This QuickTakes update on gold highlights that prices are holding above the 200-day moving average after reports that Iran and the US agreed on a memorandum of understanding to extend their ceasefire for another 60 days, although Reuters noted that President Donald Trump has not yet approved the deal.
Gold reached a record high of $5,318 per ounce on January 29 before plunging during the Middle East conflict in March, touching $4,375 near month-end. Prices later recovered through mid-April as the ceasefire held. Currently, gold appears to be testing key technical support around the March 26 low, the 200-day moving average, and the intermediate uptrend line. In our view, this cluster of support levels should remain intact.
The decline in gold prices since late January has pushed the metal back into the upward-sloping trading channel that has been in place since late 2023 (chart). Traders may be viewing the proposed 60-day ceasefire extension as a sign that neither Iran nor the US is willing to reignite the military conflict.
Gold’s upward trend is expected to regain momentum once the conflict comes to an end. We currently forecast gold prices reaching $5,500 by year-end and climbing toward $10,000 by the end of the decade. During the war, the US Dollar strengthened in foreign-exchange markets, creating headwinds for gold. At the same time, rising interest rates added further pressure, which is typically negative for the precious metal.
Some central banks were also compelled to sell portions of their gold reserves to stabilize their currencies as surging oil prices weakened exchange rates. Meanwhile, the Federal Reserve is expected to maintain a more hawkish stance through the summer, potentially limiting any major upside move in gold in the near term. Once the war concludes, however, many of these bearish pressures are likely to fade.
Our long-term bullish outlook for gold is based on the expectation that the S&P 500 could climb to 10,000 by the end of the decade. As equities continue to rise, we believe investors are likely to diversify part of their portfolios into alternative assets, including gold. Historically, the S&P 500 and gold prices have often moved inversely over shorter cyclical periods, while tending to advance together over longer-term trends (chart). Therefore, if the S&P 500 eventually reaches the 10,000 mark, we believe gold prices could also rise toward $10,000.
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.
A potential agreement between President Donald Trump and Iran is beginning to reshape market expectations, with investors increasingly anticipating a rally in stocks, weaker oil prices, and stronger bond performance if tensions in the Middle East continue to ease.
For months, global markets have been heavily influenced by geopolitical risk. Traders feared disruptions in the Strait of Hormuz, while investors worried that surging crude oil prices would reignite inflation pressures and force central banks to maintain higher interest rates for longer.
That narrative may now be changing.
Trump recently stated that negotiations with Iran are largely complete, with discussions focused on restoring stability in the Gulf region and reopening key shipping routes. Markets quickly responded to the possibility of reduced geopolitical tension.
Brent crude prices have already started to decline as optimism surrounding the negotiations grows. Investors recognize that easing tensions could reduce the geopolitical premium embedded in oil markets. If supply concerns diminish and shipping routes normalize, energy prices would likely continue falling. Lower oil prices would, in turn, help cool inflation expectations, reduce pressure on bond yields, and improve conditions for equities.
Markets understand the broader chain reaction.
At the peak of the Iran crisis, investors were preparing for a far more severe scenario in which oil prices could surge above $120 per barrel. Such a move would have intensified global inflation, pressured consumers, hurt corporate profit margins, and complicated the outlook for central banks already navigating slowing economic growth.
A credible diplomatic breakthrough would dramatically improve that outlook.
Bond markets could become one of the biggest beneficiaries. Treasury yields have already begun drifting lower alongside softer oil prices as optimism over negotiations increases.
Lower yields would also provide support for growth-oriented sectors, particularly technology and AI-related stocks, which have struggled amid elevated financing costs and geopolitical uncertainty.
Several sectors stand to gain from falling energy prices and easing interest rates, including airlines, transportation companies, industrial firms, consumer discretionary businesses, and rate-sensitive technology stocks.
Emerging markets could also recover strongly. Many developing economies faced pressure from higher energy import costs and a stronger U.S. dollar during the recent period of instability. Reduced geopolitical stress could help reverse some of those pressures.
At the same time, the U.S. dollar may weaken somewhat as safe-haven demand declines and investor confidence improves.
Still, volatility is unlikely to disappear completely.
Negotiations with Iran have failed before, and political resistance within Washington remains significant. Regional tensions also remain elevated, while critical issues such as sanctions relief, nuclear commitments, and enforcement mechanisms still need to be resolved.
Markets are well aware that geopolitical agreements can unravel quickly.
However, investors trade on probabilities rather than certainty. Right now, markets are increasingly pricing in a scenario where one of the largest geopolitical risks facing the global economy begins to ease instead of escalate.
If Trump ultimately secures a workable agreement with Iran, the impact across global asset classes could be substantial: higher equities, lower oil prices, and stronger bond markets.
After months dominated by fears of energy shocks and renewed inflation pressure, investors may finally be seeing a path toward relief.
WTI extends gains for a third consecutive session as escalating tensions with Iran intensify concerns over potential supply disruptions. President Trump’s latest warning to Iran has heightened fears of a deeper conflict in the Middle East, though a stronger US Dollar may limit further upside in the USD-denominated commodity.
West Texas Intermediate (WTI), the US benchmark for Crude Oil, extends its rally for a third straight session and reaches a two-week high during Monday’s Asian trading hours. The commodity is currently trading near $102.30, gaining around 1.35% on the day, with bullish momentum supported by escalating geopolitical tensions.
In a post on Truth Social, US President Donald Trump warned Iran that “the clock is ticking” and cautioned that there “won’t be anything left” unless action is taken soon, emphasizing that “time is of the essence.” Adding to market concerns, The Times of Israel reported on Saturday that Israel and the US are actively preparing for the possibility of renewed coordinated military strikes against Iran. These developments have heightened fears of a broader Middle East conflict, providing further support for Crude Oil prices.
At the same time, negotiations between the US and Iran remain deadlocked due to major disagreements surrounding Tehran’s nuclear program. Ongoing US restrictions on Iranian ports, along with the effective closure of the Strait of Hormuz, continue to keep a geopolitical risk premium embedded in the market. Concerns over potential disruptions to global Oil supply are also reinforcing bullish sentiment and supporting the recent rebound from monthly lows below $87.00.
However, the stronger US Dollar (USD) could limit additional gains in Oil prices, as a firmer Greenback typically weighs on demand for USD-denominated commodities. Amid renewed US-Iran tensions, expectations that the Federal Reserve may raise interest rates in 2026 have pushed the US Dollar Index (DXY) to its highest level since April 7, potentially discouraging traders from aggressively extending bullish positions in Crude Oil.
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.
Gold prices traded sideways during Thursday’s Asian session as investors remained cautious ahead of the Trump–Xi summit in Beijing. US President Donald Trump arrived in China for talks with Xi Jinping, with trade tensions and the Iran conflict expected to dominate discussions. Meanwhile, US producer inflation surged at its fastest yearly pace in four years, lending support to the US Dollar.
Gold prices remained largely unchanged during Thursday’s Asian session as investors stayed cautious ahead of the summit between US President Donald Trump and Chinese President Xi Jinping in Beijing. Market attention is also turning to the upcoming US April Retail Sales data due later in the day.
According to Bloomberg, Trump arrived in Beijing on Wednesday for the first state visit to China by a US president in nine years. The meeting comes as Washington and Beijing attempt to stabilize relations amid ongoing geopolitical tensions linked to the Iran conflict.
The US and China are reportedly exploring a framework that would allow both countries to reduce tariffs on approximately $30 billion worth of goods without compromising national security concerns.
Meanwhile, US producer inflation rose at its fastest annual pace in four years, strengthening expectations that the Federal Reserve will keep interest rates elevated to contain persistent inflation pressures.
Data from the US Bureau of Labor Statistics released on Wednesday showed that the Producer Price Index (PPI) climbed 6.0% year-over-year in April, up from 4.3% in March and above market forecasts of 4.9%. On a monthly basis, PPI increased 1.4% after a 0.7% gain in March, significantly exceeding expectations of 0.5%.
Wholesale inflation reached its highest level since December 2022, largely driven by surging oil prices amid Middle East tensions. The stronger inflation data reinforced expectations that the Federal Reserve will maintain higher interest rates for longer, which could pressure Gold prices. Although Gold is often viewed as a safe-haven asset during geopolitical uncertainty, higher interest rates reduce its appeal because the metal does not offer yield.
Gold Daily Chart
Technical Analysis
On the daily chart, XAU/USD is trading near $4,690 and continues to show a slightly bearish tone while remaining below the 100-day simple moving average (SMA). The metal is hovering just above the Bollinger Band midpoint, indicating short-term support within the current trading range. Meanwhile, the Relative Strength Index (RSI) stands at 49.65, reflecting neutral momentum and signaling consolidation rather than a strong directional move.
