.S. pulled back—by limiting exports or scaling down its role as the security backstop keeping energy flowing? The mechanics were simple but severe. WTI, being inland, depends on pipelines, storage, and export capacity. Brent, by contrast, is seaborne and priced assuming secure transit. As long as U.S. exports flowed, the arbitrage held, helping balance the global market. But if that valve closed even partially, the market effectively split in two.
Inside the U.S., crude would back up, storage would fill, refinery constraints would bite, and WTI would be forced to clear at a deeper discount. Outside the U.S., the opposite occurred: removing a few million barrels of flexible exports from a system already strained by Middle East risk made every waterborne barrel more valuable. Brent didn’t just rise from lost supply—it repriced the risk of getting oil from point A to point B. Layer in talk of U.S. troop withdrawals and reduced global security commitments, and the market started pricing something far more structural. This wasn’t about barrels alone; it was about the security architecture that enabled their movement.
Here’s where the real asymmetry appeared: the U.S. risked sitting on cheap, trapped crude, while Europe and Asia were forced into a bidding war for mobile supply at a time when mobility was less reliable. Asia felt it first through direct dependence on Middle East flows, Europe through prices and products—but both ended up paying for a world where oil wasn’t just produced, it was contested. The Brent-WTI spread ceased to be a simple arbitrage signal and became a stress indicator for a market increasingly pricing a disconnect between where oil sits and where it can actually go.
In that scenario, oil stops trading like a commodity and starts trading like a map of power: Brent becomes insured crude, WTI becomes stranded crude, and the rest of the world pays a premium for access.
Buying oil in Asia or jet fuel in Europe right now comes at record prices. Physical markets—where oil is traded as cargo on ships, railcars, or in storage—have surged faster than futures markets, as refiners and traders scramble to fill the massive supply gap caused by the U.S.-Israeli conflict with Iran.
The disruption, triggered by attacks on oil and gas facilities across the Middle East, is the largest ever in global energy, with Iran restricting traffic through the Strait of Hormuz, a key route for 20% of the world’s oil. Dennis Kissler of BOK Financial warned that even if the strait reopens, logistics challenges will delay a supply recovery.
Oil, gas, and refined products are vital for transport, shipping, and manufacturing, so supply shocks can heavily impact economies and demand for months or even years. Gulf production cuts and export halts have removed roughly 12 million barrels per day—about 12% of global daily demand—which are hard to replace, according to Petro-Logistics.
Physical Market Spike While futures prices have risen steadily since late February, physical cargo prices have surged even more. Brent crude briefly hit $119 per barrel, later settling near $109, while Middle East Dubai crude reached a record $166.80. Goldman Sachs predicts Brent could surpass its 2008 peak of $147.50 if outages continue. European and African crude cargoes hit $120, and even previously discounted Russian barrels now exceed $100.
The Mediterranean market, calm until early this week, has risen as expectations for a quick Hormuz reopening fade. David Jorbenaze of ICIS noted that spot price differentials reveal a much tighter market than headline prices suggest.
Seeking Sour Crude Refiners are turning to substitutes for Middle Eastern medium-density, high-sulphur “sour” crude. Russian Urals crude, long discounted due to sanctions, recently traded above Brent in India for the first time. Norwegian Johan Sverdrup crude reached an $11.30 premium to Brent. U.S. crude prices rose, with Mars Sour in the Gulf of Mexico hitting $107.53, about $6 above U.S. crude, reflecting its similarity to Middle Eastern oil.
Transport fuels have climbed even higher: European jet fuel hit around $220 per barrel, diesel exceeded $200, and Asian gasoil margins topped $60 per barrel. Measures such as the IEA’s release of 400 million strategic barrels and U.S. sanction waivers for Russian oil may not suffice. As Jorbenaze emphasized, “The market ultimately runs on barrels moving, not barrels being announced.”
Oil slips as the U.S. and allies move to ease supply constraints and reopen the Strait of Hormuz.
Oil prices dipped on Friday as European nations and Japan offered to help secure safe shipping through the Strait of Hormuz, while the U.S. outlined measures to boost supply.
U.S. Treasury Secretary Scott Bessent indicated sanctions on Iranian oil stuck on tankers could soon be lifted, and further releases from the U.S. Strategic Petroleum Reserve were possible. Brent fell $1.36 (1.3%) to $107.29 a barrel, and West Texas Intermediate (WTI) dropped $1.92 (2.0%) to $94.22.
Despite Friday’s decline, Brent is on track for a nearly 4% weekly gain after Iran targeted Gulf energy facilities, forcing production cuts. WTI, however, is set for its first weekly drop in five weeks, down more than 4%.
Markets eased some “war premiums” as world leaders signaled restraint, though analysts warn that full recovery of tanker logistics through Hormuz could take time. Any new attacks or disruptions could push prices higher, while diplomatic engagement may limit spikes and unwind the war premium.
Britain, France, Germany, Italy, the Netherlands, and Japan issued a joint statement offering assistance to ensure safe passage through Hormuz, which handles 20% of global oil and LNG flows.
U.S. President Donald Trump reportedly told Israeli Prime Minister Netanyahu not to strike Iranian energy facilities again. Meanwhile, North Dakota plans to increase crude output as wells restart and winter restrictions lift, though the pace will depend on oil prices and existing budgets.
Oil exports and production in the Middle East have plunged, wiping out more than 7–10 million barrels per day from global supply and triggering a significant physical shortage.
With supply tight and storage capacity limited, prices could climb to $150–$200+ per barrel, and some analysts caution that prolonged disruptions may drive even sharper spikes.
Even if the conflict subsides, a recovery is likely to be gradual, and any short-term relief won’t fully make up for the deficit, keeping prices elevated.
Just a month ago, any analyst predicting oil could surge to $200 per barrel would have been dismissed outright. Now, that scenario is increasingly being taken seriously—and for good reason.
Middle Eastern oil and fuel exports, which averaged over 25 million barrels per day in February, have plunged by nearly two-thirds by mid-March, according to data from Kpler and Vortexa. Even more concerning is production: across the region, output is being slashed, with wells not easily or quickly restarted. Limited storage is forcing producers to cut supply, and in some cases, oil is being stored offshore rather than delivered to buyers. Altogether, roughly a fifth of global oil supply is severely disrupted, and even if the conflict ended immediately, recovery would take time.
Production cuts are substantial: Iraq alone has reduced output by around 2.9 million barrels per day, while Saudi Arabia has cut between 2 and 2.5 million. The UAE and Kuwait have also made significant reductions, bringing total lost supply to over 7 million barrels daily. This stands in stark contrast to earlier expectations from the International Energy Agency, which had forecast a surplus this year. Instead, as much as 10 million barrels per day may now be offline.
With physical supply constrained, the market has little ability to respond to demand, pushing prices sharply higher and making them slow to fall even if conditions improve. Some analysts now see $150 oil as a baseline, with $200 or higher no longer out of the question. Others warn that prices could spike even further in a sustained shortage, as commodity markets tend to move dramatically under such conditions.
That said, not all forecasts are bullish. Some expect prices to retreat below $100 for Brent and $90 for WTI if the conflict ends quickly—though there are few signs of that happening. Even in a best-case scenario, restarting production would take months, meaning prices would likely remain elevated due to lingering supply constraints.
Temporary relief has come from increased availability of sanctioned Russian oil, with nearly 200 million barrels currently in transit globally. However, this is unlikely to fully offset the shortfall. Meanwhile, measures like China restricting fuel exports and cutting refining rates, or the potential restart of limited pipeline flows from Iraq and Kurdistan, are unlikely to significantly ease the imbalance.
What once seemed unthinkable—a $200 oil price—is now within the realm of possibility. Still, given the economic strain such levels would impose worldwide, there is hope that de-escalation efforts may eventually prevent the most extreme outcomes.
Trump is expected to pressure Japan to support the Iran conflict during a White House meeting.
Donald Trump is expected to use a White House meeting with Japan’s prime minister, Sanae Takaichi, to seek support for the war against Iran, putting Tokyo in a difficult position as it weighs how much assistance it can offer.
Although Trump has criticized allies for their limited backing of the U.S.-Israeli campaign—while also claiming the U.S. does not need help—he is still urging partners to contribute naval forces to clear mines and protect tankers in the Strait of Hormuz, which has been largely disrupted during the conflict.
The visit, originally intended to reinforce long-standing U.S.-Japan ties, has become more complicated. While Takaichi has advocated for a stronger military posture at home, public opposition to the Iran war has so far prevented Japan from committing to operations in the Gulf.
Meanwhile, other U.S. allies, including Germany, Italy, and Spain, have declined to join any mission in the region, frustrating Trump. Takaichi has stated that Japan has not received a formal request but is reviewing what actions might be possible within constitutional limits.
Analysts note the meeting could prove challenging for Takaichi, who had hoped to influence Trump’s approach to Asia policy—particularly regarding China—but may instead have to respond to immediate demands related to the Middle East.
Japan is also preparing for potential U.S. requests to help produce or co-develop missiles to replenish American stockpiles depleted by conflicts in Iran and Ukraine. At the same time, Tokyo’s diplomatic ties with Iran could offer a channel for mediation, though past efforts have failed.
In addition, Takaichi is expected to express Japan’s intention to join the “Golden Dome” missile defense initiative and announce new investments in the U.S., potentially including tens of billions of dollars in sectors such as energy and critical minerals, building on earlier commitments tied to easing trade tensions.
Oil prices climb after Iran launches attacks on energy infrastructure across the Middle East.
Oil prices climbed on Thursday, with Brent crude surging by as much as $5 per barrel after Iran launched attacks on energy infrastructure across the Middle East in response to a strike on the South Pars gas field—marking a significant escalation in its conflict with the United States and Israel. By 0400 GMT, Brent futures had gained $4.66, or 4.3%, to $112.04 a barrel, after earlier peaking at $112.86. Meanwhile, U.S. West Texas Intermediate (WTI) rose 96 cents, or 1%, to $97.28, having previously jumped more than $3. Brent had already advanced 3.8% on Wednesday, while WTI ended nearly unchanged.
WTI has been trading at its widest discount to Brent in over a decade, driven by releases from U.S. strategic reserves and elevated shipping costs, while renewed strikes on Middle Eastern energy assets have lent additional support to Brent. Analysts noted that the intensifying conflict—targeted attacks on oil infrastructure and the loss of Iranian leadership—could lead to prolonged supply disruptions. They also pointed to the U.S. Federal Reserve’s decision to hold interest rates steady, accompanied by a hawkish outlook, as another factor heightening market concerns amid wartime conditions.
Further escalating tensions, QatarEnergy reported significant damage to its Ras Laffan LNG hub following Iranian missile strikes, while Saudi Arabia said it intercepted ballistic missiles and a drone targeting its gas facilities. Iran had issued evacuation warnings ahead of strikes on oil sites in Saudi Arabia, the UAE, and Qatar, retaliating for earlier attacks on its own facilities in South Pars and Asaluyeh.
South Pars, part of the world’s largest natural gas field shared between Iran and Qatar, was hit in an attack attributed to Israel, though U.S. and Qatari involvement was denied by President Donald Trump. He warned that the U.S. would respond if Iran targeted Qatar and said Israel would refrain from further strikes unless provoked.
Market analysts expect oil prices to remain elevated as tensions show no signs of easing and the Strait of Hormuz remains at risk of disruption. Reports also suggest the U.S. is considering deploying additional troops to the region, with options including securing tanker routes through the Strait—potentially involving both naval and air forces, and possibly ground troops if necessary.
When geopolitical tensions tied to oil intensify, most investors focus on outright oil prices. While those prices matter, fewer pay attention to the spread between Brent and WTI—an equally revealing signal. West Texas Intermediate (WTI), priced in Cushing, Oklahoma, serves as the U.S. benchmark and mainly reflects North American supply-demand dynamics.
Brent, by contrast, is the global benchmark derived from North Sea crude and closely mirrors international supply-demand conditions—especially seaborne oil flows through key routes like the Persian Gulf and the Strait of Hormuz. Under normal circumstances, Brent trades at a premium of about $2–$5 over WTI.
Sharp changes in this premium carry important market signals. In the context of the Iran conflict, the Brent–WTI spread offers one of the clearest real-time indicators of how producers, consumers, and traders are interpreting the situation.
