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 U.S. dollar maintained its strength on Friday and is on course for a second consecutive weekly gain since the outbreak of the conflict involving Iran, as global market volatility has reinforced its role as the primary safe-haven asset.
The euro hovered close to its lowest level since November, while the Japanese yen remained weak enough to raise concerns among traders about possible intervention by Japanese authorities.
As oil prices surged, the United States allowed limited sales of certain Russian petroleum products that had previously been sanctioned due to Russia’s war in Ukraine. Meanwhile, Iran intensified strikes on oil and transportation infrastructure across the Middle East. The country’s new Supreme Leader, Mojtaba Khamenei, also pledged to keep the vital Strait of Hormuz shipping route closed.
“For now, markets are focused less on diversification and more on inflation and slowing growth,” said Gavin Friend, senior markets strategist at National Australia Bank in London, during a podcast. “The longer this crisis continues, the more we face a dangerous combination of rising inflation and weaker economic growth.”
The dollar index, which tracks the U.S. currency against a basket of major currencies, climbed to its highest level since November. The rise reflects both its safe-haven demand and the fact that the United States is a net exporter of energy.
In early Asian trading, the index slipped slightly by 0.04% to 99.63, though it remained on track for a weekly gain of about 0.8%. The euro edged up 0.13% to $1.1525.
The yen strengthened by 0.17% to 159.08 per dollar after hitting 159.43 on Thursday—its weakest level since January 14. The British pound also rose 0.11% to $1.3356.
On Thursday, the U.S. Treasury issued a new Russia-related general license allowing the sale of Russian crude oil and petroleum products that were loaded onto ships through April 11.
According to a report by the Financial Times, the Trump administration has used up “years” worth of key munitions since the conflict began. Meanwhile, U.S. forces are conducting rescue operations in western Iraq after a military refueling aircraft crashed—an incident that U.S. Central Command said was not caused by hostile or friendly fire.
Earlier this week, the International Energy Agency agreed to release a record 400 million barrels of oil from strategic reserves. However, this would cover only around 20 days of supply lost from disruptions around the Strait of Hormuz and could take weeks or months to reach the market.
Investors are also turning their attention to next week’s policy meetings at the Federal Reserve and the European Central Bank to assess how central bankers might respond to a potential shock in energy prices.
Data from LSEG showed that the swaps market now expects the European Central Bank to potentially begin raising interest rates as early as June. In contrast, the U.S. Federal Reserve is expected to delay any rate cuts until September, later than earlier expectations of July.
The Australian dollar gained 0.14% against the U.S. dollar to reach $0.7084, while New Zealand’s kiwi rose slightly by 0.05% to $0.5858.
In the cryptocurrency market, bitcoin climbed 1.81% to $71,464.23, and ether increased 2.48% to $2,114.22.
The U.S. dollar remains exceptionally strong, a factor that could help keep U.S. financial markets relatively resilient. Because gold is priced in dollars, the metal may once again attract nervous investors as a safe haven. At the same time, shipping disruptions have created an acute shortage of fertilizers, raising concerns about potential food supply shortages.
Meanwhile, the International Energy Agency has proposed the largest release of oil reserves in its history—around 400 million barrels—to help offset supply disruptions linked to tensions around the Strait of Hormuz. Bloomberg also reported that Germany and Japan are preparing to tap their strategic crude reserves in the coming days.
Signs of stress are also emerging in private credit markets. BlackRock has restricted withdrawals from one of its flagship private credit vehicles, the HPS Corporate Lending Fund, after a surge in redemption requests. The $26 billion fund received about $1.2 billion in withdrawal requests during the first quarter but will permit only $620 million in redemptions—roughly 5% of the fund. If anxiety spreads further across private credit markets, it could tighten lending conditions and slow economic growth, potentially prompting the Federal Reserve to respond with additional interest-rate cuts.
Inflation data also supported expectations for future rate reductions. The U.S. Department of Labor reported that the Consumer Price Index rose 0.3% in February and 2.4% over the past 12 months, with both headline and core readings matching economists’ forecasts. A particularly encouraging detail was the moderation in shelter costs—often measured through owners’ equivalent rent—which increased only 0.2% in February. Given that shelter costs have risen about 3% over the past year and have been a major driver of inflation, this slowdown suggests price pressures in that category may be cooling more rapidly.