To the upside, the first resistance level is located near the 100-day SMA around $4,790. Additional gains could face resistance near the upper Bollinger Band at roughly $4,838 if bullish momentum strengthens further. On the downside, initial support is found around the Bollinger midpoint near $4,680, followed by a stronger support area close to the lower Bollinger Band around $4,518, where any deeper correction may begin to stabilize.
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.
USD/CAD advances as escalating Middle East tensions strengthen the US Dollar’s appeal as a safe-haven currency.
President Trump has expressed growing frustration over the lack of progress in peace negotiations, raising concerns about a possible change in the region’s conflict approach.
Meanwhile, higher oil prices provide support for the Canadian Dollar, though they also create challenges for the Bank of Canada by adding to ongoing inflation pressures.
USD/CAD edges higher after closing nearly unchanged in the previous session, hovering around 1.3690 during Tuesday’s Asian trading hours. The pair is regaining upward momentum as the US Dollar strengthens amid escalating geopolitical tensions.
Investor sentiment has shifted toward safe-haven assets following reports of worsening diplomatic conditions in the Middle East. Markets are increasingly pricing in the risk of renewed large-scale military conflict, a development that typically drives demand for the Greenback against more risk-sensitive currencies.
A CNN report published Monday stated that US President Donald Trump has become increasingly dissatisfied with the lack of progress in negotiations aimed at ending regional hostilities. Sources close to the administration indicated that Washington is now giving more serious consideration to renewed military operations. Adding to market concerns, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said, according to Reuters, that Iran’s armed forces are fully prepared to respond to any future attacks, placing the already fragile ceasefire under additional pressure.
Despite broad USD strength, the Canadian Dollar continues to receive support from rising oil prices. As Canada is the largest crude supplier to the United States, the CAD tends to benefit from gains in energy markets. Concerns that escalating regional tensions could disrupt global supply flows and reduce Middle Eastern exports have pushed crude prices sharply higher, helping cap further upside in USD/CAD.
At the same time, surging energy prices are reviving inflation concerns in Canada. March inflation data already reflected the impact of volatile oil prices, with annual CPI rising to 2.4%, the highest level seen in a year. While elevated crude prices generally strengthen the CAD, they also complicate the Bank of Canada’s policy outlook. Although the BoC recently kept interest rates unchanged and suggested that energy-related inflation may remain temporary, a prolonged geopolitical conflict could eventually force policymakers to reconsider their current stance.
The precious metal has been supported by speculation of a potential de-escalation in Middle East tensions.
At the same time, markets are also reacting to reports that the US and Japan could pursue coordinated currency intervention.
The US dollar recovered from earlier selling pressure amid lingering uncertainty over a rapid resolution to the Middle East conflict, alongside stronger-than-expected US economic data. ADP reported a 109K increase in private sector employment in April, marking the strongest reading since the beginning of 2025. The resilience in the labour market, combined with persistent inflation pressures, helped the DXY rebound 0.5% from its intraday lows, recovering roughly half of its earlier losses on Wednesday. However, the recovery proved short-lived.
Markets are also focused on renewed US–Iran diplomatic efforts, with talks expected to resume by 15 May. As often seen in geopolitics, markets tend to price in outcomes ahead of confirmation. Rumours of de-escalation initially pushed EUR/USD to its highest level since February near 1.1800, before subsequent uncertainty triggered a pullback.
At the same time, geopolitical risks are increasingly seen as more damaging for Europe than for the US. Additional pressure comes from renewed tariff threats by Donald Trump, including potential increases on European auto imports from 15% to 25%. Slowing growth combined with inflationary pressure from higher energy costs is raising stagflation concerns in the eurozone, forcing the ECB into a more cautious policy stance. Even if further rate hikes occur, they are expected to be limited, leaving interest rate differentials supportive of the US dollar and capping EUR/USD upside.
Beyond geopolitics, currency markets are also reacting to developments in Japan. While fundamentals favour a stronger US dollar versus the yen, any coordinated effort to weaken the dollar could impose significant strain on Tokyo. Discussions around possible joint intervention—drawing comparisons to the 1985 Plaza Accord—have resurfaced, with US officials expected to meet Japanese counterparts to discuss foreign exchange stability.
Meanwhile, gold has benefited from easing Middle East tensions, posting its strongest daily gain since late March. The metal is also supported by shifting inflation expectations following the decline in oil prices, which reduces the likelihood of aggressive Fed tightening into 2026. However, upcoming US data releases remain a key catalyst, and any downside surprise could provide fresh momentum for further upside in gold.
The conclusion of Operation Epic Fury is lifting risk sentiment.
Japan is expected to keep cracking down on speculators.
The US Dollar weakened after the White House announced the end of the two-month “Operation Epic Fury” and highlighted progress in talks with Iran. Markets are interpreting the developments as a sign of easing tensions in the Middle East, triggering a selloff in Brent crude and pushing the dollar index back toward two-month lows amid improving risk sentiment.
The more optimistic backdrop could support further gains in EUR/USD, though much will depend on how quickly oil prices decline. Damage to energy infrastructure across the Persian Gulf is expected to keep Brent and WTI well above the $65–70 range seen before the conflict erupted, maintaining underlying inflationary pressure.
US services PMI data continues to point to the strongest price pressures since 2022, while futures markets are increasingly pricing in the possibility of additional Fed tightening. That complicates any effort by Kevin Warsh to deliver the aggressive policy easing sought by Donald Trump. For now, however, traders remain focused almost entirely on developments in the Middle East.
The prospect of a ceasefire has already lifted EUR/USD toward 1.1760, and the pair could extend gains if de-escalation continues. On the other hand, a collapse in negotiations or renewed friction between the US and Iran would likely trigger a reversal, especially as Washington continues expanding its military presence in the Persian Gulf despite softer rhetoric.
Meanwhile, Wednesday’s sharp drop in USD/JPY has fuelled speculation that Japanese authorities intervened in the currency market again. Tokyo appears determined to discourage speculative dollar buying during periods of USD weakness.
Gold has also surged more than 3% on hopes of easing geopolitical tensions, climbing above $4,700. Lower oil prices reduce the risk of persistent inflation and lessen pressure on central banks to tighten policy further, potentially reviving demand for gold as a debasement hedge.
Gold draws buyers for a second consecutive session as optimism over a potential US–Iran peace agreement weakens the US dollar. Easing inflation concerns also dampen expectations of aggressive Fed tightening, supporting demand for the metal, while traders await the US ADP report for fresh direction ahead of Friday’s Nonfarm Payrolls release.
Gold (XAU/USD) holds firm near a more-than-one-week high, staying above $4,650 as the European session begins on Wednesday. A broadly weaker US Dollar—pressured by growing optimism over a potential US–Iran peace agreement—has supported the metal’s rebound from Monday’s one-month low around $4,500. At the same time, falling crude oil prices are easing inflation concerns and reducing expectations of a more aggressive Federal Reserve, further boosting demand for the non-yielding asset for a second consecutive day.
On the geopolitical front, US President Donald Trump announced a temporary pause in “Project Freedom,” the military effort to escort commercial vessels through the Strait of Hormuz, to allow room for negotiations with Iran. He noted meaningful progress toward a comprehensive deal, echoing earlier remarks from Defense Secretary Pete Hegseth that the US is not seeking renewed escalation and that the ceasefire with Iran remains intact. Additionally, Secretary of State Marco Rubio confirmed the conclusion of “Operation Epic Fury,” a joint US–Israel campaign launched on February 28.
These developments have strengthened expectations of a peace agreement that could end the US-Israeli conflict involving Iran and reopen the strategically crucial strait, lifting investor sentiment while weighing on the dollar’s appeal. Meanwhile, oil prices have dropped to a one-week low, helping to curb fears of rising inflation and allowing the Fed to maintain a more cautious policy stance. Still, according to CME Group’s FedWatch Tool, markets are pricing in more than a 35% chance of a rate hike by year-end, which may limit further downside in the USD and cap gold’s near-term upside.
Given this backdrop, traders may wait for stronger follow-through buying before confirming that gold has formed a bottom near $4,500 and positioning for additional gains. Attention now turns to the US ADP private employment report later in the North American session, along with remarks from key FOMC officials and ongoing geopolitical updates. The primary focus, however, remains Friday’s closely watched US Nonfarm Payrolls report, which is expected to play a decisive role in shaping the near-term outlook for both the dollar and gold.