A widening spread suggests markets are pricing in a global supply disruption, while a stable or narrowing gap—even with high spot prices—implies expectations that any disruption will be limited and temporary.
Recently, the spread has been highly volatile. It currently stands at around $7, pointing to concerns that the conflict could continue to strain global supply. However, frequent swings in the spread show how quickly sentiment is shifting with each new development.
S&P 500 Trails Most Sectors
Last week, the S&P 500 slipped by less than 0.5%, but it has fallen just over 3% from its Tuesday peak and now sits roughly 5% below recent highs. As illustrated in the charts, most sectors are outperforming the broader market based on both absolute and relative measures. The blue circle in the first chart shows that many sectors are positioned in the top-left quadrant—suggesting they are somewhat overbought relative to the S&P 500, yet slightly oversold on a standalone technical basis.
The second chart compares each sector’s performance versus the S&P 500 over the past five days and the prior 20-day period. Transportation stands out as a clear laggard. The third chart, which breaks down the sector’s top ten holdings, shows that oil-sensitive industries—such as trucking, freight, and airlines—have been hit the hardest. These businesses are also closely tied to overall economic activity.
As a result, elevated oil prices combined with rising concerns about economic slowdown are weighing heavily on transportation stocks. If the conflict drags on, the sector is likely to continue underperforming. Even if valuations become deeply oversold, they may stay depressed until there are clearer signs of stability or resolution.
Oil prices declined during Wednesday’s Asian session, pulling back from recent gains after Iraq and the Kurdistan Regional Government agreed to restart crude exports via Turkey’s Ceyhan terminal.
The agreement helped ease some concerns over supply disruptions stemming from the U.S.-Israel conflict with Iran. However, Brent crude remained above $100 per barrel, as the war entered its third week with little indication of de-escalation.
Markets also stayed cautious ahead of the Federal Reserve’s policy decision later in the day, amid worries that persistent inflation—fueled in part by higher oil prices linked to the Iran conflict—could prompt a more hawkish stance.
By 00:18 ET (04:18 GMT), Brent futures had dropped 2.3% to $101.05 per barrel, while West Texas Intermediate (WTI) crude fell 3.3% to $93.03 per barrel.
WTI faced additional pressure after data from the American Petroleum Institute showed U.S. crude inventories rose by 6.6 million barrels last week, defying expectations of a 0.6 million barrel draw. This data often signals a similar trend in official government figures, due later Wednesday.
On Tuesday, Iraq and Kurdish authorities finalized a deal to resume oil shipments to Turkey’s Ceyhan hub starting Wednesday. The move comes as major oil producers seek alternative export routes beyond the Strait of Hormuz, especially after Iran effectively blocked the critical passage earlier this month.
Iraq had reportedly aimed to export at least 100,000 barrels per day through Ceyhan, after shutting in around 70% of its production due to the conflict. Still, the volumes from Ceyhan are expected to cover only a small portion of the supply gap caused by disruptions in Hormuz.
Oil prices also eased after reports that the United Arab Emirates may support a U.S.-led initiative to secure shipping through the Strait of Hormuz. Iran had largely halted traffic through the strait—which handles roughly 20% of global oil supply—in retaliation for U.S. and Israeli strikes.
The UAE could become the first country to back Washington’s efforts, though most allies have so far declined to participate. Meanwhile, tensions remain high, with Iran escalating attacks on vessels near Hormuz following strikes on a key export facility. Reports also indicated that Iranian security chief Ali Larijani was killed in an Israeli strike, raising the risk of further retaliation.
Despite the pullback, oil prices remain supported by ongoing supply concerns. Brent has surged more than 40% since the conflict began in late February. Analysts at OCBC expect crude prices to stay above $100 per barrel through at least mid-2026, citing the lack of clear prospects for easing tensions.
Oil prices to remain above $100/bbl
Oil prices are expected to stay above $100 per barrel in the near term, as the U.S.-Iran conflict shows little indication of easing, according to analysts at OCBC.
The bank noted that with the conflict now in its third week and no meaningful diplomatic progress, crude flows through the Strait of Hormuz remain heavily restricted, keeping global supply tight.
OCBC has revised its outlook, projecting Brent crude to hover around $100 per barrel until mid-2026—well above its earlier estimate of roughly $70—before gradually declining toward $70 by early 2027 as disruptions ease.
Analysts warned that prolonged shipping disruptions are forcing Gulf producers to cut output, increasing the likelihood that short-term supply issues could turn into more sustained losses.
Tanker activity in the Strait of Hormuz has dropped sharply due to security concerns, effectively disrupting a crucial route responsible for about 20% of global oil consumption.
Although some shipments have cautiously resumed following Iranian inspections and potential stockpile releases from the International Energy Agency, overall volumes remain significantly below normal.
OCBC added that mitigation efforts—such as rerouting through alternative pipelines, tapping strategic reserves, and ongoing Iranian exports—could replace up to 10 million barrels per day. However, this would still leave a notable supply shortfall if disruptions persist.
The bank concluded that oil markets are nearing a “moderately severe” supply shock scenario, with risks tilted toward further price increases if geopolitical tensions continue.
Oil jumps more than 2% as markets assess supply threats from the Iran conflict.
Oil prices rebounded over 2% early Tuesday, recovering part of the previous session’s losses as supply concerns intensified amid major disruptions in the Strait of Hormuz.
Brent crude climbed to around $102.69 a barrel, while WTI rose to about $95.92. The gains follow a sharp selloff in the prior session, when prices dropped after some tankers managed to pass through the key shipping route.
The Strait of Hormuz—responsible for roughly 20% of global oil and LNG trade—has been largely disrupted by the ongoing US-Israel conflict with Iran, now in its third week, heightening fears of supply shortages, rising energy costs, and persistent inflation.
Tensions remain elevated as several US allies declined calls to deploy naval escorts for tankers, while risks of further attacks on shipping continue to threaten stability in the region. Iran has also sought the release of seized Indian tankers as part of efforts to secure safe passage through the Gulf.
The disruption has already forced the UAE to cut oil output by more than half, tightening global supply. In response to rising energy costs, the International Energy Agency is considering additional releases from strategic reserves beyond the 400 million barrels already planned.
Meanwhile, major banks have raised their oil price forecasts, reflecting the risk of prolonged supply disruptions. Scenarios range from a quick resolution that pushes prices back toward $70 to an extended conflict that could drive Brent toward $85 or higher.
Security sources report that drones and rockets were launched at the US embassy in Baghdad.
Several rockets and at least five drones targeted the US embassy in Baghdad early Tuesday, in what Iraqi security sources described as the most severe attack since the US–Israel conflict with Iran began.
Witnesses saw multiple drones heading toward the compound, with air defenses intercepting some, while at least one hit inside the embassy, sparking fire and smoke. Blasts were also reported across the city.
The strike reflects escalating retaliation by Iran-backed militias against US interests in Iraq following the war that started on February 28.
In response, Iraqi forces have increased security across Baghdad, shutting down the fortified Green Zone that houses key government buildings and diplomatic missions.
The US Dollar Index holds onto Monday’s pullback around the 100.00 mark as attention turns to the Fed’s policy decision.
Iran has permitted multiple countries to move their energy tankers through the Strait of Hormuz.
The Fed is widely anticipated to leave interest rates unchanged on Wednesday.
The US Dollar (USD) is holding onto Monday’s corrective move, which was triggered by a sharp pullback in oil prices that helped ease concerns about unanchored consumer inflation.
At the time of writing, the US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is edging slightly higher near 99.90.
The index retreated notably from Friday’s more-than-nine-month high of 100.54 as oil prices dropped after Iran permitted several countries to transport oil and Liquefied Petroleum Gas (LPG) shipments through the Strait of Hormuz, potentially reducing worries over energy supply disruptions.
In recent weeks, the USD has rallied strongly, supported by its safe-haven appeal amid escalating tensions involving Iran, the United States, and Israel. Additionally, elevated oil prices have dampened expectations for near-term interest rate cuts by the Federal Reserve (Fed).
Data from the CME FedWatch tool suggests that markets are largely convinced the Fed will keep rates unchanged until at least the September meeting, with the probability of a rate cut at that time standing at around 50%.
Looking ahead, investors will closely watch Wednesday’s Fed policy decision for further guidance. Attention will also be on the FOMC’s Economic Projections report, which will provide updated forecasts for interest rates, inflation, and economic growth.
WTI
WTI prices advance to around $94.20 during early Tuesday trading in Asia.
Rising geopolitical tensions in the Middle East continue to support crude prices.
The IEA is considering releasing additional oil reserves to mitigate the economic fallout from the US–Israel conflict with Iran.
West Texas Intermediate (WTI), the US crude benchmark, is hovering near $94.20 during early Tuesday trading in Asia, supported by ongoing tensions surrounding Iran, with no clear signs of de-escalation. Market participants are also awaiting the American Petroleum Institute (API) report due later in the day.
On Tuesday, the Israeli military reported detecting missiles launched from Iran toward Israeli territory, urging residents in impacted areas to seek shelter immediately. Meanwhile, the United Arab Emirates (UAE) announced a temporary full closure of its airspace as a precautionary step, with its defense ministry confirming responses to incoming missile and drone threats from Iran.
Fears of retaliatory Iranian strikes targeting ships, infrastructure, and key transit ports for oil shipments have raised concerns that the conflict could evolve into a prolonged regional war. Such risks may continue to provide near-term support for WTI prices.
However, on the supply side, the International Energy Agency (IEA) is considering releasing additional oil reserves into the global market to ease upward pressure on prices. The agency indicated a potential release of up to 400 million barrels, which, if coordinated among member countries, could temporarily boost supply and help limit sharp price spikes.
Silver (XAG/USD)
Silver declines as traders adjust positions ahead of Wednesday’s Federal Reserve policy decision.
Higher oil prices, driven by escalating tensions in the Middle East, are fueling inflation concerns and dampening expectations for near-term Fed rate cuts.
At the same time, geopolitical risks involving the United States, Iran, and Israel are helping to cap deeper losses by maintaining demand for safe-haven assets like silver.
Silver (XAG/USD) is trading near $80.50 on Tuesday, down about 0.60% on the day. The metal remains under pressure as fading expectations for near-term US rate cuts—amid rising inflation concerns tied to Middle East tensions—continue to weigh on sentiment.
Markets broadly expect the Federal Reserve to keep its benchmark rate unchanged within the 3.50%–3.75% range at Wednesday’s meeting, according to the CME FedWatch tool. If confirmed, this would mark a second straight pause following the prior easing cycle. Prolonged higher rates tend to pressure non-yielding assets like Silver, as they raise the opportunity cost of holding them.
Escalating geopolitical tensions in the Middle East have driven Oil prices higher, fueling fears of persistent inflation. Rising gasoline costs in the US are adding strain on households and may keep inflation expectations elevated, reinforcing the case for the Fed to maintain restrictive policy for longer.
Geopolitical developments continue to influence the precious metals market. Recent US strikes on Iran’s key export hub on Kharg Island have intensified concerns over global energy supply disruptions. While Washington has indicated the conflict could be resolved within weeks and is exploring an international effort to secure shipping routes through the Strait of Hormuz, uncertainty remains high.
This fragile geopolitical backdrop may help limit further downside in Silver. As a safe-haven asset, it tends to attract demand during periods of heightened risk, which could cushion losses even as higher interest rate expectations dampen overall investor appetite.
Sources: Ghiles Guezout, Lallalit Srijandorn and Sagar Dua
U.S. Strategy I: Roaring 2020s vs. Stagflating 1970s Redux
In last Tuesday’s QuickTakes, reacting to the latest Middle East conflict, we noted that although markets were already due for a pullback because of excessive bullish sentiment, the escalation increased the likelihood of a deeper correction. We suggested the market could fall around 10% from its peak, potentially reaching 15% if Iran’s Islamic Revolutionary Guard Corps (IRGC) succeeded in sustaining a blockade of the Strait of Hormuz using drones and fast boats.
Since then, much of Iran’s conventional naval capability has reportedly been destroyed. However, as long as the IRGC retains drone capabilities, the strategic waterway could remain effectively constrained. Donald Trump has authorized the United States Navy to escort vessels through the Strait, though the operation may take time to deploy and may not fully eliminate the threat of Iranian drone attacks.