On the corporate front, Nvidia is set to host its annual GPU Technology Conference next week, where the company is expected to unveil details about its next-generation chip architecture. Anticipation surrounding the event has already helped lift semiconductor and memory stocks. The conference is also expected to emphasize optical networking technologies, which could benefit companies such as Ciena, Corning, and Ubiquiti.
The U.S. dollar strengthened on Wednesday as rising oil prices reignited inflation concerns, while an in-line and backward-looking U.S. consumer inflation reading did little to reinforce expectations for Federal Reserve rate cuts.
By 16:03 ET (20:03 GMT), the U.S. Dollar Index—tracking the greenback against a basket of six major currencies—had climbed 0.4% to 99.22. The euro slipped 0.3% to 1.1570, while the British pound was largely unchanged at 1.3416.
Oil prices climb despite record release from strategic reserves
Oil prices rose on Wednesday as the conflict with Iran showed little sign of easing, with a record release of 400 million barrels from emergency reserves by the International Energy Agency (IEA) doing little to calm concerns about rising inflation.
In a note, analysts at ING said the foreign-exchange market remains “strongly driven” by the recent sharp swings in oil prices.
Market attention remains focused on the Strait of Hormuz, the narrow passage south of Iran through which roughly one-fifth of the world’s oil supply passes, much of it headed to Asia. Concerns over potential Iranian attacks have caused a buildup of vessels on both sides of the strait, as shipping companies seek to ensure crew safety and face difficulties securing insurance for voyages.
Brent crude, the global benchmark, is now trading near $90 per barrel after surging to $120 earlier in the week. U.S. gasoline prices have also climbed, raising the risk of renewed inflationary pressure that could prompt the Federal Reserve to adopt a more hawkish monetary policy stance. Higher interest rates may in turn attract foreign capital, providing additional support for the U.S. dollar.
Oil prices have remained highly sensitive to developments in the Middle East. Comments from the U.S. Energy Secretary that the military had escorted a tanker through the Strait of Hormuz sent Brent prices swinging between $81 and $92 per barrel.
President Donald Trump has also threatened to intensify U.S. attacks on Iran following reports that Tehran had deployed naval mines in the Strait of Hormuz. After a CNN report suggested that mines had been placed in the bottleneck—though not yet extensively—Trump warned on Tuesday that Iran would face retaliation “at a level never seen before” if the mines were not removed.
The IEA’s coordinated release announced on Wednesday far exceeds the 182 million barrels made available by member countries after Russia’s invasion of Ukraine in 2022.
ING analysts described the move as a “temporary measure,” arguing that only military de-escalation would be capable of pushing crude prices sustainably lower. They added that the large reserve release could also signal that markets should not expect an immediate ceasefire.
“In our view, these mixed signals could prevent the dollar from falling much further today unless there are encouraging headlines on de-escalation,” the ING analysts said.
U.S. consumer inflation comes in line with forecasts
The February Consumer Price Index (CPI) report drew attention on Wednesday, although the data does not reflect the impact of the Iran conflict or the resulting surge in oil prices, making it more backward-looking than usual.
According to the U.S. Bureau of Labor Statistics, headline CPI rose 0.3% month-on-month and 2.4% year-on-year in February, both in line with market expectations. Core CPI increased 0.2% from the previous month and 2.5% from a year earlier, also matching forecasts.
Despite meeting estimates, the report is likely to receive limited attention as markets focus on developments in the Middle East. Concerns that higher oil prices could trigger renewed inflationary pressure may prompt the Federal Reserve to keep interest rates on hold.
“The good news is that inflation didn’t come in higher than expected in this morning’s CPI report, but the data is backward-looking and reflects a period before the war in Iran began,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management.
“It is widely assumed — and we agree — that the Fed will remain on hold for longer as policymakers wait to see whether inflation expectations begin to rise and become entrenched, or if conditions return to where they were before the military operations in the Middle East,” Zaccarelli added.
Oil prices rebounded on Wednesday as investors questioned whether a planned large-scale release of strategic reserves by the International Energy Agency would be enough to offset potential supply disruptions caused by the U.S.–Israeli conflict with Iran.