Gold H4
Gold bulls remain in control as long as prices hold above the 200-period SMA breakout level on the H4 chart. The metal’s solid rebound from the $4,500 region—near the 50% retracement of the March–April rally—combined with a move above $4,600, supports a bullish outlook. Prices are now approaching the 200-period SMA at $4,651.69, which serves as the next key resistance.
Momentum indicators reinforce the positive bias. The RSI sits around 59, suggesting steady strength without entering overbought territory, while the MACD histogram remains positive and continues to rise, pointing to building bullish momentum as gold tests overhead resistance.
On the downside, immediate support is located at the 38.2% Fibonacci retracement level around $4,588.83. Further declines could find buying interest near the 50% level at $4,495.62, followed by the 61.8% retracement around $4,402.41. A decisive break below this last level would invalidate the bullish setup and shift the near-term outlook back in favor of the bears.
As the U.S. conflict with Iran moves into its third month, markets have largely steadied following early fears of disruption to the energy sector and oil prices. Still, the evolving political landscape—including a ceasefire that has been in place since early April—continues to inject a high degree of uncertainty. Should the truce break down and tensions escalate again, investors could see renewed volatility.
One approach to navigating this uncertainty is through exchange-traded funds (ETFs), which offer exposure to sectors that may benefit from shifting conditions. Below are two funds to consider, depending on whether your outlook on developments in the Middle East is more optimistic or cautious.
A Cost-Effective, Highly Liquid Way to Gain Crude Oil Exposure
The United States Oil Fund LP is among the most widely used exchange-traded products for investors seeking exposure to oil. Structured as a commodity pool, USO invests in oil futures contracts to mirror daily price movements of light, sweet crude—an oil type that dominates production in the U.S., making the fund closely linked to the domestic energy market.
USO carries an expense ratio of 0.60%, which is relatively low compared to many similar funds. It also stands out for its strong liquidity, with an average monthly trading volume exceeding 27 million shares. Although it isn’t the largest fund by assets—managing roughly $1.9 billion—it remains highly active in the market.
These characteristics make USO especially appealing for short-term traders. Its ability to capture near-term price swings in crude oil is a key advantage, though its reliance on futures contracts exposes it to contango, which can erode returns over time. As such, it may not be the best choice for long-term, buy-and-hold strategies tied to developments in the Iran conflict.
That said, if oil prices continue climbing—something that could happen if the ceasefire collapses and tensions escalate—USO offers a practical way for investors to capitalize on that upward movement.
An Airline-Focused ETF Positioned to Rebound if Fuel Markets Stabilize
Investors anticipating a de-escalation in geopolitical tensions may turn their attention to one of the sectors hit hardest by the conflict: aviation. Airlines have faced mounting challenges, from volatile jet fuel costs and supply constraints to disruptions in routes and operations driven by regional instability.
The U.S. Global Jets ETF tracks a basket of companies tied to the air travel industry, encompassing not just airlines but also firms involved in aircraft manufacturing, maintenance, and related services.
While the fund has global exposure, it leans heavily toward U.S.-based companies and includes many of the world’s largest carriers. Major holdings such as Delta Air Lines, American Airlines, and United Airlines together account for roughly one-third of its portfolio.
JETS stands out for its pure focus on aviation, unlike broader transportation ETFs. This specialization could make it particularly attractive to investors who expect improving diplomatic relations between the U.S. and Iran. However, its year-to-date performance—down around 8% in 2026—suggests that tensions have yet to ease meaningfully.
The fund carries an expense ratio comparable to that of USO and manages a relatively modest asset base of about $725 million, along with lower trading volumes—typical for a niche ETF. It also pays a dividend, though with a yield of roughly 0.5%, income generation is more of a secondary benefit than a primary draw.
More broadly, a sustained ceasefire or an end to the conflict could lift a range of ETFs. Industries with high sensitivity to oil prices would likely see the strongest upside. Even diversified funds focused on developed or emerging markets could benefit if key shipping routes like the Strait of Hormuz reopen and global trade flows return to normal, helping stabilize both energy markets and the wider economy.
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.”
Bitcoin fell on Wednesday after the Federal Reserve kept interest rates unchanged and indicated it may maintain this stance to counter inflation risks stemming from Middle East tensions. Renewed diplomatic friction between the U.S. and Iran further dampened market sentiment, pushing the world’s largest cryptocurrency down about 1% to $75,632 by late trading.
Fed holds rates
The Federal Reserve kept its benchmark interest rate unchanged at 3.50%–3.75%, in line with expectations, but the decision drew the most dissent since October 1992. One official favored a 25-basis-point cut, while three others opposed signaling any easing bias for now.
The move comes as rising oil prices linked to Middle East tensions continue to pressure U.S. inflation, while the labor market remains subdued with low hiring and firing activity—making policy decisions more complex. In his press conference, Jerome Powell said the Fed is in a “good place” to either raise or cut rates depending on how inflation evolves, particularly from energy shocks.
He also indicated he will remain a Fed governor after his term as chair ends. This comes as the Senate advances Kevin Warsh, his potential successor, toward a full confirmation vote. Prolonged higher interest rates are typically a headwind for risk assets like cryptocurrencies.
Trump moves to extend the Iran blockade long-term, turning down Tehran’s proposal.
Donald Trump is reportedly pursuing a long-term blockade strategy against Iran, favoring sustained economic pressure over renewed military action or withdrawal, according to a The Wall Street Journal report. This comes after the U.S. rejected a three-step proposal from Tehran that would have reopened the Strait of Hormuz while postponing nuclear talks, with Trump considering the offer inadequate.
In comments to Axios, Trump described the blockade as potentially more effective than airstrikes and reaffirmed his stance against lifting it, citing concerns over Iran’s nuclear ambitions. Meanwhile, Axios reported that U.S. Central Command has drafted a plan for a brief but intense round of strikes to break the negotiation impasse.
Trump also criticized Iran on social media, urging faster progress toward a non-nuclear agreement, alongside a provocative post emphasizing a tougher stance. The ongoing closure of the Strait of Hormuz pushed oil prices higher on Wednesday.
Despite these macro pressures—including rising oil prices, increased liquidations, and expectations of prolonged high interest rates—Bitcoin has remained relatively stable. According to analyst Iliya Kalchev from Nexo Dispatch, this resilience may indicate that weaker market participants have already exited, or that the market is consolidating ahead of a major catalyst that could determine its next move.
Most altcoins moved lower alongside Bitcoin on Wednesday. The second-largest cryptocurrency, Ethereum, dropped 2.2% to $2,241.03, while XRP, ranked third, fell 1.3% to $1.3620. Solana and Cardano also declined by 1.4% and 1.8%, respectively. Among meme coins, Dogecoin reduced part of its earlier gains but was still up 2.6% at last check.
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.
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.
Gold prices climbed during Asian trading on Wednesday, rebounding from a one-week low after the U.S. extended its ceasefire with Iran indefinitely, though uncertainty around future peace negotiations persisted.
The precious metal had come under pressure in the previous session after Federal Reserve Chair nominee Kevin Warsh indicated he had not assured President Donald Trump of any interest rate cuts if confirmed.
Spot gold gained 0.9% to $4,763.66 per ounce, while gold futures advanced 1.3% to $4,782.21/oz as of 02:45 ET (06:45 GMT). Prices continued to trade within the $4,700–$4,900 range observed over the past two weeks.
Other precious metals also posted gains, with spot silver rising 2.4% to $78.5335/oz and spot platinum increasing 2.3% to $2,087.15/oz.
On Tuesday, Donald Trump announced an indefinite extension of the ceasefire with Iran, opening the door for further negotiations between Washington and Tehran.
Despite the extension offering some near-term relief, the outlook for future peace talks remains unclear. Expected discussions between the U.S. and Iran, which were slated for Tuesday, collapsed at the last minute.
Trump also stated that a naval blockade against Iran would stay in place, prompting backlash from Iranian officials, who described the move as an “act of war.”
Gold has faced difficulties since the conflict began, as safe-haven demand has been outweighed by concerns over the war’s potential to drive inflation.
Since the outbreak of the conflict in late February, the metal has traded more like a risk-sensitive asset, often moving in line with equities as market sentiment shifts with developments in the situation.
Warsh signals no pledge on rate cuts, hints at major Fed policy changes
Precious metals came under pressure on Tuesday as the U.S. dollar strengthened, supported by market reaction to testimony from Kevin Warsh.
Warsh stressed the importance of the Federal Reserve’s independence from political influence, while also pointing to the possibility of a significant policy overhaul at the central bank if he is confirmed as chair.