Media reports over the weekend underscored those risks. According to the New York Post, an Iranian suicide drone struck a commercial oil tanker in the Strait, setting it ablaze while U.S. naval protection efforts for shipping lanes could still be weeks away.
Limits of Air Power
Military historians have long debated whether air power alone can decisively win wars. Most conclude it rarely achieves lasting victory by itself. While air strikes can destroy infrastructure, supply chains, and concentrated forces, they cannot control territory, conduct searches, or administer local governance. Nor can they fully eliminate dispersed threats such as drones.
Over the weekend, President Trump declined to rule out deploying ground forces, though he dismissed the idea of using Kurdish fighters as proxies for an invasion of Tehran, saying the conflict was already “complicated enough.” He indicated ground operations would only occur if the adversary were sufficiently weakened.
Domestic Economic Backdrop
At home, economic data has also softened. February’s U.S. employment report came in much weaker than expected, while January retail sales disappointed. As a result, the Federal Reserve Bank of Atlanta’s GDPNow model lowered its estimate for Q1 real GDP growth to 2.1% (annualized), down from 3.0%.
This leaves both the U.S. economy and equity markets caught between geopolitical shocks and slowing domestic momentum. The Federal Reserve faces a similar dilemma: if higher oil prices persist, its dual mandate could be squeezed between rising inflation and weakening employment.
Implications for the Economic and Market Outlook
Rapidly Changing Conditions
Given the speed of developments, scenario probabilities are being adjusted. The base case remains the “Roaring 2020s” with a 60% probability. However, the “Meltup” scenario has been cut from 20% to 5%, while the “Meltdown” scenario—now including the risk of 1970s-style stagflation—has been raised from 20% to 35%.
Looking beyond this year to the rest of the decade, the outlook narrows to two primary possibilities:
Roaring 2020s: 85% probability
Stagflating 1970s Redux: 15% probability
Oil Prices and Market Risk
Historically, sharp oil price spikes have often coincided with recessions and bear markets. One recent exception was the 2022 surge following Russia’s invasion of Ukraine, which produced a bear market but not a recession—highlighting the resilience of the U.S. economy.
A similar pattern could play out today. While the economy may absorb higher energy costs, the current oil shock still increases the likelihood of a 10%–15% correction in equities, even if a full bear market ultimately proves avoidable under current conditions.
War Likely to Continue for Several More Weeks
Our relatively optimistic scenario assumes the conflict will persist for a few more weeks, while the U.S. economy and corporate earnings remain resilient, as they have during previous shocks.
One reason for this resilience is the sharp decline in the economy’s energy intensity—measured as total energy consumption per unit of real GDP. In the United States, energy intensity has fallen dramatically over the past several decades, dropping about 70% between 1950 and 2024 and roughly 62% since 1979.
This structural shift means the U.S. economy is far less sensitive to oil-price shocks than in earlier decades, particularly compared with the 1970s oil crisis period when energy costs had a much larger impact on growth and inflation.
The United States economy has gradually shifted from heavy reliance on energy-intensive manufacturing toward a more service-oriented structure, which has helped reduce overall energy consumption relative to economic output.
Additional factors behind the decline in energy intensity include the introduction of Corporate Average Fuel Economy (CAFE) standards and ongoing technological improvements in internal combustion engines, both of which have improved fuel efficiency across the transportation sector.
At the same time, the expansion of the digital economy—including data centers, cloud computing, and artificial intelligence—has been driving stronger electricity demand. Even so, the growing use of natural gas and renewable energy sources in power generation, as well as their increasing adoption in industrial processes that previously relied on oil, should continue to moderate the economy’s direct dependence on crude oil.
Oil production
U.S. oil production, which includes natural gas plant liquids and renewable fuels/oxygenates, has reached a record level of 24 million barrels per day (mbd), significantly exceeding domestic consumption of 21 mbd (Fig. 7 and Fig. 8). As a result, the United States has become a net exporter of roughly 3.0 mbd (Fig. 9). This represents a dramatic shift compared with 2007, when the country was a net importer of approximately 12 mbd.
A potential return of 1970s-style stagflation
A bear market cannot be ruled out if investors begin to expect a repeat of the stagflationary conditions seen in the 1970s. At that time, the global economy was hit by two major oil shocks. In October 1973, Arab members of Organization of the Petroleum Exporting Countries (OPEC) imposed an oil embargo on the United States and other countries that supported Israel during the Yom Kippur War.
Oil prices surged dramatically, rising about fourfold from roughly $3 to nearly $12 per barrel within only a few months. This led to stagflation—an unusual and painful economic condition characterized by slow economic growth, high unemployment, and accelerating inflation (Fig. 10). The crisis resulted in long queues at gasoline stations, fuel rationing, and a heightened awareness of the United States’ dependence on foreign energy supplies.
The second oil crisis occurred after the Iranian Revolution, which significantly disrupted global oil supplies. As a result, oil prices surged, rising to more than twice their previous level. This shock further weakened an already fragile economy and deepened the stagflationary pressures. Together, the two oil crises contributed to two recessions during the 1970s.
According to Polymarket, the probability of a recession this year rose to a three-month high of 34% on Friday, up from 21% on Wednesday, February 25, just before the conflict began (Fig. 11).
U.S. Strategy II: A Direct Confrontation with the IRGC
When the conflict began on Saturday, February 28, the initial assumption was that it would end quickly. However, by the following Tuesday, that view changed, prompting further analysis in that day’s QuickTakes. A key concern is that by eliminating the leadership of the Iranian regime in the opening hour of the war, the United States and Israel effectively unleashed the regime’s most powerful force—the Islamic Revolutionary Guard Corps (IRGC). Often described as a “state within a state,” the IRGC is believed to control 20–40% of Iran’s economy, including large construction companies, telecommunications networks, and oil engineering firms. This financial base allows it to sustain operations even under severe sanctions.
In April 2019, the United States officially designated the IRGC as a Foreign Terrorist Organization—the first time Washington had applied such a label to a branch of another government. Because of their decentralized structure and access to weapons such as suicide drones, the group would be difficult to eliminate through air power alone.
Donald Trump first publicly demanded Iran’s “unconditional surrender” on Friday, March 6. The following day, he clarified that the phrase meant a situation where Iran could no longer continue fighting. On Sunday morning, he also warned that any new Supreme Leader selected by Iran’s Assembly of Experts “would not last long” without his approval, implying a U.S. veto over the succession process following the death of Ali Khamenei.
Without a central leader, Iran lacks a figure capable of formally accepting unconditional surrender. For example, on Saturday, Iranian President Masoud Pezeshkian issued a public apology for Iran’s “fire-at-will” attacks on neighboring countries. Yet only hours later, the IRGC launched another wave of strikes, highlighting a severe breakdown in command and control after Khamenei’s death on February 28. Even without the regime’s top leader, the IRGC’s decentralized design allows regional commanders to operate independently, already carrying out retaliatory drone and missile attacks against U.S. assets and allies in the Gulf.
One objective of the ongoing air campaign is to weaken the IRGC’s ability to suppress domestic opposition. By striking the Basij—the IRGC’s paramilitary force used for internal control—the United States hopes to open the door for a possible uprising inside Iran. However, from the perspective of financial markets, the war will not truly end until commercial ships can move through the Strait of Hormuz without the threat of IRGC attacks. Once that happens, the stock market’s bullish trend could resume.
U.S. Economy: Domestic Impact
Within the United States, economic data from January and February were collected before the war and present a mixed picture. Data from March will likely reveal the first economic effects of the conflict, including rising inflation and a weakening labor market. One immediate sign of inflationary pressure is the sharp increase in gasoline prices, driven by the surge in crude oil prices (Fig. 12).
Food prices may not increase right away, but fertilizer shortages could push them higher in the months ahead. Roughly 25%–33% of the global nitrogen fertilizer trade—particularly urea and anhydrous ammonia—moves through the Strait of Hormuz. On March 2, an Iranian drone attack struck the Ras Laffan Industrial City in Qatar, the world’s largest export hub for liquefied natural gas. Since natural gas is the main feedstock used to produce nitrogen fertilizers, disruptions there could have significant downstream effects. Meanwhile, Saudi Arabia, Oman, and the United Arab Emirates—all among the world’s top ten exporters of urea—are facing logistical and production challenges because of the ongoing air conflict.
If the blockade remains in place into early April, farmers might be forced to shift away from nitrogen-intensive corn-based fertilizer systems toward soybean alternatives or simply reduce fertilizer usage. Lower fertilizer application typically results in reduced crop yields, which could lead to a secondary food price shock toward the end of 2026.
This conflict represents another major test of the resilience of the U.S. economy since the beginning of the decade. It also challenges the so-called “Roaring 2020s” outlook. Despite the new risks, that optimistic scenario remains the base case with a 60% probability. However, the likelihood of a 1970s-style stagflation scenario has been raised to 35%, while the probability of a market melt-up has been reduced to 5% for the rest of 2026.
Recent economic data suggest that the labor market weakened in February and retail sales were soft in January. On the positive side, productivity growth has been particularly strong in recent quarters. If that trend continues, higher productivity could help mitigate some of the stagflationary pressures created by the war.
Employment
The January employment report came in significantly stronger than expected, whereas the February report was much weaker than forecasts. Severe weather conditions and a labor strike negatively affected February’s figures. As a result, nonfarm payrolls declined by 92,000 last month.
In addition, the January payroll figure was slightly revised downward by 4,000 to 126,000, while December’s data was adjusted from a previously reported gain of 48,000 to a decline of 17,000 (Fig. 13). Meanwhile, the unemployment rate increased marginally, rising to 4.4% in February from 4.3% in January.
The positive development is that average hourly earnings increased by 0.4% month over month in February, while the average workweek remained unchanged. Consequently, our Earned Income Proxy, which estimates wages and salaries within personal income, rose by 0.3% in February, reaching a new record high (Fig. 14).
The Federal Reserve is facing a policy dilemma: a softening labor market, which would normally justify cutting the federal funds rate, versus rising energy and fertilizer costs linked to the Iran conflict, which could push inflation higher and argue for keeping rates unchanged or even tightening policy.
This clash of signals complicates the Fed’s next move. Weak employment data suggests the economy may need monetary support, while higher oil and commodity prices risk reigniting inflation, forcing policymakers to remain cautious about easing.
Retail Sales
In January, retail sales declined by 0.2% month over month, while December’s figures, previously reported as showing moderate growth, were revised downward to no change compared with the previous month.
Among sectors, nonstore retailers experienced a 1.9% monthly increase, whereas motor vehicle and parts dealers recorded a 0.9% decline (Fig. 15). Sales at gasoline stations also dropped 2.9%.
One positive sign was a 0.3% month-over-month rise in core retail sales, which excludes several more volatile categories.
The rollout of last year’s One Big Beautiful Bill Act is expected to support consumer spending in the weeks ahead. A “February rebound” in retail activity is likely as record-high tax refunds—about 20% larger on average than last year—begin reaching households’ bank accounts.
Productivity
Labor productivity—defined as output per hour worked—increased at an annualized rate of 2.8% in Q4 2025. This marks the third consecutive quarter in which productivity growth has surpassed the long-term average of 2.1%, a benchmark calculated from data beginning in the late 1940s (Fig. 16).
At the same time, unit labor costs rose by only 1.3% year over year in Q4 2025, which helped contain inflationary pressures in the economy (Fig. 17).
GDPNow
As noted earlier, the newest economic data prompted the Federal Reserve Bank of Atlanta’s GDPNow model to lower its forecast for first-quarter 2026 economic growth from 3.0% to 2.1% (Fig. 18).
Oil prices increased on Monday as the ongoing conflict involving the United States, Israel, and Iran continued to disrupt oil production and transportation across the Middle East, despite a call from Donald Trump for international cooperation to protect the strategic Strait of Hormuz.
Brent crude futures climbed by $2.30, or 2.2%, reaching $105.44 per barrel at 0903 GMT, while U.S. West Texas Intermediate crude rose $1.29, or 1.3%, to $100 per barrel.
Both benchmarks have jumped more than 40% this month, reaching their highest levels since 2022. The surge followed U.S.–Israeli strikes on Iran, which led Tehran to halt shipments through the Strait of Hormuz—an essential route for global energy trade—disrupting roughly one-fifth of the world’s oil and LNG supplies.