A former Fed governor, Warsh is viewed as less dovish than markets had anticipated. His nomination in late January had already sparked sharp declines in gold and other precious metals.
Although his confirmation appears likely, the timeline remains uncertain. Several Republican leaders have opposed moving forward with Warsh’s appointment until the Trump administration ends its ongoing probe into current Fed Chair Jerome Powell.
As a result, Powell is expected to remain in his role beyond the scheduled end of his term on May 15, particularly if Congress delays Warsh’s confirmation.
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.
Easing tensions in the Middle East have weakened the dollar.
Meanwhile, the Bank of England is guiding rate expectations, keeping the prospect of two hikes intact.
Over the past two weeks, the US dollar has slid to its weakest level since early March, erasing nearly all the gains recorded at the onset of the Middle East conflict. With talks involving Iran expected to resume soon, and Donald Trump maintaining that the war will end shortly without the need for a ceasefire extension, geopolitical support for the greenback has faded. Alongside record highs in US equity indices, this shift has helped sustain the EUR/USD rally, as macroeconomic factors regain prominence.
At the same time, investor focus has turned toward corporate earnings and Congressional discussions over Kevin Warsh’s potential appointment as Fed Chair. Despite Trump’s assurances, a leadership change at the Fed could coincide with rising inflation driven by higher oil prices, potentially necessitating tighter monetary policy. The key question remains whether Warsh would align with the president’s stance or uphold the Fed’s independence.
Some investors are drawing comparisons to the 1970s, when an oil-driven inflation shock prompted a Fed Chair aligned with the White House to loosen policy. That decision fueled even higher inflation and entrenched expectations, leading to a sharp decline in the US dollar. Only after a change in leadership and aggressive rate hikes—despite a recession—did the dollar begin a sustained recovery from mid-1980 onward.
Potential currency interventions may also weigh on the dollar. Japan’s Finance Minister, Satsuko Katayama, has long advocated selling USD/JPY, and her rhetoric has intensified following talks with Scott Bessent. This hints that the US may be open to coordinated action in the FX market, reminiscent of the 1985 interventions that triggered a prolonged decline in the dollar.
Meanwhile, other European currencies are advancing alongside the euro. The British pound has climbed back to pre-war levels, supported in part by the Bank of England’s hawkish tone. Megan Green has backed market expectations of two rate hikes in 2026, while Andrew Bailey suggested earlier projections of four hikes were excessive.
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.
The U.S. dollar remained near a six-week low on Wednesday as growing optimism about a sustained ceasefire in the Iran conflict boosted investors’ appetite for risk.
In recent weeks, investors have increasingly shifted toward riskier assets like equities, putting pressure on the dollar, which had served as a preferred safe-haven during tensions in the Middle East.
As of 16:57 ET (20:57 GMT), the U.S. Dollar Index—measuring the greenback against a basket of six major currencies—edged down 0.1% to 98.06.
Trump signals possible end to war despite ongoing U.S. blockade
The U.S. dollar surged in March as investors sought safety during the Middle East crisis, supported by the view that the U.S.—as a net energy exporter—would be less affected by disruptions such as the closure of the Strait of Hormuz.
However, the currency has since slipped back toward pre-war levels, as expectations of a lasting ceasefire reduce its safe-haven appeal. Analysts at ING noted that markets are increasingly pricing in a positive outcome from upcoming U.S.-Iran talks, though they caution that risks for the dollar may still tilt upward.
President Donald Trump indicated the conflict with Iran could soon end, even as U.S. forces maintain a fully enforced naval blockade restricting Iranian shipping. He suggested a permanent ceasefire might be reached before King Charles’ upcoming visit and described the conflict as nearing its conclusion.
Reports also indicate that ceasefire negotiations may resume shortly after earlier talks failed to yield results. The White House said discussions remain active and constructive, expressing optimism about a potential agreement while denying any request to extend the current truce.
The U.S. and Iran are observing a fragile two-week ceasefire through April 21. Meanwhile, broader regional tensions persist, with Israel continuing strikes in Lebanon despite rare direct talks with Lebanese officials—raising concerns that the fragile de-escalation could unravel.
Inflation and central banks in a potential “peace trade”
Oil prices have been volatile but stayed below $100 per barrel, as traders closely monitor supply through the Strait of Hormuz—a key route for roughly a fifth of global oil shipments. Despite fluctuations, crude remains higher than pre-conflict levels, sustaining concerns about rising global inflation.
Recent U.S. data for March showed that higher oil prices significantly lifted headline inflation, while core inflation was less affected.
According to Thierry Wizman of Macquarie, a peace scenario would likely push oil and gas prices lower. This would trigger a “peace trade,” particularly impacting inflation expectations and central bank policy. Central banks that turned more hawkish due to rising energy costs could shift back to their pre-war outlooks if prices ease.
Wizman noted that the Bank of England—and possibly the European Central Bank—have the most room to soften their stance, as they had become notably more aggressive on rate hikes after the conflict began. A drop in energy prices could therefore lead to a less hawkish policy outlook.
He added that one of the most attractive trades in such a scenario would be positioning for lower interest rates over the next 9 to 12 months, particularly in instruments like GBP OIS or Libor, even as markets have yet to fully price out the possibility of rate hikes this year.
Euro and pound steady; yen weakens despite Katayama’s remarks.
The euro remained largely flat at $1.1799, while the British pound slipped 0.1% to $1.3560.
The Japanese yen also weakened slightly, with USD/JPY rising 0.1% to 158.96, despite comments from Finance Minister Satsuki Katayama indicating that authorities stand ready to take “bold” measures if necessary.
After bilateral talks at the U.S. Treasury in Washington, Katayama noted that both sides had extensive discussions on currency matters and agreed to strengthen coordination going forward.
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.
Markets have rebounded strongly after President Donald Trump chose to halt military action against Iran, but improved risk sentiment doesn’t change the bigger picture—oil prices are likely to stay elevated.
A clear relief rally is underway. US equity futures jumped almost immediately following the announcement of a two-week pause, with the Dow, S&P 500, and Nasdaq-100 all moving sharply higher. Meanwhile, oil prices, which had surged on fears of supply disruptions in the Strait of Hormuz, retreated as traders quickly unwound worst-case positions.
The speed of the reaction highlights how markets had been positioned for escalation. Defensive strategies were widespread, volatility was high, and crude prices had already priced in a significant geopolitical premium. Removing even part of that risk triggered a rapid reversal.
This strong rally also reflects how stretched investor sentiment had become. Markets were preparing for a scenario where a substantial share of global oil supply could be disrupted. Even a temporary easing of those fears prompted a swift shift back into equities.
Equity markets had already hinted at a possible de-escalation. Despite increasingly aggressive rhetoric, indices had begun to stabilize, suggesting investors anticipated some form of pause. The confirmation has now accelerated the move back into risk assets.
Technology stocks are expected to lead the recovery. The sector had been hit hardest by rising yields and risk aversion, but slightly lower oil prices help ease inflation concerns, supporting valuations—especially for large-cap and AI-driven companies.
Consumer sectors should also benefit quickly. Lower oil prices reduce fuel costs, boosting household purchasing power. Airlines, travel firms, and retailers are particularly well positioned to gain from improved sentiment and lower input expenses.
Financial stocks are also likely to rise. Greater stability encourages deal-making, strengthens capital markets activity, and eases pressure on credit conditions. Banks typically perform better when uncertainty declines and risk appetite increases.
Energy stocks, however, face a more mixed outlook. In the short term, falling crude prices may weigh on them. But underlying supply constraints remain unresolved, inventories are still tight, and geopolitical fragmentation continues to influence energy flows.
There’s a reason oil prices remain significantly higher this year. The risks go beyond the current conflict. Even if shipping through Hormuz resumes, it only provides temporary relief and does not fix deeper vulnerabilities in global energy supply chains.
As a result, oil is unlikely to fall back to previous lows anytime soon. A geopolitical premium is now built into prices, and traders will continue to factor in the risk of renewed disruptions.
Attention now turns to whether the two-week pause will hold. Temporary ceasefires often come with uncertainty, effectively starting a countdown. Markets will be watching closely to see if diplomacy can turn this into a longer-term solution.
Key factors include compliance with the pause, coordination over shipping routes, and the tone of ongoing negotiations. Meaningful progress could extend the rally further, lifting industrials, cyclical sectors, and emerging markets.
However, if diplomacy fails, sentiment could reverse quickly. Oil prices would likely surge again, volatility would return, and recent equity gains could be erased.
For now, investors are navigating a narrow path between opportunity and risk. The current rally is driven by reduced immediate fear, but underlying tensions remain unresolved—and energy markets continue to reflect that uncertainty.
Positioning for short-term gains may be reasonable, but any sustained upside will depend entirely on whether diplomatic efforts lead to lasting progress.
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%.
Gold prices dipped in Asian trade on Tuesday, marking a third consecutive day of losses, as investors grappled with inflation and interest-rate concerns ahead of U.S. President Donald Trump’s looming deadline on Iran. Spot gold eased about 0.2% to roughly $4,640 an ounce by early U.S. trading, while U.S. gold futures also retreated. Markets had closed lower on Monday after a volatile session.
Trump’s warning to Iran fuels concerns about rising inflation.
Trump’s escalating rhetoric on Iran added to inflation concerns, even as geopolitical tensions intensified. He warned that Iran could face severe consequences if it failed to reopen the Strait of Hormuz by his Tuesday 8 p.m. ET deadline, increasing fears of a wider conflict in the Middle East.
The standoff has already disrupted global energy supplies and driven oil prices higher, further fueling inflation expectations and clouding the outlook for monetary policy.
Although gold is usually supported by geopolitical uncertainty, it has instead weakened as rising oil prices feed inflation worries and reduce the likelihood of near-term interest rate cuts by the U.S. Federal Reserve.
Higher interest rates tend to weigh on non-yielding assets like gold, while a stronger dollar has also added pressure on bullion prices.
Iran has turned down a U.S. proposal for a ceasefire.
Diplomatic efforts to ease the conflict have made limited headway. Iran has rejected a U.S.-backed proposal for a 45-day ceasefire and a phased reopening of the Strait of Hormuz.
Instead, Tehran is pushing for a comprehensive settlement that includes sanctions relief, security assurances, and compensation for damages.
The absence of any breakthrough has increased uncertainty in financial markets, with investors closely monitoring developments ahead of Trump’s deadline.
Market participants are also awaiting key U.S. inflation figures due on Friday, which are expected to offer further signals on the Federal Reserve’s interest rate path.
In other precious metals, silver declined 0.9% to $72.16 per ounce, while platinum fell 1% to $1,963.60 per ounce. Meanwhile, copper prices moved higher, with benchmark London Metal Exchange futures rising 0.7% to $12,422.5 a ton, and U.S. copper futures edging up 0.3% to $5.62 per pound.
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.
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.
The U.S. dollar is on track for its strongest monthly performance since July, solidifying its position as the dominant safe-haven asset as escalating conflict in the Middle East drives oil prices higher and fuels concerns about a global economic slowdown.
The greenback extended its broad rally overnight, with the notable exception of the Japanese yen, where renewed intervention warnings from Tokyo have made traders cautious about pushing the currency much beyond the 160-per-dollar level.
After hitting its weakest level since July 2024 a day earlier, the yen traded at 159.81 in Tuesday’s Asian session, marking a roughly 2.4% monthly decline, largely due to Japan’s heavy reliance on imported energy. It showed little reaction to data indicating a slight easing in Tokyo inflation.
Meanwhile, the euro dropped 0.3% overnight and is set for a monthly loss of around 3%, while both the Australian and New Zealand dollars fell to multi-month lows. The Australian dollar, which had remained relatively resilient for most of the month, has recently come under pressure as market concerns shift from inflation toward slowing global growth. It slipped to a two-month low of $0.6834 before stabilizing slightly, while the New Zealand dollar hit a four-month low near $0.5716.
Elsewhere, South Korea’s won weakened to its lowest level since 2009. The U.S. dollar index climbed to 100.61 on Monday—its highest since last May—and is up 2.9% in March, marking its sharpest monthly gain since July.
Geopolitical tensions intensified after U.S. President Donald Trump warned that the U.S. could target Iran’s energy infrastructure if Tehran fails to reopen the Strait of Hormuz, following Iran’s dismissal of U.S. peace proposals and continued missile strikes on Israel. Reports of an Iranian attack on a Kuwaiti oil tanker near Dubai further lifted oil prices.
According to ING’s global head of markets, Chris Turner, the dollar is unlikely to give up its gains without clear signs of de-escalation from Iran.
On the monetary policy front, Federal Reserve Chair Jerome Powell signaled a cautious stance, downplaying the likelihood of near-term rate hikes and emphasizing a wait-and-see approach as inflation expectations remain stable in the longer term. Although this pushed short-term bond yields lower and reduced expectations for rate hikes this year, it did little to weaken the dollar, which continues to benefit from safe-haven demand amid global uncertainty.
Other traditional safe havens have underperformed since the conflict began. Bonds and gold have struggled, while the yen has remained weak and the Swiss franc has been pressured by signals from the Swiss National Bank that it may act to curb currency strength. The dollar has gained nearly 4% against the franc this month, reaching around 0.80 francs.
Looking ahead, investors are watching for upcoming European inflation data and China’s PMI figures later in the session.
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.
For years, financial elites have brushed off gold as an unproductive asset—an inert yellow metal that generates no income and seems out of place in a fast-moving, digital economy. But by 2026, that long-standing view is beginning to lose credibility.
As the image of the “almighty U.S. dollar” starts to crack under the weight of a federal deficit exceeding $38 trillion—and still rising uncontrollably—gold is no longer just a hedge. It is increasingly seen as a primary escape route from a global era of fiscal excess.
The strongest argument for gold today doesn’t lie in consumer demand like jewelry, but in central bank behavior. Since the freezing of Russian reserves in 2022 following its invasion of Ukraine, a clear message has emerged. Many countries, especially in the Global South and BRICS+, are growing wary of holding U.S. Treasury assets that can be restricted or liquidated instantly.
This shift goes beyond simple de-dollarization—it signals a deep, structural reallocation of global capital. When central banks accumulate gold at record levels, they are not chasing short-term gains; they are securing financial independence. Gold stands apart as the only major asset that is not someone else’s liability.
Meanwhile, sovereign debt dynamics have moved from troubling to almost absurd. With debt-to-GDP ratios at extreme levels, major economies are stuck in a dilemma: raising interest rates enough to curb inflation risks making their debt burdens unmanageable.
As a result, real interest rates are likely to remain low or even negative—conditions that have historically favored gold. When inflation erodes the returns of supposedly “safe” government bonds, gold’s lack of yield becomes far less of a disadvantage and even appealing.
There’s a certain irony in this moment. As technology enables the creation of endless digital assets and AI-generated content, tangible assets like gold are gaining renewed appeal among both institutional and individual investors. Governments can expand debt or issue digital currencies at will, and AI can produce limitless synthetic content—but gold remains constrained by physical reality.
It cannot be created out of thin air. Annual mine production increases global supply by only about 1.5% to 2%, and the total amount of gold ever mined—around 212,000 tons—would fill just a few Olympic-sized swimming pools.
In a world marked by uncertainty, where even truth feels scarce, investors are gravitating toward something real—an asset that requires human effort, heavy machinery, and time to produce, and one that has consistently preserved value throughout history.
The bullish case for gold is not based solely on doomsday fears. It reflects a deeper issue: the erosion of sound financial systems, manageable debt levels, and trust in institutions. As that trust weakens, gold tends to rise.
At roughly $5,060 per ounce, gold’s recent performance—illustrated through instruments like SPDR Gold Shares (GLD)—shows a powerful surge, supported by strong volume and capital inflows. This movement suggests more than simple hedging; it indicates a strategic shift toward safeguarding wealth against potential systemic shocks.
Interestingly, while technical analysts might interpret the chart as signaling a sell, such a view overlooks a key imbalance: even the largest corporations, despite their substantial cash reserves, are dwarfed by the scale of global sovereign debt.
The scale of the debt-versus-gold imbalance is striking. Companies in the S&P 500 collectively hold an estimated $2.5 to $3 trillion in cash and equivalents, according to J.P. Morgan. While that figure appears substantial, it represents just about 5% of the total debt owed by the G7 economies.
The G7—comprising the United States, Canada, the United Kingdom, France, Germany, Italy, and Japan, along with the broader European Union—sits at the center of the global financial system. The U.S. alone, with an economy valued at roughly $30–32 trillion, accounts for about 26% of global GDP, which the IMF estimates at $123.6 trillion in 2026.
Yet the U.S. national debt has climbed to $38.87 trillion as of March 2026 and continues to grow at a pace of around $7 billion per day. At this trajectory, it is expected to surpass $40 trillion within the year.
This has pushed the U.S. debt-to-GDP ratio to approximately 123%, meaning federal debt exceeds the size of the entire economy by 23%. Such levels are near post–World War II highs and far above historical norms—an indication of growing fiscal strain. Despite this, there appears to be little political momentum to curb spending, with policymakers instead signaling further expansion.