On Monday, oil-loading activities were suspended at the UAE’s Fujairah port after a drone strike triggered a fire in the emirate’s petroleum industrial area, according to two sources who spoke to Reuters.
Fujairah, located outside the Strait of Hormuz, serves as an export hub for around 1 million barrels per day of the UAE’s flagship Murban crude oil, equivalent to roughly 1% of global oil demand.
The International Energy Agency warned on Thursday that the conflict in the Middle East is causing the most severe oil supply disruption on record, as major producers including Saudi Arabia, Iraq, and the United Arab Emirates have reduced output since the war began.
According to PVM analyst Tamas Varga, investors appear to understand that if just two weeks of disruption in the Strait of Hormuz have already caused significant damage to production, exports, and refining, a prolonged conflict could have far more serious consequences, particularly as global inventories continue to decline.
Analysts from ING said on Monday that recent U.S. strikes on Kharg Island over the weekend have heightened concerns about oil supply, as the majority of Iran’s crude exports are shipped through the island.
Although the attacks appeared to focus on military installations rather than energy infrastructure, ING noted that they still threaten supply stability. This is because Iranian crude is currently among the few oil flows still passing through the vital Strait of Hormuz.
During the weekend, Donald Trump warned that additional strikes could target Kharg Island—an export hub responsible for roughly 90% of Iran’s oil shipments—after U.S. forces hit military facilities there, prompting retaliatory actions from Tehran.
On Sunday, Trump called on other countries to assist in safeguarding this critical energy corridor and said that Washington was holding discussions with several nations about jointly monitoring and securing the strait.
Trump also stated that the United States remained in communication with Iran, though he expressed skepticism that Tehran was ready to engage in meaningful negotiations to bring the conflict to an end.
Meanwhile, the International Energy Agency announced on Sunday that more than 400 million barrels of strategic oil reserves would soon be released into the market—a record intervention intended to stabilize prices amid disruptions caused by the Middle East conflict.
According to the agency, reserves from countries in Asia and Oceania will be made available immediately, while supplies from Europe and the Americas are expected to enter the market by the end of March.
SEB analyst Meyersson said that as the conflict moves into its third week, the absence of a clear resolution is increasing global market anxiety about the possibility of an uncontrolled escalation.
However, U.S. Energy Secretary Chris Wright said on Sunday that he expected the war to end within the next few weeks, which could allow oil supplies to recover and energy prices to decline.
U.S. President Donald Trump warned that he could authorize strikes on Iran’s oil infrastructure on Kharg Island if Tehran continues attacks on vessels passing through the strategically crucial Strait of Hormuz. The threat added further uncertainty to global markets already facing one of the most significant supply disruptions in history.
Trump accompanied the warning with a social media message claiming that U.S. forces had “completely destroyed” military targets on Kharg Island. The island functions as the main export terminal for roughly 90% of Iran’s crude shipments and is located about 300 miles northwest of the Strait of Hormuz.
However, the president clarified that American strikes had not targeted Kharg’s oil infrastructure. He added that if Iran or any other party attempted to block the safe passage of ships through the Strait of Hormuz, Washington could reconsider that restraint.
Trump also stated that Iran lacked the capability to defend itself against U.S. military action. In a post on Truth Social, he urged Iran’s armed forces and their allies to surrender, warning that continuing the conflict could further devastate the country.
Iran’s military responded on Saturday by warning that any attack on its oil or energy facilities would be met with retaliation against installations belonging to oil companies cooperating with the United States in the region, according to Iranian media reports.
Iran’s semi-official Fars News Agency reported that more than 15 explosions were heard on Kharg Island during the U.S. strikes. Sources said the attacks hit air-defense systems, a naval installation, and airport infrastructure, while leaving oil facilities untouched.
Energy markets were closely monitoring whether the strikes had damaged Kharg Island’s complex network of pipelines, storage tanks, and export terminals. Even minor disruptions could further constrain global oil supply and intensify volatility in energy markets.
Elsewhere in the region, Iran’s Islamic Revolutionary Guard Corps announced that it had carried out additional strikes against Israel in coordination with Lebanon’s Hezbollah, according to Iran’s Tasnim News Agency.
Meanwhile, the Israel Defense Forces said on Friday that its air force had attacked more than 200 targets across western and central Iran within the past 24 hours, including missile launchers, air-defense systems, and weapons manufacturing facilities.
The United States has also suffered losses. The U.S. military confirmed that all six crew members aboard a refueling aircraft that crashed in western Iraq had died.
According to The Wall Street Journal, citing U.S. officials, five U.S. Air Force tanker aircraft stationed at a base in Saudi Arabia were damaged in an Iranian missile strike and were undergoing repairs.
Gulf and Lebanon emerge as key flashpoints
Oil markets have experienced sharp price swings in response to Trump’s shifting comments about the potential duration of the conflict, which began on February 28 when large-scale U.S. and Israeli airstrikes targeted Iran. The fighting quickly expanded into a wider regional confrontation with major implications for global energy and financial markets.
Lebanon has become another focal point of the conflict, with Israeli forces and Hezbollah exchanging strikes in and around Beirut.
In addition to missile and drone attacks against Israel and U.S.-aligned Gulf states, Iran’s Islamic Revolutionary Guard Corps has attempted to disrupt shipping through the Strait of Hormuz, a vital route that carries about 20% of the world’s fossil fuel supplies.
Trump said on Friday that the United States Navy would soon begin escorting oil tankers through the waterway.
Although he previously suggested the war might last only a few weeks, Trump declined to predict a timeline for its end, saying the conflict would continue for as long as necessary.
Despite the fighting, Iran has continued exporting crude oil while several Gulf producers have halted shipments due to concerns about potential Iranian attacks.
Satellite imagery reviewed by TankerTrackers.com showed multiple very large crude carriers loading oil at Kharg Island earlier in the week. Iran exported between 1.1 million and 1.5 million barrels per day from the start of the war through midweek.
Bob McNally, president of Rapidan Energy Group, said Trump’s remarks could push markets to focus on the possibility that the current energy disruption — already the largest on record — might worsen and persist longer than expected.
Some industry analysts doubt Kharg Island’s oil infrastructure will remain untouched. Josh Young, chief investment officer at Bison Interests, remarked that bombing the island without hitting its oil facilities would be pointless.
War spreads across the Middle East
Iran’s new supreme leader, Mojtaba Khamenei, said in his first public remarks that the Strait of Hormuz would remain closed and warned neighboring countries to shut down U.S. military bases on their soil or risk becoming targets themselves.
European governments are now discussing measures to protect their interests. France has been consulting with European, Asian, and Gulf Arab partners on plans to deploy warships to escort commercial tankers through the Strait of Hormuz, according to French officials.
After nearly two weeks of fighting, about 2,000 people have been killed — the majority in Iran, with significant casualties also reported in Lebanon and increasing losses in Gulf states that have rarely been on the front lines of regional conflicts.
Millions of civilians have been displaced. In Lebanon, as Israeli airstrikes continued to hit the outskirts of Beirut, the country’s interior minister said authorities were struggling to accommodate the hundreds of thousands of people seeking refuge in the capital.
WTI declined after Australia’s Energy Minister Chris Bowen announced the release of 762 million liters of fuel from the country’s reserves. However, oil prices could climb again as the Strait of Hormuz remains closed amid intensifying tensions between the U.S., Israel, and Iran. Iran’s new supreme leader Mojtaba Khamenei stated that keeping the strait shut should continue to serve as a “tool to pressure the enemy.”
West Texas Intermediate (WTI) crude traded slightly lower during Asian trading hours on Friday, hovering around $95.20 per barrel after surging more than 9% in the previous session. Prices eased after Australia’s Energy Minister Chris Bowen announced that the country would release up to 762 million liters of fuel from strategic reserves and relax fuel stockholding rules to ease supply disruptions linked to the conflict with Iran.
The Australian government also plans to cut minimum fuel reserve requirements by as much as 20% in an effort to stabilize domestic supply. Nevertheless, oil prices could continue to climb as the Strait of Hormuz remains effectively closed amid escalating tensions between the United States, Israel, and Iran.
Since the war began, U.S. crude prices have jumped more than 40%. The International Energy Agency (IEA) warned that the U.S.–Israeli conflict with Iran could be triggering the largest supply disruption in the history of the global oil market.
Reports indicate that officials from the U.S. Department of Defense and the National Security Council underestimated Iran’s willingness to shut down the Strait of Hormuz in response to U.S. military strikes while planning the operation. The waterway carries around one-fifth of global oil consumption, making it one of the most strategically vital shipping routes in the world. Any interruption to tanker traffic there can rapidly impact global energy markets.
In his first public remarks since assuming power, Iran’s new supreme leader Mojtaba Khamenei said the closure of the Strait of Hormuz should remain a “tool to pressure the enemy.” He also warned that all U.S. military bases in the region should be shut down immediately or risk potential attacks.
The U.S. dollar strengthened on Wednesday as rising oil prices reignited inflation concerns, while an in-line and backward-looking U.S. consumer inflation reading did little to reinforce expectations for Federal Reserve rate cuts.
By 16:03 ET (20:03 GMT), the U.S. Dollar Index—tracking the greenback against a basket of six major currencies—had climbed 0.4% to 99.22. The euro slipped 0.3% to 1.1570, while the British pound was largely unchanged at 1.3416.
Oil prices climb despite record release from strategic reserves
Oil prices rose on Wednesday as the conflict with Iran showed little sign of easing, with a record release of 400 million barrels from emergency reserves by the International Energy Agency (IEA) doing little to calm concerns about rising inflation.
In a note, analysts at ING said the foreign-exchange market remains “strongly driven” by the recent sharp swings in oil prices.
Market attention remains focused on the Strait of Hormuz, the narrow passage south of Iran through which roughly one-fifth of the world’s oil supply passes, much of it headed to Asia. Concerns over potential Iranian attacks have caused a buildup of vessels on both sides of the strait, as shipping companies seek to ensure crew safety and face difficulties securing insurance for voyages.
Brent crude, the global benchmark, is now trading near $90 per barrel after surging to $120 earlier in the week. U.S. gasoline prices have also climbed, raising the risk of renewed inflationary pressure that could prompt the Federal Reserve to adopt a more hawkish monetary policy stance. Higher interest rates may in turn attract foreign capital, providing additional support for the U.S. dollar.
Oil prices have remained highly sensitive to developments in the Middle East. Comments from the U.S. Energy Secretary that the military had escorted a tanker through the Strait of Hormuz sent Brent prices swinging between $81 and $92 per barrel.
President Donald Trump has also threatened to intensify U.S. attacks on Iran following reports that Tehran had deployed naval mines in the Strait of Hormuz. After a CNN report suggested that mines had been placed in the bottleneck—though not yet extensively—Trump warned on Tuesday that Iran would face retaliation “at a level never seen before” if the mines were not removed.
The IEA’s coordinated release announced on Wednesday far exceeds the 182 million barrels made available by member countries after Russia’s invasion of Ukraine in 2022.
ING analysts described the move as a “temporary measure,” arguing that only military de-escalation would be capable of pushing crude prices sustainably lower. They added that the large reserve release could also signal that markets should not expect an immediate ceasefire.
“In our view, these mixed signals could prevent the dollar from falling much further today unless there are encouraging headlines on de-escalation,” the ING analysts said.
U.S. consumer inflation comes in line with forecasts
The February Consumer Price Index (CPI) report drew attention on Wednesday, although the data does not reflect the impact of the Iran conflict or the resulting surge in oil prices, making it more backward-looking than usual.
According to the U.S. Bureau of Labor Statistics, headline CPI rose 0.3% month-on-month and 2.4% year-on-year in February, both in line with market expectations. Core CPI increased 0.2% from the previous month and 2.5% from a year earlier, also matching forecasts.
Despite meeting estimates, the report is likely to receive limited attention as markets focus on developments in the Middle East. Concerns that higher oil prices could trigger renewed inflationary pressure may prompt the Federal Reserve to keep interest rates on hold.
“The good news is that inflation didn’t come in higher than expected in this morning’s CPI report, but the data is backward-looking and reflects a period before the war in Iran began,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
“It is widely assumed — and we agree — that the Fed will remain on hold for longer as policymakers wait to see whether inflation expectations begin to rise and become entrenched, or if conditions return to where they were before the military operations in the Middle East,” Zaccarelli added.
President Donald Trump appears to be effectively controlling the pace and direction of the conflict, a point echoed by U.S. Defense Secretary Pete Hegseth. For traders, this concentration of decision-making power is not entirely unfamiliar, as markets have grown accustomed to navigating policy shocks driven by Trump. In theory, when authority is concentrated in a single figure, it could narrow the range of possible outcomes.
In practice, however, the opposite may be happening. During most geopolitical crises, markets assess risks through institutional processes—cabinet deliberations, coalition coordination, and diplomatic negotiations. These structures allow traders to gradually build probability models for how events may unfold. This time, while the decision-making framework appears more centralized, the range of potential outcomes seems broader. When the decision loop runs through a single, highly unpredictable leader, markets struggle to rely on consistent messaging. Instead of clarity, price action begins to reflect personality, tone, and mood.
As a result, global financial markets are being influenced not only by economic fundamentals but also by political rhetoric and timing. Traders find themselves constantly reacting to headlines—whether from press briefings or social media—because a single comment can shift market positioning more quickly than traditional macroeconomic analysis.
This dynamic defined one of the week’s most chaotic trading sessions. Market movements were not driven by earnings revisions, macroeconomic releases, or the typical interaction between bond and equity markets. Instead, crude oil became the central driver of market sentiment, with every headline emerging from the Strait of Hormuz quickly rippling across equities, currencies, and safe-haven assets. When volatility spikes in energy markets, it rarely remains confined to commodities. Oil remains a critical component of the global economic system, meaning fluctuations in its price often transmit shocks across multiple asset classes.
The Asian trading session initially opened with cautious optimism. After Trump suggested the conflict might be approaching some form of resolution, crude prices moved sideways, well below the sharp volatility seen previously. For a short period, it appeared that markets might return to pricing economic fundamentals rather than reacting to geopolitical developments.
That sense of calm proved short-lived. Hegseth later warned that Tuesday could become the most intense day of strikes in the conflict. At that point, markets quickly reassessed the situation, realizing that the earlier calm might have been only a temporary pause before further escalation. As a result, the geopolitical risk premium rapidly returned to oil prices.
For traders, the oil market has effectively become the roulette ball—bouncing unpredictably as new headlines hit the market. The result is a trading environment that feels less like a traditional price discovery process and more like a casino table, with participants watching the wheel spin and trying to anticipate where the next move will land.
Follow the bouncing barrel
Overnight: After Donald Trump delivered a quasi “all-clear” tone the previous day, oil prices moved sideways during overnight trading, remaining well above the sharp lows seen during the earlier selloff.
09:00 ET: Reports that the International Energy Agency was convening a meeting to discuss the possibility of a coordinated Strategic Petroleum Reserve (SPR) release pushed crude prices lower.
12:45 ET: U.S. Energy Secretary Chris Wright posted on social media that the U.S. military had escorted an oil tanker through the Strait of Hormuz, triggering a sharp drop in oil prices.
13:10 ET (approx.): Wright deleted the post shortly afterward. Journalists cited sources denying the escort operation, while Islamic Revolutionary Guard Corps officials also rejected the claim—prompting oil prices to rebound.
13:25 ET:CBS News reported that U.S. intelligence believed Iran may be laying mines in the Strait of Hormuz, sending crude prices sharply higher.
14:00 ET: White House Press Secretary Karoline Leavitt confirmed there had been no tanker escort, which helped extend the upward move in oil.
14:20 ET: The International Energy Agency concluded its meeting without announcing any coordinated SPR release, allowing oil prices to climb further.
By the closing bell, the overall result appeared deceptively calm. West Texas Intermediate crude oil settled around $85 a barrel—technically lower than the previous close but essentially unchanged from levels seen when equities finished trading the day before. Anyone focusing only on the closing price would miss the real story. The session itself demonstrated how modern markets behave when geopolitics drives price action and information arrives in fragments rather than through formal policy announcements.
The options market, however, reveals the deeper dynamic. Volatility in crude rose again, and the skew in pricing has become pronounced. Investors are paying the largest premiums in years for call options on WTI futures relative to puts—an indication that traders remain uneasy about potential upside risks tied to disruptions in the Strait of Hormuz. In effect, the derivatives market is insuring against the possibility that the next headline could remove additional barrels from global supply. In an environment where tanker movements slow and supply routes tighten, the real threat is not yesterday’s price spike but the next one.
That anxiety is grounded in fundamentals. If disruptions in the Gulf expand—or simply persist longer than expected—oil prices would likely rise as more Middle Eastern supply faces shutdown risks and potential force majeure declarations. Even with diversion pipelines and strategic reserves acting as buffers, the scale of possible disruption clashes with a global market that still consumes more than 100 million barrels per day. While daily trading may appear dominated by headlines, the underlying arithmetic of missing supply continues to shape market expectations.
The uncertainty also spilled directly into equity markets. When crude prices fell earlier in the session, stocks briefly rallied as inflation concerns eased and interest-rate-sensitive sectors found support.
However, Asian and European equities remain particularly vulnerable because both regions are major energy importers. Markets have become highly sensitive to Brent crude oil once it moves above the $85 level. That threshold is deeply embedded not only in trader psychology but also within automated trading systems that now dominate market flows. When crude rises above that zone, systematic strategies, energy sensitivity models, and macro-risk algorithms often trigger a reflexive reaction, amplifying the feedback loop between oil and equities. In practical terms, the relationship becomes mechanical: higher oil prices tend to pressure Asian equities, while cooling crude prices allow stocks to stabilize.
Even in U.S. markets, the environment is not ideal for absorbing shocks. According to the Delta One desk at Goldman Sachs, liquidity conditions remain relatively thin. Depth in the S&P 500 order book sits near $4.53 million—around 25% below the 20-day average—while overall market trading volumes are also roughly 25% lower than typical levels. This means markets are attempting to interpret large macroeconomic signals with reduced liquidity, a situation that can amplify price swings whenever oil becomes the trigger.
In effect, the broader financial system spent the session taking cues from the crude market. When oil moves sharply, equity markets quickly react. While this correlation may weaken during calmer periods, it becomes dominant when the Strait of Hormuz turns into the world’s most important venue for price discovery in energy markets.
For traders, the lesson is clear. In stable environments, fundamentals dominate and models guide trading decisions. But during geopolitical crises—particularly those involving Middle Eastern energy supply—unexpected shocks become the primary driver. Information itself becomes the commodity being traded. Headlines, signals, and rumors can move prices as much as actual supply changes. When global risk perception hinges on a small number of political decisions—often shaped by figures such as Donald Trump—markets stop behaving like predictable equations and begin reacting more like mood indicators, capable of changing direction with a single statement or social media post.
Oil prices rebounded on Wednesday as investors questioned whether a planned large-scale release of strategic reserves by the International Energy Agency would be enough to offset potential supply disruptions caused by the U.S.–Israeli conflict with Iran.
Brent crude futures rose 59 cents, or 0.7%, to $88.39 a barrel by 07:27 GMT, while West Texas Intermediate crude oil gained 98 cents, or 1.2%, to $84.43 per barrel.
Both benchmarks had extended losses earlier in Asian trading after plunging more than 11% on Tuesday, despite U.S. crude initially jumping 5% at the market open.
According to a report by The Wall Street Journal, the proposed IEA release would surpass the 182 million barrels collectively released by member countries in 2022 following the Russian invasion of Ukraine.
Analysts at Goldman Sachs said such a stockpile release could offset roughly 12 days of an estimated 15.4 million barrels-per-day disruption in Gulf exports.
Meanwhile, the conflict continued to escalate. The U.S. and Israel launched what both the Pentagon and Iranian sources described as the most intense airstrikes of the war on Tuesday. The United States Central Command also said the U.S. military had destroyed 16 Iranian mine-laying vessels near the Strait of Hormuz, after Donald Trump warned that any mines placed in the waterway must be removed immediately.
Some analysts remained skeptical that the reserve release would significantly ease market tensions. Suvro Sarkar, energy sector team lead at DBS Bank, said such moves were unlikely to solve the crisis, adding that oil prices would largely depend on how long the conflict with Iran continues. Strategic signals, including potential reserve releases, may help temper near-term price spikes, he added.
Leaders of the Group of Seven have also convened to discuss a coordinated emergency stockpile release. Emmanuel Macron is set to host a virtual meeting with other G7 leaders to assess the Middle East conflict’s impact on energy markets and possible responses.
Trump has repeatedly stated that the U.S. is prepared to escort oil tankers through the Strait of Hormuz if necessary. However, sources told Reuters that the United States Navy has so far declined shipping industry requests for escorts, citing high security risks.
Supply concerns remain
Energy infrastructure disruptions have also added to supply worries. Abu Dhabi National Oil Company reportedly shut down its Ruwais refinery after a drone strike caused a fire at the complex.
At the same time, Saudi Arabia, the world’s largest oil exporter, is attempting to increase shipments via the Red Sea. However, current export levels remain far below what would be needed to fully offset the decline in flows through the Strait of Hormuz. The kingdom is relying on the Red Sea port of Yanbu to boost shipments as neighbors such as Iraq, Kuwait, and the UAE have already reduced production.
Energy consultancy Wood Mackenzie estimates the war is currently cutting Gulf oil and refined product supplies by about 15 million barrels per day, a disruption that could potentially push crude prices as high as $150 per barrel.
Analysts at Morgan Stanley noted that even a quick resolution to the conflict could still leave energy markets facing several weeks of disruption.
Meanwhile, signs of strong demand also supported prices. Data from the American Petroleum Institute indicated that U.S. crude, gasoline, and distillate inventories all declined last week.
Gold prices increased during Asian trading on Tuesday but remained within a narrow range as investors looked for clearer signals about a potential de-escalation in the U.S.–Israel conflict with Iran.
The precious metal advanced alongside a broader improvement in market risk sentiment after U.S. President Donald Trump suggested the conflict with Iran could end soon and said Washington was also considering steps to help curb the recent surge in oil prices.
Spot gold climbed 0.8% to $5,175.48 per ounce as of 01:55 ET (05:55 GMT), while gold futures gained 1.6% to $5,184.79 per ounce. Spot prices had edged slightly higher on Monday after experiencing significant volatility throughout the session.
Gold stays within the $5,000–$5,200 range as safe-haven demand remains mixed.
Gold stayed firmly within the $5,000–$5,200 per ounce range set over the past week, as traders weighed a wave of uncertainty surrounding the global economy.
Although the conflict with Iran boosted safe-haven demand for gold, gains were limited by worries that the crisis could fuel inflation, potentially prompting more hawkish policies from major central banks.
Analysts at ANZ also pointed out that gold’s strong rally this year has faced bouts of profit-taking, as investors looked to raise liquidity during a sharp selloff in global equity markets.
Other precious metals moved higher on Tuesday, with spot silver climbing nearly 6% to $89.1915 per ounce, while spot platinum gained 0.7% to $2,201.48 per ounce. In the industrial metals market, LME copper futures rose 1.3% to $13,095.30 a tonne.
Trump signals Iran tensions may ease, boosting oil supply outlook.
Risk sentiment improved on Tuesday and oil prices declined after Donald Trump said several times on Monday that the war with Iran could soon come to an end. Trump also floated potential steps to reduce supply disruptions caused by the conflict, including temporarily easing sanctions on certain oil exporters, particularly Russia.
However, he did not provide a clear timeline for any de-escalation and continued to maintain a tough stance toward Tehran. Trump warned that the Islamic Republic would face severe consequences if it attempted to block the Strait of Hormuz.
“We will strike easily destroyable targets that would make it virtually impossible for Iran to rebuild as a nation again — death, fire and fury will follow,” Trump said.
Iran dismissed Trump’s statements and reiterated that it would continue blocking the Strait of Hormuz until attacks by the United States and Israel against Tehran cease.
The conflict entered its eleventh consecutive day on Tuesday, with tensions across the Middle East showing little sign of easing. A prolonged war is expected to keep supporting gold prices, as safe-haven demand remains strong amid rising inflation risks driven by disruptions in the oil market.
U.S. crude oil futures surged on Friday as the widening U.S.–Israeli conflict with Iran disrupted global oil supply expectations.