Looking beyond the U.S., the broader picture is equally concerning. Combined sovereign debt across G7 nations now stands at roughly $65 trillion, with no coordinated effort to rein in deficits or reduce spending.
If this trajectory continues, the long-term consequences for fiat currencies could be severe. A system increasingly burdened by unsustainable debt risks eventual disruption, potentially leading to a profound global financial reset. In such a scenario, gold could continue its upward trajectory, with projections pointing toward $6,000 per ounce as a plausible next milestone.
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.
Every few months, headlines claim the U.S. dollar’s dominance as the world’s reserve currency is ending. Arguments often cite China selling Treasuries, central banks stockpiling gold, BRICS creating a new monetary system, or the 2022 sanctions that froze $300 billion of Russia’s reserves—suggesting that dollar-denominated assets are no longer “safe” and that the supposedly risk-free asset has become a weapon.
Yet the data tells a different, more important story—one often overlooked by investors chasing simple narratives, exposing the risk of being badly misled.
The Numbers Don’t Support a “Flight from the Dollar”
Foreign holdings of U.S. Treasury securities hit a record $9.4 trillion in December 2025, up from $8.7 trillion the previous year—an increase of over $700 billion, or about 8%. Since 2020, foreign holdings have grown from roughly $7.1 trillion, a gain of more than $2.3 trillion. Rather than fleeing, foreign investors are buying U.S. dollar assets at an accelerating pace.
From November 2024 to November 2025, the UK, Belgium, and Japan were the top buyers of U.S. debt, each purchasing over $115 billion. The UK led the pack, boosting its holdings by around $150 billion in just one year. Belgium, which hosts Euroclear—the world’s largest international central securities depository—recorded a 26% increase in its U.S. Treasury holdings, the highest percentage gain among major holders.
China, on the other hand, trimmed its U.S. Treasury holdings by about $86 billion during the same period. However, the reported TIC figure of $683 billion understates China’s true exposure, since it only counts securities held in U.S. custody. A substantial and increasing portion of China’s Treasury holdings is actually custodied through European intermediaries—mainly the Belgian and Luxembourg accounts that have been expanding so rapidly.
As highlighted previously:
“This isn’t a conspiracy—it’s simply financial plumbing. China relies on Belgium for custodial purposes not only to reduce geopolitical risk but also because Euroclear Bank, located there, sits at the center of cross-border settlement and collateral management. Similarly, Clearstream in Luxembourg serves the same global institutional clients. For central banks or state institutions seeking to hold large Treasury portfolios with flexible settlement and collateral options, these hubs provide crucial operational infrastructure.”
The Real Story: Debt Holders and Custody, Not the Dollar
The critical issue isn’t whether the U.S. dollar is losing its reserve status—it’s about who holds U.S. debt and where it is custodied.
Foreign official (central bank) holdings peaked at around $4.1 trillion in 2020 and have since declined to roughly $3.7–$3.8 trillion. Official institutions have been net sellers since 2021, with rolling twelve-month outflows of approximately $107 billion. This trend reflects risk management decisions by central banks, especially after the 2022 freeze of Russian reserve assets, which highlighted the importance of jurisdiction, legal frameworks, and operational controls in custody arrangements.
Yet private foreign investors—banks, asset managers, hedge funds, sovereign wealth funds, and corporate treasuries—have more than offset the decline in official holdings. In 2023, private foreign holdings surpassed official holdings for the first time and now stand near $5.7 trillion, an 80% increase since 2020. This is not de-dollarization but “de-officialization”: dollars continue to flow, but through different channels.
Custody Migration: Sanctions, Regulation, and Infrastructure
The key shift is in where Treasuries are held, not whether. Post-2022 sanctions accelerated migration of custody from New York-based institutions to European clearinghouses like Euroclear and Clearstream. Euroclear’s assets under custody exceeded €43 trillion in 2025, with turnover rising 20% year-over-year to €1,390 trillion—evidence of a growing, not declining, business.
While sanctions are part of the story, regulatory arbitrage is an even bigger driver. The SEC’s December 2023 mandate requiring central clearing of Treasury cash and repo transactions (compliance by December 2026 and June 2027) represents a massive structural change, potentially bringing $4 trillion in daily transactions under FICC’s central clearing. Combined with Basel III capital charges, Dodd-Frank derivatives margining, and post-trade transparency rules, the incentives to custody and trade Treasuries through European platforms rather than DTCC are substantial, independent of geopolitical concerns.
The 2022 freeze of Russian assets, held at Euroclear (~€185 billion), sent a strong signal that Western-custodied assets can be seized under extreme circumstances. Yet ironically, shifting custody from New York to Brussels doesn’t escape Western sanctions—it simply moves jurisdictional risk from U.S. law to Belgian and EU law, while still leveraging Euroclear’s robust operational infrastructure.
Gold’s Signal Matters—It Complements, Doesn’t Replace, Other Indicators
Central bank gold buying has been remarkable. Looking at tonnage—which removes price effects and shows actual physical accumulation—the trend is clear. Excluding the U.S., central bank gold reserves rose from about 24,800 tonnes in 2005 to 31,282 tonnes in 2024, a 26% increase (or roughly 1.3% annually) over two decades. However, this growth was uneven: from 2005 to 2021, central banks added only around 200 tonnes per year on average, a modest 0.8% annual increase.
Between 2022 and 2024, net gold purchases jumped to roughly 1,055 tonnes per year, representing a 3.7% annual growth rate. Remarkably, over half of the total twenty-year accumulation happened during just these three years. That said, purchase activity has since begun to slow.
Advocates of de-dollarization often cite this chart as “proof” of the dollar’s decline. Yet the data contains a fundamental paradox that few commentators address.
Gold is bought, sold, and settled using U.S. dollars.
The LBMA, the center of wholesale physical gold trading, publishes its benchmark price twice daily in U.S. dollars per troy ounce. Similarly, COMEX futures, which drive price discovery, are quoted and settled in U.S. dollars. When central banks like the PBoC, Reserve Bank of India, or National Bank of Poland buy gold, the transactions are denominated in dollars, cleared through dollar-based infrastructure, and the asset’s value is marked in dollars. Even the Shanghai Gold Exchange, which quotes prices in renminbi, effectively tracks the dollar-denominated LBMA benchmark adjusted for the USD/CNY rate.
This creates a fundamental paradox for the de-dollarization narrative. When a central bank sells $10 billion in U.S. Treasuries to buy $10 billion in gold, it has not meaningfully reduced dollar exposure. It has merely swapped one dollar-denominated asset (Treasuries, with counterparty risk, yield, and maturity) for another (gold, with no counterparty risk, yield, or maturity). While the gold itself is physically non-dollar, its acquisition, valuation, and future liquidation all involve dollars.
Central banks are not de-dollarizing—they are de-risking within the dollar system, moving from assets that could be frozen or sanctioned to assets that cannot. This distinction is crucial: gold accumulation does not weaken the dollar’s role as the global unit of account. Every tonne of gold purchased flows through dollar-denominated clearing infrastructure.
The proper framing is “gold vs. Treasuries”, not “gold vs. the dollar.” Gold is a rotation within the dollar ecosystem, shifting from an asset with counterparty risk to one without.
Even with this accumulation, gold remains a fraction of total holdings. Excluding the U.S., central bank gold is worth about $2.4 trillion, below the $3.7–$3.8 trillion in official Treasury holdings and far smaller than the $9.4 trillion in total foreign Treasury holdings. No central bank is abandoning Treasuries wholesale. For example, the PBoC still holds at least $684 billion in reported Treasuries (likely much more via intermediaries) versus roughly $200 billion in gold. Even the most aggressive gold-buying central banks are pursuing marginal diversification, not substitution.
In reality, central banks are accumulating gold incrementally as a hedge against potential dollar weaponization. However, none are selling off their Treasury holdings en masse to fund these purchases. Gold and Treasuries function as complementary assets within a diversification strategy, not as substitutes in a supposed currency battle.
The Real Story: A Five-Layer Shift in Global Dollar Dynamics
Custody Migration, Not Asset Flight – U.S. Treasuries are relocating from New York-based custody to European clearinghouses. This shift is primarily a hedge against regulatory and sanctions risks. Importantly, these assets remain U.S. dollar-denominated obligations, leaving the dollar’s role as the global unit of account intact.
Official-to-Private Rotation – Central banks are trimming their holdings, while private foreign investors—hedge funds, asset managers, and banks—are increasingly buying U.S. debt. The marginal buyer of Treasuries is no longer the PBoC or Bank of Japan, but private investors seeking yield and collateral.