Brent crude settled at $92.69 per barrel, rising $7.28 or 8.5%, while West Texas Intermediate (WTI) climbed $9.89, or 12.2%, to close at $90.90 per barrel.
On a weekly basis, WTI jumped 35.6% and Brent gained about 27%, marking their strongest weekly advances since the early stages of the COVID-19 pandemic in spring 2020.
For the second straight day, U.S. crude futures outperformed Brent as refiners around the world rushed to secure alternative oil supplies to offset potential disruptions from the Middle East.
According to UBS analyst Giovanni Staunovo, refiners and trading firms are actively seeking substitute barrels, with the United States — the world’s largest oil producer — emerging as a key supplier.
Janiv Shah, vice president of oil analytics at Rystad Energy, noted that several factors contributed to the wider gains in WTI compared with Brent. Strong refinery activity supported by attractive refining margins, along with favorable arbitrage opportunities for shipments to Europe, helped drive demand for U.S. crude.
Could oil exceed $100?
Qatar’s energy minister warned in an interview with the Financial Times that Gulf energy producers might halt exports within weeks if the conflict escalates further. Such a move, he suggested, could push oil prices as high as $150 per barrel.
John Kilduff, partner at Again Capital, said the situation is increasingly alarming. “The worst-case scenario is unfolding right in front of us,” Kilduff said, adding that forecasts of oil reaching $100 per barrel now appear increasingly realistic.
Oil prices began their sharp rally after the United States and Israel carried out strikes on Iran last Saturday, which prompted Iran to halt tanker traffic through the Strait of Hormuz.
Around 20% of the world’s daily oil supply normally passes through this key shipping route. With the strait effectively closed for seven days, roughly 140 million barrels of crude — equivalent to about 1.4 days of global demand — have been prevented from reaching international markets.
The conflict has expanded across major energy-producing regions in the Middle East, disrupting production and forcing several refineries and liquefied natural gas facilities to shut down.
UBS analyst Giovanni Staunovo said oil prices are likely to continue rising for as long as the strait remains closed. He noted that markets previously believed U.S. President Donald Trump might eventually scale back the conflict to avoid higher oil prices, but the longer the situation persists, the greater the perceived supply risk becomes.
In an interview with Reuters on Thursday, Trump said he was not worried about rising gasoline prices in the United States linked to the conflict, commenting that “if they rise, they rise.”
Earlier on Friday, oil prices briefly dropped by more than 1% after speculation that the U.S. Treasury Department might take steps to counter the surge in energy costs.
On Thursday, the Treasury issued waivers allowing companies to purchase sanctioned Russian oil. The first approvals were granted to Indian refiners, which have since bought millions of barrels of Russian crude.
All major asset classes were still showing positive year-to-date returns as of Friday’s close. However, market conditions can shift dramatically over a single weekend.
The ongoing joint U.S.–Israel military operation against Iran is expected to persist for days, potentially even weeks. While the longer-term market impact remains uncertain, it is reasonable to expect that the prevailing bullish sentiment — already exhibiting signs of exhaustion in certain segments — may become another casualty of escalating tensions in the Middle East.
Through February 27, foreign equities and commodities had emerged as the top performers in 2026, based on ETF benchmarks. Yet assumptions that seemed firmly grounded just a week ago now appear outdated in light of rapidly evolving geopolitical developments.
The central issue now is the degree of vulnerability facing the global economy. In short, the longer the conflict persists, the greater the risk of economic blowback. At present, the likelihood of a swift resolution appears limited, particularly as the war expands across the Middle East, including Iran’s strike on Saudi oil infrastructure.
According to Torbjorn Soltvedt, an analyst at Verisk Maplecroft, the attack on Ras Tanura Refinery represents a meaningful escalation, placing Gulf energy infrastructure directly in Iran’s crosshairs. He noted that a prolonged period of instability is likely, as Iran attempts to inflict economic pressure by targeting tankers, regional energy facilities, trade corridors, and U.S. security partners.
Should the conflict drag on and oil prices remain elevated, the global economic impact could be substantial. In 2025, approximately 31% of all seaborne crude shipments passed through the Strait of Hormuz, according to analytics firm Kpler. Given Iran’s strategic positioning, it retains the capacity to disrupt — if not completely halt — shipping flows through this critical chokepoint.
Norbert Rücker, head of economics at Julius Baer, emphasized that the broader economic consequences hinge largely on the uninterrupted flow of oil and gas through Hormuz. The gravest risk, he suggested, is not necessarily a full closure, but significant damage to key regional energy infrastructure.
Kpler further cautioned that any meaningful shutdown — or even a prolonged de facto closure driven by insurers withdrawing coverage — would likely trigger simultaneous supply shocks across multiple commodity markets.
How long the conflict will endure remains highly uncertain. On Sunday, Donald Trump indicated that the military campaign could last “four weeks or less,” though such timelines in geopolitical conflicts are often fluid.
Energy markets are already reacting. Crude prices are climbing, with the international Brent Crude benchmark trading near $78 per barrel this morning — its highest level in more than a year.
The Trump administration’s stated objective of pursuing regime change in Iran points to the possibility of a protracted conflict. On Sunday, Donald Trump urged “Iranian patriots who yearn for freedom” to seize the moment and reclaim their country — rhetoric that signals ambitions extending beyond limited military strikes.
However, achieving regime change would be extraordinarily difficult. Although Iran’s Supreme Leader, Ali Khamenei, was reportedly killed in Saturday’s airstrikes, the Islamic Revolutionary Guard Corps remains a formidable power center. The Revolutionary Guard — Iran’s dominant military institution with vast economic holdings that help finance its operations — has likely prepared for sustained confrontation following years of tensions and prior strikes by the U.S. and Israel. Airpower alone is unlikely to dismantle what amounts to the regime’s praetorian guard.
According to Jonathan Panikoff, now affiliated with the Atlantic Council, the decisive factor will ultimately be internal dynamics. Once U.S. and Israeli strikes subside, any movement to end the regime would depend on whether rank-and-file security forces stand aside or align with popular unrest. Otherwise, those elements of the regime that retain control of weapons are likely to use force to preserve power.
Regime change in Iran is currently viewed as only moderately probable. Betting markets on Polymarket assign roughly a 42% likelihood to that outcome. The takeaway: expectations for a swift resolution appear limited, with the conflict likely to persist until one side concedes strategic ground.
However, the longer-term outlook may look different. Sanam Vakil, director of the Middle East and North Africa Program at Chatham House, argues that over time the survival of the Islamic Republic in its current form is doubtful. In his assessment, the regime as it exists today may ultimately prove unsustainable.
If that scenario unfolds, the central question shifts to succession: what replaces the current leadership — and whether any transition ushers in greater stability or instead fuels further instability within Iran and across the broader Middle East.
The world’s most critical oil chokepoint has effectively gone offline — and energy markets are adjusting instantly.
Brent crude surged 13% to $82.37 per barrel on Monday morning, marking its largest one-day jump in four years. The rally followed coordinated U.S. and Israeli airstrikes on Iran over the weekend — an operation the Pentagon has labeled Operation Epic Fury. The strikes killed Supreme Leader Ali Khamenei, ending his 36-year rule and plunging the Islamic Republic into its most severe political upheaval since 1979. Tehran responded swiftly, launching attacks on U.S. bases across the region and, more critically for global markets, targeting oil tankers moving through the Strait of Hormuz.
That narrow passageway handles roughly 20% of global oil flows each day. By Monday morning, it was effectively shut. Maersk suspended all vessel transits. Over 200 oil and LNG carriers dropped anchor. Iran’s Islamic Revolutionary Guard Corps reportedly warned ships that no vessels would be permitted to pass. This is no longer rhetoric — it is a tangible supply shock.
Why the Oil Outlook Has Fundamentally Shifted
Oil markets are accustomed to geopolitical tension. They have repeatedly absorbed headlines without lasting disruption. What they cannot easily digest is the sudden loss of one-fifth of global supply with no clear timeline for restoration.
Just days ago, Brent was trading near $73, and the prevailing narrative centered on excess supply. The U.S. Energy Information Administration projected WTI crude would average $53 by year-end. OPEC+ was discussing potential production increases. Market bears appeared firmly in control.
That backdrop has flipped. Brent settled near $79 after briefly touching $82, while WTI climbed from $67 on Friday to $72. Diesel futures — a key barometer of industrial activity — spiked more than 20% intraday. U.S. gasoline futures advanced 9% to their highest level since July 2024. According to GasBuddy analyst Patrick De Haan, retail gasoline prices could rise by 10 to 30 cents per gallon in the near term, with some stations potentially increasing prices by as much as 85 cents.
The market is no longer pricing geopolitical risk. It is pricing physical disruption.
“The magnitude of the retaliation caught the market completely off guard,” said Jorge Leon, head of geopolitical analysis at Rystad Energy. “This is far removed from what investors had been pricing in.”
OPEC+ attempted to ease concerns on Sunday by announcing a relatively small output increase of 206,000 barrels per day for April. However, as Helima Croft of RBC Capital Markets noted, incremental barrels offer limited relief if transport routes remain compromised. “Accessing spare capacity becomes highly constrained when key waterways are effectively shut down,” she wrote.
From a broader market perspective, Dominic Wilson of Goldman Sachs emphasized that equities will be driven less by dramatic headlines and more by the duration of the energy shock. In a client note, he argued that only a prolonged and severe spike in oil prices would materially alter the global growth trajectory.
Meanwhile, analysts at JPMorgan outlined four key variables shaping the outlook: the scale of supply disruption, the length of the outage, the speed at which alternative production can be activated, and the credibility of a diplomatic resolution. On Sunday, Donald Trump suggested U.S. military operations could extend for “four to five weeks” — a timeframe that implies a potentially sustained period of elevated risk for energy markets.
How to Position for the Oil Shock
Energy equities are the clearest near-term beneficiaries, and capital is already rotating aggressively into the space. The Energy Select Sector SPDR Fund (XLE) notched a fresh 52-week high on Monday. Below are five vehicles to consider:
Exxon Mobil (XOM)
Trading near $155, just shy of its all-time high of $156.93, Exxon represents the most diversified large-cap exposure to elevated crude prices. The company produced 4.7 million barrels of oil equivalent per day last quarter, exceeded Q4 expectations with EPS of $1.71, and has earmarked $20 billion in buybacks for 2026.
Wells Fargo recently lifted its price target to $183 from $156. CEO Darren Woods reiterated on the latest earnings call that there is “no near-term peak Permian” for the company. With Permian breakevens around $35 per barrel and production in Guyana scaling, incremental oil price gains translate efficiently into free cash flow expansion.
Chevron (CVX)
Shares briefly reached a new 52-week high of $196.76 before closing near $193. Chevron’s estimated Brent breakeven — inclusive of dividends and capex — sits near $50 per barrel. At current levels around $79 Brent, the company is generating substantial surplus cash.
Bank of America raised its target to $206 from $188. Chevron is also reportedly in exclusive discussions to assume control of Iraq’s West Qurna 2 field from Lukoil, a move that would add meaningful production upside. CEO Mike Wirth recently characterized the company as “bigger, stronger, and more resilient than ever.”
ConocoPhillips (COP)
Up nearly 4% to roughly $118 and marking a new 52-week high, ConocoPhillips offers more direct leverage to crude prices given its pure upstream model.
Goldman Sachs added COP to its U.S. Conviction Buy List, arguing the stock is approaching a material re-rating. The Marathon Oil integration is enhancing scale, while a $2 billion asset divestiture is sharpening its Permian focus. At current oil prices, COP is generating approximately $7 in EPS, implying a sub-17x multiple — reasonable for a commodity cycle inflection.
Occidental Petroleum (OXY)
Trading near $54, Occidental offers higher beta exposure. Its more levered balance sheet amplifies upside in a sustained higher-price environment.
Berkshire Hathaway holds roughly 28% of the company, providing a credibility anchor via Warren Buffett’s long-term endorsement. While the Carbon Engineering acquisition adds energy-transition optionality, the immediate thesis is straightforward: if Brent sustains levels above $80, OXY’s earnings power expands rapidly, making a $70+ valuation plausible under that scenario.
Energy Select Sector SPDR Fund (XLE)
For investors seeking diversified sector exposure without single-name volatility, XLE remains the default allocation. Trading near $93 and at a 52-week high, the ETF is heavily weighted toward Exxon (~22%), Chevron (~17%), and ConocoPhillips (~8%), which together account for nearly half the portfolio.
XLE provides integrated exposure across oil, gas, and energy services in a single vehicle. Should the conflict extend for several weeks — as suggested by Donald Trump — the entire sector could undergo a structural repricing higher.
The Bear Case You Can’t Ignore
History shows that geopolitical shocks often produce violent spikes followed by equally sharp reversals. During the June 2025 “12-day war” between Israel and Iran, crude initially surged but retraced quickly once it became clear that physical supply flows were unaffected.
While this episode involves direct tanker strikes and the functional closure of the Strait of Hormuz, some analysts still see a limited-duration event. Max Layton of Citigroup argues the base case is a leadership shift in Tehran that brings the conflict to an end within one to two weeks.
A similar view comes from Landon Derentz at the Atlantic Council. He notes that regional energy infrastructure remains intact and that global supply capacity has not been structurally damaged. The oversupply dynamics that capped prices before the conflict have not disappeared. If Hormuz reopens quickly, crude could surrender much of its recent gains.
The Inflation Risk
There is also a macro layer that complicates the bullish narrative. Sustained higher oil prices feed directly into transportation, manufacturing, and consumer input costs. That dynamic could constrain the Federal Reserve, forcing policymakers to delay or abandon anticipated rate cuts.
Monday’s Institute for Supply Management manufacturing data showed input costs rising at their fastest pace since 2022. Treasury yields have begun to move higher in response. If oil remains elevated long enough to reignite inflation pressures, the Fed’s stance could shift from easing to holding — a headwind for equities broadly, even if energy stocks outperform on relative terms.
A Structural Repricing of Risk
That said, even a swift diplomatic resolution would not fully reset the clock. Markets were effectively assigning near-zero geopolitical risk premium to oil prior to this weekend. That complacency has been challenged.
Energy equities were already trading at modest multiples relative to free cash flow. Now they have a tangible catalyst. Even if the conflict de-escalates quickly, the perception of risk — and the embedded premium in crude pricing — is unlikely to vanish overnight.
What to Watch
Three catalysts in the next 72 hours. First, Iran’s response — Tehran’s next move over the next 24 to 48 hours will determine whether this is a two-week shock or a multi-month crisis. Any strikes on Saudi or UAE energy infrastructure pushes Brent toward $90 or beyond.
Second, the Strait of Hormuz reopening timeline. If shipping insurance companies begin covering Hormuz transits again this week, oil pulls back. If the effective closure extends past Friday, the supply disruption becomes real and sustained — and $80+ becomes the new floor.
Third, the U.S. Strategic Petroleum Reserve. The IEA said Monday it’s in contact with major producers about potential coordinated reserve releases. Any SPR drawdown announcement would cap oil’s upside temporarily but wouldn’t change the structural supply picture.
The energy sector just went from afterthought to the most important trade in the market. Whether this conflict lasts two weeks or two months, the companies producing oil at $35 to $50 breakevens and generating massive free cash flow at $70 to $80 Brent are going to reward shareholders. The question isn’t whether to own energy — it’s how much.
Over the weekend, the United States and Israel launched coordinated missile and drone strikes on Iran, targeting key military facilities in an attempt to curb Tehran’s nuclear ambitions. The operation reportedly killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, marking a dramatic escalation and sharply increasing regional tensions. Iran responded swiftly with a wide-ranging missile campaign aimed not only at Israel but also at several Gulf states, including Qatar, the United Arab Emirates, and Bahrain. The fallout rippled across the region, prompting multiple Gulf nations to close their airspace and suspend equity trading.
Energy markets were also disrupted. Shipping activity through the Strait of Hormuz—a strategic chokepoint responsible for roughly 20% of global oil flows—slowed dramatically as tanker operators rerouted vessels for security reasons. Meanwhile, Qatar temporarily halted liquefied natural gas production at the world’s largest export terminal following a drone strike. U.S. President Donald Trump indicated that American military operations would persist, suggesting tensions could remain elevated in the near term.
From a market standpoint, energy represents the primary transmission channel of this crisis into global financial assets. Prolonged or severe disruptions to oil and gas supply could push up inflation expectations, dampen business sentiment, and heighten cross-asset volatility. Simply put, the longer and more intense the geopolitical shock, the greater the potential market fallout.
This dynamic was visible when markets reopened Monday. Brent crude briefly climbed to $82 per barrel amid concerns over tighter supply. Sustained price strength would likely reinforce inflation pressures, with knock-on effects for equities and interest rates. However, for oil to remain structurally elevated, investors would likely need confirmation of a more extended—or even complete—closure of the Strait of Hormuz. Such a development would mark a significant escalation beyond current disruptions and warrant a larger risk premium in energy markets. Political factors within Iran, particularly how the Islamic Revolutionary Guard Corps (IRGC) chooses to respond, will be critical. Whether the IRGC de-escalates or intensifies its actions will determine how much of the current market reaction reflects temporary risk pricing versus a genuine physical supply shock.
Oil Rallies After Tanker Flows Stall in the Strait of Hormuz
With developments unfolding quickly, tracking energy prices remains one of the clearest ways to gauge both the intensity and staying power of the geopolitical risk. Oil and natural gas markets typically react swiftly to new headlines, making them a real-time indicator of whether tensions are easing, stabilizing, or escalating further. As a result, close monitoring of these markets will be crucial in assessing how the conflict may shape global financial conditions in the coming days and weeks.
The United States has built up its most significant military footprint in the Middle East since 2003, deploying two aircraft carriers and F-22 stealth fighters. Indirect negotiations in Geneva between US envoys Steve Witkoff and Jared Kushner and Iranian officials concluded Thursday without progress. The Trump administration has cautioned that Iran will face “drastic consequences” if it fails to agree to meaningful nuclear concessions.
Israel has activated bomb shelters and warned Lebanon that its infrastructure could be targeted if Hezbollah becomes involved in any US–Iran confrontation. The US State Department authorized the departure of non-essential personnel and family members from the US Embassy in Israel on February 27, following similar instructions for the embassy in Beirut issued on February 23. Meanwhile, reports suggest the US 5th Fleet in Bahrain has been scaled back to fewer than 100 essential personnel.
China has urged its citizens to leave Iran immediately. South Korea escalated its advisory to a “Level 3” red alert, instructing nationals to depart. Australia has offered voluntary departure to diplomatic dependents in the UAE, Qatar, and Jordan, citing a worsening security environment. Several European countries, including Finland, Sweden, and Serbia, have also recommended that their citizens evacuate Iran.
Commercial carriers such as KLM have begun suspending regional flights. Governments are encouraging citizens to exit while commercial routes remain available, warning that air corridors could close quickly if hostilities erupt.
Does this mean a US–Israel strike on Iran is imminent? Possibly—but diplomatic channels remain active. The State Department confirmed that Secretary of State Marco Rubio will travel to Israel early next week. Meanwhile, reports indicate that Omani Foreign Minister Badr Al Busaidi is set to meet Vice President JD Vance and other US officials in Washington in previously undisclosed talks aimed at preventing escalation.
Oil markets are ending February on firm footing, with prices rising about $1 per barrel during the final trading week as tensions intensify. This week’s indirect talks in Geneva produced no tangible outcome, and Trump’s 10–15 day deadline is fast approaching. At the same time, attention to the upcoming OPEC+ summit has been muted—potentially opening the door for Saudi Arabia to surprise markets with another production increase for April.
The recovery in oil prices, combined with a reshuffling of global equity allocations, has recently delivered a notable lift to US energy ETFs (see chart). However, today’s modest $1.50 rise in crude suggests markets may have already priced in the risk of a swift conflict—or remain unconvinced that one is imminent.
Saudi Arabia could still opt to raise output, but much of that additional supply would need to transit the Strait of Hormuz, a critical chokepoint that Iran has repeatedly threatened to shut down.
Between 2023 and 2025, the 10-year US Treasury yield moved largely in tandem with the price of Brent crude (see chart), reflecting a strong correlation between energy prices and long-term interest rates.
In recent weeks, however, that relationship has diverged. While oil prices have climbed, the 10-year yield has declined. This shift suggests that investors may be rotating into bonds as a safe haven, anticipating that a renewed conflict in the Middle East could trigger broader geopolitical instability and economic uncertainty.
It was notable that the 10-year yield slipped below 4.00% today, even after a stronger-than-expected PPI inflation print.
More broadly, both nominal and real 10-year yields have traded within a relatively narrow range since 2023 (see chart). In our view, that sideways pattern is likely to persist through the remainder of the year.
Bitcoin (BitfinexUSD) is rebounding from its weekend slide, trading above the $67,000 mark as investors process a dramatic shift in Middle Eastern geopolitics.
The bounce comes after intense volatility sparked by coordinated U.S. and Israeli strikes on Iran. President Donald Trump stated that the operation led to the death of Supreme Leader Ayatollah Ali Khamenei. Although Tehran initially rejected the reports, Iranian state media later confirmed his death, triggering sharp reactions across global financial markets.
As highlighted in Saturday’s analysis, Bitcoin has a consistent pattern of sharply dropping on unexpected geopolitical shocks before stabilizing. That pattern appears to be unfolding again. After falling to nearly $63,000 yesterday, the cryptocurrency has gradually attracted renewed capital flows as the initial wave of panic selling eases.
Ethereum and XRP are also participating in the broader recovery. ETH/USD has moved back toward the $2,000 level, while XRP is trading near $1.40, with investors anticipating a key March 1 deadline that could bring greater regulatory clarity in the United States.
Regime change dynamics and shifting sentiment
Khamenei’s death was a decisive and largely unforeseen development. The swift return of buyers into Bitcoin reflects a growing belief among traders that the most severe phase of military escalation may have already passed.
At the same time, optimism is tempered by uncertainty surrounding the power vacuum in Tehran. As Iran’s highest authority for decades, Khamenei’s absence leaves open questions about the country’s leadership transition and broader regional stability.
President Trump’s remarks encouraging Iranians to “reclaim their country” indicate that Washington may be aiming for structural regime change. For crypto investors, the coming days represent a critical period of observation. If Iran manages a controlled leadership transition without broadening the conflict, Bitcoin’s rebound could remain intact. However, a drawn-out internal or regional confrontation could quickly pressure the $67,000 support level once more.
Escalation risks and Bitcoin’s “safe haven” debate
Despite the recovery, the possibility of a wider regional conflict persists. Iran’s Revolutionary Guards have reportedly carried out strikes against neighboring states hosting U.S. forces, and casualties have been reported following retaliatory action involving Israel. This ongoing cycle of retaliation continues to unsettle institutional crypto participants.
The central issue now is whether Bitcoin can genuinely function as a “digital gold” hedge during geopolitical crises — or whether it will keep behaving like a high-beta technology asset that reacts sharply to shifts in global risk sentiment.
The United States and Israel carried out coordinated strikes on Iran on Saturday, killing Supreme Leader Ali Khamenei and triggering a fresh wave of conflict across the Middle East.
The attacks unsettled neighboring Gulf Arab oil producers as concerns mounted over further escalation, particularly after Iran retaliated with missile launches toward Israel.
According to four trading sources, several major oil companies and leading commodity traders temporarily halted crude and fuel shipments through the Strait of Hormuz following the strikes.
Key Reactions from Analysts
Helima Croft, Head of Commodities Research, RBC Capital:
Croft said the long-term impact on oil prices will depend on whether the IRGC retreats under sustained airstrikes or escalates further, potentially increasing the costs of what she described as Washington’s second regime-change effort in just over two months.
She added that regional leaders had cautioned Washington about the spillover risks of renewed confrontation with Iran, warning that oil prices above $100 per barrel would pose a serious threat.
Croft also emphasized that OPEC’s ability to cushion supply shocks is limited. Aside from Saudi Arabia, most OPEC+ members are already producing near capacity, meaning any announced output increase may have little practical effect.
Jorge Leon, SVP and Head of Geopolitical Analysis, Rystad Energy:
Leon noted that while alternative infrastructure exists to bypass the Strait of Hormuz, a prolonged disruption could effectively remove 8–10 million barrels per day from the market—significant in a world consuming roughly 100 million barrels daily.