Share Erosion Despite Nominal Growth – Foreign ownership as a percentage of total U.S. debt has dropped from roughly 49% in 2008 to 32% in 2024. Yet in absolute terms, holdings have reached record levels. Because the U.S. continues to issue debt faster than foreign investors can buy it, domestic entities—like the Fed, banks, and money market funds—must absorb the difference.
Gold as Insurance, Not Replacement – Central banks are accumulating gold at the fastest rate in decades as a hedge against geopolitical risks, including sanctions. This is prudent portfolio diversification, not a strategic move against the dollar.
Regulatory Fragmentation – U.S. market structure changes—mandatory clearing, capital charges, and transparency rules—are encouraging Treasury trading and custody offshore. This is largely a self-inflicted structural shift, potentially posing a bigger long-term risk to U.S. financial primacy than Chinese gold purchases.
The Bottom Line
The narrative of de-dollarization is largely factually incorrect, yet it reflects a genuine shift in sentiment. The dollar is not collapsing—foreign demand for U.S. Treasuries remains at record levels. What is changing is the infrastructure through which the world accesses dollar assets. This shift isn’t driven by adversaries trying to dismantle the system, but by participants aiming to shield themselves from political and regulatory risks.
The world isn’t abandoning the dollar—it is hedging against those who control it. This distinction is crucial for investors in positioning portfolios and for policymakers considering the long-term impact of using the dollar as a geopolitical tool.
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 has climbed above $110 per barrel following direct strikes on key energy infrastructure in the Middle East, signaling a broader repricing of global risk that investors can no longer ignore.
Attacks on Iran’s South Pars gas field, significant damage reported at Qatar’s Ras Laffan LNG facility, and a vessel hit near the Strait of Hormuz point to a coordinated escalation rather than isolated events. Together, they highlight growing threats to both energy supply and critical trade routes.
The Strait of Hormuz alone handles about a fifth of global oil flows, along with a large share of LNG shipments, while Ras Laffan contributes roughly 20% of global LNG output. Disruptions at this scale quickly translate into higher energy costs, squeezed corporate margins, and slower economic growth.
Markets have responded, but likely not enough.
Parallels to the 1970s energy crises are becoming harder to ignore. Supply shocks of this magnitude tend to ripple across economies, embedding inflation and forcing a reassessment of risk across asset classes. Rising energy prices rarely stay confined to commodities—they spill over into transportation, manufacturing, and consumer prices, reshaping expectations.
Many portfolios built over the past decade have relied on assumptions of stable energy markets and smooth global trade. Those assumptions are now under strain. Investors may need to shift toward more resilient and diversified positioning.
Gold, for instance, has historically performed well during periods of geopolitical stress, reinforcing its role as a hedge. Hard assets tend to attract demand when uncertainty rises and currencies face pressure.
Energy exposure is also coming back into focus. Oil and gas producers—especially those outside immediate conflict zones—stand to benefit from tighter supply and higher prices. Investors underweight the sector may need to reconsider their positioning.
Broader commodities exposure is increasingly relevant as well. Higher energy costs feed into production and transportation expenses globally, strengthening the case for assets that perform in inflationary environments.
Sector allocation deserves careful review. Industries reliant on low fuel costs and efficient logistics—such as airlines and parts of heavy manufacturing—face growing pressure. Meanwhile, energy, defense, and infrastructure-related sectors are likely to see stronger demand as geopolitical risks rise.
Geographic diversification is becoming more critical. Economies heavily dependent on Middle Eastern energy, particularly across parts of Asia, are more exposed to disruptions. Expanding international exposure can help mitigate regional risk.
Currency dynamics are shifting alongside these trends. Energy-importing countries often see their currencies weaken as import costs rise, while the U.S. dollar and commodity-linked currencies tend to strengthen during periods of elevated oil prices and geopolitical tension.
A structural repricing of risk is clearly underway. Energy infrastructure is being directly targeted, and key transport routes are under strain—echoing past global shocks where supply disruptions had lasting economic consequences.
Investors who continue to position for a quick return to stability risk being caught off guard. The energy crises of the 1970s offer a useful precedent: prolonged inflation, shifting capital flows, and strong performance from diversified real assets.
In this environment, a disciplined and forward-looking strategy is essential. Reviewing exposure across asset classes, sectors, and geographies—and avoiding overreliance on any single outcome—can help portfolios better withstand what is shaping up to be a more volatile and uncertain global landscape.
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.
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.
The sharp rise in oil prices following escalating tensions between the United States and Iran has reignited talk of stagflation. That concern is largely misplaced. What markets may actually be reacting to is not a repeat of the 1970s, but the early stages of a broader shift in capital allocation — away from financial assets and toward tangible ones.
The Stagflation Comparison Falls Apart
Whenever oil prices surge, fears of stagflation quickly emerge. The pattern appeared in 2022 and is resurfacing again. The instinct makes sense: higher energy costs can push inflation upward while weighing on economic growth. However, drawing a direct parallel with the stagflation period of the 1970s and early 1980s oversimplifies the situation.
Classic stagflation requires a persistent combination of three conditions: entrenched inflation far above target levels, stagnating or shrinking economic activity, and limited policy tools capable of correcting the imbalance without worsening the problem. In the United States during 1973 and again in 1979, all of these factors were present. Today’s environment looks very different.
Inflation is the first major distinction. During the 1970s, U.S. consumer prices averaged above 7% for much of the decade and surged beyond 13% at the end of the period. Inflation was embedded in wages, expectations, and policy frameworks. By contrast, today’s inflation has already declined significantly from its 2022 highs. While still above the ultra-low levels seen after 2008, it remains far more controlled. Importantly, central banks now possess the credibility that was missing during the Federal Reserve leadership of Arthur Burns. Inflation expectations remain relatively stable — a crucial difference.
Economic growth tells a similar story. Real GDP continues to expand at a respectable pace, and while the labor market is gradually cooling, it is far from collapsing. Corporate profits have generally remained resilient, apart from sectors particularly sensitive to higher interest rates. Consumer spending — supported by continued employment — has not stalled. In this context, an oil price spike represents a headwind rather than an automatic trigger for recession.
Supply conditions also differ dramatically from those of the 1970s. The earlier oil crises were driven by coordinated OPEC embargoes that deliberately restricted supply to Western economies. At the time, alternatives were limited and domestic production could not compensate. Today, the United States is the world’s largest oil producer thanks to the shale revolution. A disruption involving Iran can lift prices, but it does not recreate the systemic vulnerability that defined the 1973 crisis.
The reality is straightforward: energy prices may push inflation slightly higher and shave some growth at the margins. But an isolated oil shock does not produce stagflation unless the broader economic structure is already broken — and that is not the case today.
What the Oil Spike Actually Signals
Rather than focusing on stagflation, investors should consider what oil’s move may be revealing about broader market dynamics.
Historical patterns following geopolitical shocks offer a useful guide. In the first three months after such events, oil tends to be the strongest performer among major assets, rising roughly 18% on average. Gold typically advances about 6%, while equities post modest gains of around 4%, often reflecting relief that the situation did not escalate further.
Six months later, however, the picture often changes. Gold generally continues to climb, with average gains near 19%. Equity markets lose momentum, and oil frequently gives back much of its initial spike as supply responses and fading fear premiums bring prices back down.
The tactical takeaway is clear: oil tends to perform best during the initial shock phase, while gold benefits from the longer period of uncertainty that follows. The geopolitical risk premium embedded in oil prices is often temporary, but in gold it can evolve into a more lasting repricing tied to concerns about currencies, fiscal sustainability, and the reliability of financial assets.
The Bigger Shift: Real Assets Regaining Importance
Looking at the broader market landscape, the oil rally may represent just one element of a larger transition.
During 2024 and 2025, equity markets were dominated by a single theme: artificial intelligence. Capital poured into a small group of large technology companies investing heavily in AI infrastructure. The narrative was simple — if AI would reshape the economy, investors should own the companies leading that transformation.
By 2026, leadership appears to be shifting. The strongest performers are increasingly the firms supplying the physical foundations of the AI economy: semiconductor manufacturers, materials producers, energy providers, and industrial supply chains. Meanwhile, some of the technology platforms themselves face rising costs and pressure on their traditional software revenue models.
This development suggests something deeper than a normal sector rotation.
For decades, capital markets favored companies that consumed resources while undervaluing those that produced them. Asset-light businesses commanded premium valuations, while industries tied to the physical economy — mining, energy, utilities, and heavy industry — were often neglected and underfunded.