He suggested countries with strategic petroleum reserves may release supplies if the disruption drags on. Absent quick de-escalation, he expects oil prices to reprice sharply higher at the start of the week.
Eurasia Group energy analysts:
They anticipate oil prices will surge when markets reopen. If fighting continues into Sunday, prices could jump $5–$10 above the current $73 level, especially given Iran’s claim that it has closed the Strait of Hormuz and reports of tanker disruptions.
Barclays energy analysts:
Barclays warned that markets may confront worst-case supply fears on Monday. Brent crude could climb to $100 per barrel as traders assess the risk of major supply interruptions amid intensifying regional instability.
Vishnu Varathan, Head of Macro Research (Asia ex-Japan), Mizuho, Singapore:
Varathan said recurring regional attacks may become the new norm, keeping oil prices elevated as both production and transit routes remain vulnerable. OPEC could face pressure to boost output, though a 10–25% risk premium on oil prices would not be excessive—even without a full blockade of the Strait of Hormuz, which he described as a potential 50% premium event.
Christopher Wong, Strategist, OCBC, Singapore:
Wong expects geopolitical risk premiums to rise as markets open. Safe-haven assets like gold are likely to gap higher, while oil could strengthen on supply concerns. Meanwhile, risk assets and high-beta currencies may experience early volatility, particularly if retaliation or regional spillover intensifies.
Nick Ferres, CIO, Vantage Point Asset Management, Singapore:
Ferres argued that energy remains undervalued and should rally at the start of the week—alongside gold.
Thunderous explosions and massive fireballs from missiles launched by Iran across the Gulf underscored a long-feared reality for regional leaders: Tehran can carry the fight directly to their territory. The attacks are likely to solidify Arab governments’ backing for joint action by the United States and Israel.
Even on the Palm Jumeirah — Dubai’s most exclusive enclave — blasts shook buildings and struck a luxury hotel, sending residents scrambling as missiles and interceptors streaked overhead. The scenes made clear that the conflict had spilled beyond Iran’s borders, just as Tehran had cautioned.
“What has now been demonstrated is that we — not the United States — are directly exposed,” said Ebtesam Al-Ketbi of the Emirates Policy Center. “When Iran attacked, it hit the Gulf first, claiming it was targeting U.S. bases.”
Analysts say Tehran’s strikes are designed to show that no American ally in the region is out of reach and to increase the price of supporting Washington’s campaign. But they warn that any error in judgment could turn calibrated signaling into full-scale war.
Gulf officials argue that by hitting oil-producing neighbors, Iran is widening the battlefield and putting global energy supplies at risk, not merely regional stability. For rapidly expanding economies such as Saudi Arabia, Qatar and the United Arab Emirates — all reliant on open skies, safe sea lanes and steady trade — a broader confrontation would be severely destabilizing.
By casting the confrontation as a campaign for regime change in Iran, President Donald Trump has raised the stakes, increasing the likelihood that Tehran could retaliate more aggressively, observers say.
If Iran were to misjudge and directly attack Gulf Cooperation Council states, the nature of the conflict would shift dramatically. Regional governments would be under intense pressure to respond as lives and strategic assets come under threat.
Some Gulf analysts contend that Iran is undermining its own strategic interests by striking neighboring states. While Tehran insists it is targeting U.S. military installations, Gulf capitals view the attacks as clear violations of sovereignty.
In recent indirect talks with Washington aimed at defusing tensions, Iran signaled willingness to negotiate over its nuclear program but refused to discuss its ballistic missile arsenal or its backing of regional militias. Tehran has suggested that such issues be handled in a regional dialogue excluding the United States — a proposal Gulf states argue would weaken rather than strengthen the existing security framework, given their longstanding reliance on U.S. protection.
From their perspective, Iran’s missile capabilities and network of proxies pose immediate threats. Without external security guarantors, they see little credibility in a regional-only arrangement.
Meanwhile, Trump’s rhetoric has shifted notably. Whereas he previously described potential U.S. strikes as leverage to secure a nuclear agreement, he has more recently framed them in terms that imply regime change. Unlike the large-scale 2003 invasion of Iraq under George W. Bush, which involved a prolonged troop deployment and occupation, the current strategy appears focused on limited air operations designed to achieve swift, visible outcomes while minimizing American casualties and domestic political fallout.
The bet is that a short, decisive campaign would yield political benefits, whereas a drawn-out war — especially one disrupting oil flows or the broader economy — could carry heavy costs.
Should the conflict expand to include U.S. bases, diplomatic missions, energy infrastructure, or the crucial maritime corridor of the Strait of Hormuz, the economic and political repercussions for the United States, the Gulf, and global markets would escalate sharply.
In a post on Truth Social, Donald Trump warned Iran not to carry out any additional retaliatory strikes against the United States or its Middle East allies. He said Tehran had threatened large-scale attacks on neighboring countries seen as aligned with Washington.
The remarks suggest that Iran’s military capabilities remain operational despite the reported killing of its Supreme Leader, Ali Khamenei. The wave of retaliatory strikes indicates that Tehran has not been deterred by his death.
Iran reportedly targeted the United Arab Emirates, striking Dubai International Airport and the Burj Khalifa, the world’s tallest building. It also launched attacks on Bahrain’s capital, as well as Qatar and Kuwait. In response, several Gulf states have warned they may retaliate against Iran.
Qatar has shut down its main airport in Doha, while Dubai International Airport has also been closed following the strikes.
It remains uncertain whether Trump’s threat to respond with significantly greater force will deter further escalation. It is also unclear what he meant by saying, “We will hit them with a force that has never been seen before.”
Impact of the Conflict on Global Trade and the Energy Sector
Earlier today, we noted that the sudden closure of Dubai International Airport caused widespread flight cancellations due to its vital role as a global transit hub. Leading Gulf airlines — Emirates, Qatar Airways, and Etihad Airways — have suspended services indefinitely.
In addition, three major Japanese shipping companies have halted operations in the Gulf following a U.S. naval warning. These include Nippon Yusen (TYO:9101), Mitsui O.S.K. Lines (OTC:MSLOY), and Kawasaki Kisen Kaisha (TYO:9107).
Analysts at RBC Capital Markets say that U.S. strikes on Iran and Tehran’s counterattacks have created a cascading effect across the Gulf. The Strait of Hormuz is now viewed as “effectively closed,” disrupting roughly 20% of global LNG exports and about 90% of Japan’s crude oil imports.
They warn that crude oil prices could spike sharply as tensions intensify and diplomatic efforts remain stalled. Investors are advised to closely track developments in the region and assess their potential implications for oil and LNG markets.
Oil prices fell more than 1% in Asian trading on Monday, taking a breather after last week’s sharp rally, as investors assessed the likelihood of a third round of U.S.-Iran nuclear negotiations and renewed uncertainty around U.S. trade policy.
By 20:50 ET (01:50 GMT), Brent crude for April delivery dropped 1% to $71.03 a barrel, while WTI crude declined 0.9% to $65.75 a barrel.
Both benchmarks had climbed nearly 6% last week amid signs of a potential U.S.-Iran confrontation and an unexpected drawdown in U.S. crude inventories, which supported prices.
Traders watch third round of U.S.- Iran nuclear talks
Iran and the United States are expected to hold a third round of nuclear discussions on Thursday in Geneva, raising hopes that tensions may ease.
Iranian Foreign Minister Abbas Araghchi told CBS’s “Face the Nation” on Sunday that there is a strong possibility of reaching a diplomatic resolution, adding that an agreement is within reach. Markets viewed the remarks as a signal of potential compromise.
Iran is a major producer within OPEC and possesses some of the largest proven oil reserves globally. The country also borders the Strait of Hormuz, a vital chokepoint that handles about one-fifth of the world’s seaborne oil. Any escalation involving Iran could disrupt shipments and drive up freight and insurance costs.
Trump raises global tariffs to 15%
Meanwhile, U.S. President Donald Trump unveiled new global tariffs, initially imposing a 10% duty on imports for 150 days after the U.S. Supreme Court invalidated his previous, broader tariff plan.
The administration increased the rate to 15% on Saturday—the maximum permitted under the applicable law—adding fresh uncertainty to global trade and demand prospects.
Higher tariffs can strain supply chains and prompt retaliatory actions from trade partners. Slower trade activity and weaker industrial production typically weigh on fuel consumption.
Oil prices moved modestly higher in Asian trading on Friday, building on strong gains from the prior two sessions and putting major benchmarks on course for roughly a 6% weekly advance, as rising tensions between the U.S. and Iran heightened concerns about potential supply disruptions in the Middle East.
By 22:41 ET (03:41 GMT), Brent for April delivery climbed 0.2% to $71.81 a barrel, while West Texas Intermediate (WTI) crude rose 0.5% to $66.78 a barrel.
Both contracts were hovering near their highest levels since early August and were set to record weekly gains of more than 6%.
Oil near six-month high on US-Iran tensions
Investor anxiety has intensified after U.S. President Donald Trump warned Tehran that “bad things” could follow if a nuclear agreement is not reached within roughly 10–15 days, raising the possibility of military action.
According to a Wall Street Journal report, Trump is considering a limited strike on Iranian targets to pressure Tehran into accepting a nuclear deal.
Any escalation involving Iran — a key OPEC producer — could jeopardize shipments through the Strait of Hormuz, a vital passageway that handles about one-fifth of global oil trade, thereby increasing the market’s sensitivity to geopolitical risk.
This week’s rally also marked a rebound from earlier losses, when prices slipped at the start of the week on hopes that U.S.-Iran negotiations were making progress. The renewed tough rhetoric has since restored a geopolitical risk premium, pushing crude back toward multi-week highs.
US crude inventories drop sharply – EIA
Data from the U.S. Energy Information Administration on Thursday showed crude stockpiles fell by around 9 million barrels last week, defying expectations for a 1.7 million-barrel increase.
The report also indicated declines in gasoline and distillate inventories, both coming in below forecasts, suggesting solid demand from refiners and consumers.
Markets are now awaiting the release of the U.S. Personal Consumption Expenditures (PCE) Price Index later on Friday — the Federal Reserve’s preferred measure of inflation.
Following recent hawkish Fed minutes that signaled policymakers are in no rush to cut interest rates, the PCE data could offer additional insight into the central bank’s policy trajectory.
WTI prices could stage a rebound as supply concerns intensify amid escalating US-Iran tensions and stalled Ukraine-Russia negotiations.
Talks between Washington and Tehran have yielded little concrete progress, with Iranian officials only اشاره to a broad framework for a potential nuclear agreement, leaving uncertainty over future crude exports.
Meanwhile, peace discussions between Ukraine and Russia held in Geneva concluded without a breakthrough, sustaining geopolitical risks that may continue to underpin oil prices.
West Texas Intermediate (WTI) crude slips slightly on Thursday after plunging 4.9% in the previous session, hovering around $65.00 per barrel during Asian trading. Despite the recent drop, oil prices may find support from potential supply disruptions linked to rising US-Iran tensions and stalled Ukraine-Russia peace efforts.
Negotiations between Washington and Tehran remain unresolved. Iranian officials have pointed to a “general agreement” on the framework of a possible nuclear deal, but key differences persist. US Vice President JD Vance stated that Iran failed to meet Washington’s red lines, while US President Donald Trump reiterated that military action remains an option. Reports suggest that any potential US strike could develop into a prolonged campaign, with Israel advocating for an outcome aimed at regime change in Iran.
Meanwhile, peace talks in Geneva between Ukraine and Russia concluded without tangible progress, according to Reuters. Ukrainian President Volodymyr Zelenskiy accused Moscow of stalling US-backed diplomatic efforts to end the four-year conflict. Trump has urged Kyiv to consider a deal that could involve significant concessions, even as Russian forces continue attacking energy infrastructure and making battlefield advances.
On the trade front, India’s state-run Bharat Petroleum Corporation Limited (BPCL) reportedly made its first-ever purchase of Venezuelan crude, while HPCL Mittal Energy Limited resumed buying cargoes from Venezuela for the first time in two years.
In US inventory data, the American Petroleum Institute (API) reported a 0.609 million-barrel decline in weekly crude stocks, partially offsetting the previous week’s massive 13.4 million-barrel build — the largest increase since January 2023.
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