Yet the real economy never disappeared. In fact, its importance is now becoming more apparent.
The expansion of artificial intelligence requires enormous amounts of electricity to power data centers. Electrification of transportation and manufacturing depends on vast quantities of copper and other metals. Efforts to rebuild domestic manufacturing and strengthen supply chains demand steel, critical minerals, and engineering capacity that has been underdeveloped for years. Energy security has also become a top political priority, encouraging renewed investment in domestic production infrastructure.
All of these forces point toward the same conclusion: the materials and energy systems that underpin the global economy are increasingly scarce relative to rising demand.
When markets begin to recognize a prolonged supply gap in strategically important commodities, the resulting repricing can be powerful and long-lasting. Recent strength in assets such as copper, gold, uranium, and energy infrastructure may be early evidence of that process.
Investment Implications
Viewing the current environment through the lens of stagflation frames it as a temporary economic problem. That interpretation misses the larger opportunity.
The macroeconomic risks are likely overstated: inflation is not deeply entrenched, the economy continues to expand, and the conditions that produced 1970s-style stagflation are absent. Investors who position primarily for economic collapse may find themselves overly defensive.
At the same time, the stagflation narrative understates the structural shift taking place. If markets are beginning to rotate from financial assets toward real ones — from digital platforms to the physical infrastructure supporting them — then the investment strategy should focus less on protection and more on positioning.
In simple terms, the beneficiaries are likely to be the builders rather than the spenders: companies involved in energy production, materials, infrastructure, and industrial supply chains, along with scarce hard assets.
History shows that when these types of market rotations begin, they often last longer and move further than most investors expect. Commodity sectors have experienced more than a decade of underinvestment, while the forces driving demand — artificial intelligence power needs, electrification, and reindustrialization — are structural trends rather than short-term cycles.
This moment may not replicate the 1970s. But it could mark the beginning of a similarly significant shift: a period in which the physical economy returns to the center of global capital markets, rewarding investors who recognize the change early.
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.
The U.S. housing market is currently facing a pronounced imbalance between supply and demand. Housing starts have climbed to their highest level in a year, even as existing home inventory remains limited and home prices continue to face upward pressure.
At the same time, new inflationary risks are emerging. A 15% global tariff and rising energy costs tied to the conflict in Iran threaten to weaken consumer purchasing power and potentially disrupt expectations for a housing market recovery in 2026.
Ongoing inflation has also forced the Federal Reserve to maintain a defensive “higher for longer” interest-rate stance. Market expectations now suggest the first potential rate cut may not arrive until October 2026.
This week, the U.S. housing sector has been in focus as a wave of economic data coincides with an important earnings release from homebuilder Lennar. Investors are closely monitoring the interaction between limited housing supply, evolving inflation pressures, and geopolitical developments that could reshape the economic outlook for 2026.
The Inventory Challenge: Existing Home Sales and Construction Activity
The week began with a reminder of the housing market’s supply-demand imbalance. On Tuesday, the National Association of Realtors reported that existing home sales for February rose 1.7% from January to a seasonally adjusted annual rate of 4.09 million units. Although the monthly increase suggests some stabilization, sales remain down 1.4% compared with the same period last year.
NAR Chief Economist Lawrence Yun noted that while housing inventory is gradually increasing, supply growth remains slow. As the spring buying season approaches, a key concern is that if demand strengthens faster than inventory expands, home prices could climb further, worsening affordability challenges for first-time buyers.
However, more encouraging news emerged today from the United States Census Bureau. The latest housing starts report showed that residential construction activity rose for the third straight month, reaching its fastest pace since February 2025. Housing starts increased 7.2% in January to an annualized rate of 1.49 million units.
The rise was largely driven by a sharp 29.1% increase in multifamily construction, while single-family building activity continued to lag. This development offers some support for homebuilders—particularly Lennar Corporation, which is scheduled to report earnings later today.
Despite the improvement in construction activity, sentiment across homebuilding stocks has remained cautious, as investors continue to worry about housing affordability and elevated construction costs.
Spotlight on Homebuilders: Lennar Earnings in Focus
With many homeowners locked into ultra-low mortgage rates from previous years, the responsibility for adding new housing supply has increasingly shifted to publicly traded homebuilders. Lennar is scheduled to report its Q1 2026 earnings later today, offering investors an important gauge of the industry’s current health.
Market participants will be paying close attention to several key issues:
Construction Outlook: Whether Lennar plans to accelerate new housing starts despite ongoing economic uncertainty.
Mortgage Rate Buy-Down Programs: The extent to which the company continues subsidizing buyer mortgage rates—an approach that has helped sustain sales activity but is beginning to weigh on profitability. Analysts expect gross margins to ease toward the 15–16% range this quarter.
Upcoming Homebuilder Earnings to Watch
Lennar (LEN) – March 12, 2026
KB Home (KBH) – March 24, 2026
D.R. Horton (DHI) – April 21, 2026
PulteGroup (PHM) – April 23, 2026
Toll Brothers (TOL) – May 19, 2026
*Estimated based on historical reporting schedules.
The Inflation Shock: Tariffs and the Iran Conflict
The housing outlook is becoming more complex as the U.S. economy faces a sudden two-pronged inflation shock. Although February’s Consumer Price Index (CPI) showed a relatively moderate 2.4% year-over-year increase, that figure is now considered outdated because it was recorded before two major inflationary developments.
Global Tariffs: After a ruling by the Supreme Court of the United States, the administration introduced a 10% global tariff on February 24, which was quickly raised to 15% in early March. These tariffs are expected to increase the cost of imported construction materials. Perhaps more importantly, they could further strain household finances, making prospective buyers even more hesitant to enter the housing market.
Conflict in Iran: Shortly after the tariff announcement, military strikes by Israel and the United States targeted multiple locations across Iran, triggering sharp reactions in global energy markets. Oil prices surged in the aftermath, and the impact is already being felt by consumers. U.S. gasoline prices have climbed roughly 20% in under two weeks, pushing the national average to $3.58 per gallon.
Despite the International Energy Agency releasing 400 million barrels from strategic reserves, energy markets remain skeptical that this supply will be sufficient to offset potential disruptions from the Middle East if the conflict persists. Concerns intensified after reports that Iran intends to keep the Strait of Hormuz closed, a move that threatens a critical global oil transit route.
The Fed’s Dilemma: March FOMC Meeting
Later this week, the Bureau of Economic Analysis will publish the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred gauge of inflation. Under normal circumstances, this would be the most significant economic release of the week.
However, due to the 2025 government shutdown, the agency is still working through a backlog of delayed reports. As a result, Friday’s release will reflect January data, meaning it predates both the newly implemented tariffs and the outbreak of the Iran conflict.
Attention is also turning to the upcoming meeting of the Federal Open Market Committee scheduled for March 17–18. Earlier in the year, markets anticipated that the Federal Reserve might begin easing policy relatively soon. Now, however, expectations have shifted. According to the CME FedWatch Tool, policymakers are widely expected to hold interest rates steady, with current market pricing suggesting the first—and possibly only—rate cut of 2026 could arrive in October.
Consumer Impact: Windfalls vs. Headwinds
As the U.S. tax season progresses, many households are receiving larger tax refunds. Consumers often treat these refunds as a temporary financial windfall, typically using them to pay down credit card balances accumulated during the holiday season or to make major purchases such as vehicles or household appliances.
However, this extra liquidity is unlikely to trigger a surge in housing demand. Instead, it may simply help households cope with rising living costs. Higher gasoline prices, in particular, function like a stealth tax by reducing discretionary income. Rather than saving for a home down payment, many consumers may find themselves allocating more of their budgets toward essential expenses.
Recent data from the Internal Revenue Service shows that the average tax refund has increased by 10.6% compared with last year, based on figures from the first four weeks of the filing season.
The Bottom Line
The U.S. housing market currently finds itself caught between an urgent need for additional supply and an increasingly challenging macroeconomic backdrop. While major homebuilders such as Lennar represent the sector’s strongest source of new housing inventory, they are confronting a difficult environment marked by higher construction costs from tariffs and cautious consumers strained by persistent inflation.
At the same time, the Federal Reserve appears poised to maintain its “higher for longer” interest-rate policy as it works to contain renewed inflationary pressures. If that stance persists, borrowing costs are likely to remain elevated, limiting housing affordability and slowing demand.
As a result, the much-anticipated housing market recovery expected in 2026 could face delays, particularly if geopolitical tensions and trade disruptions continue to weigh on inflation and consumer confidence. Until those uncertainties begin to ease, the path toward a sustained housing rebound may remain uneven.
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 ETERNAL SOVEREIGN 