Brent crude futures rose 59 cents, or 0.7%, to $88.39 a barrel by 07:27 GMT, while West Texas Intermediate crude oil gained 98 cents, or 1.2%, to $84.43 per barrel.
Both benchmarks had extended losses earlier in Asian trading after plunging more than 11% on Tuesday, despite U.S. crude initially jumping 5% at the market open.
According to a report by The Wall Street Journal, the proposed IEA release would surpass the 182 million barrels collectively released by member countries in 2022 following the Russian invasion of Ukraine.
Analysts at Goldman Sachs said such a stockpile release could offset roughly 12 days of an estimated 15.4 million barrels-per-day disruption in Gulf exports.
Meanwhile, the conflict continued to escalate. The U.S. and Israel launched what both the Pentagon and Iranian sources described as the most intense airstrikes of the war on Tuesday. The United States Central Command also said the U.S. military had destroyed 16 Iranian mine-laying vessels near the Strait of Hormuz, after Donald Trump warned that any mines placed in the waterway must be removed immediately.
Some analysts remained skeptical that the reserve release would significantly ease market tensions. Suvro Sarkar, energy sector team lead at DBS Bank, said such moves were unlikely to solve the crisis, adding that oil prices would largely depend on how long the conflict with Iran continues. Strategic signals, including potential reserve releases, may help temper near-term price spikes, he added.
Leaders of the Group of Seven have also convened to discuss a coordinated emergency stockpile release. Emmanuel Macron is set to host a virtual meeting with other G7 leaders to assess the Middle East conflict’s impact on energy markets and possible responses.
Trump has repeatedly stated that the U.S. is prepared to escort oil tankers through the Strait of Hormuz if necessary. However, sources told Reuters that the United States Navy has so far declined shipping industry requests for escorts, citing high security risks.
Supply concerns remain
Energy infrastructure disruptions have also added to supply worries. Abu Dhabi National Oil Company reportedly shut down its Ruwais refinery after a drone strike caused a fire at the complex.
At the same time, Saudi Arabia, the world’s largest oil exporter, is attempting to increase shipments via the Red Sea. However, current export levels remain far below what would be needed to fully offset the decline in flows through the Strait of Hormuz. The kingdom is relying on the Red Sea port of Yanbu to boost shipments as neighbors such as Iraq, Kuwait, and the UAE have already reduced production.
Energy consultancy Wood Mackenzie estimates the war is currently cutting Gulf oil and refined product supplies by about 15 million barrels per day, a disruption that could potentially push crude prices as high as $150 per barrel.
Analysts at Morgan Stanley noted that even a quick resolution to the conflict could still leave energy markets facing several weeks of disruption.
Meanwhile, signs of strong demand also supported prices. Data from the American Petroleum Institute indicated that U.S. crude, gasoline, and distillate inventories all declined last week.
The U.S. dollar rally paused on Tuesday as investors evaluated signs that the joint U.S.–Israeli military campaign against Iran could be nearing its end.
The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.3% to 98.91 at 15:47 ET (19:47 GMT).
U.S. President Donald Trump suggested that the conflict in Iran—now ongoing for more than a week—could conclude “very soon.” However, he warned that further fighting could occur if Iran attempts to block shipments through the Strait of Hormuz, a crucial passage south of Iran that carries about one-fifth of global oil flows.
Despite these comments, the conflict has shown little sign of easing, with the United States launching its most intense airstrikes on Iran so far on Tuesday.
Concerns that prolonged disruptions in the Strait of Hormuz could drive global inflation higher had supported the dollar in recent days. Iran’s leadership reportedly warned it would not allow “one liter of oil” to pass through the chokepoint if U.S. and Israeli strikes continued. Still, Trump’s remarks appeared to boost market sentiment.
Analysts at ING, including Chris Turner and Francesco Pesole, said in a note that markets reversed course after an initially shaky start to the week.
“After a very shaky start, Monday proved to be a day of reversal for risk assets as President Trump hinted that military operations could end soon,” they wrote. “No one knows whether that will be the case, but Monday’s events show that the U.S. administration is more sensitive to energy than it seemed.”
However, the analysts added that oil supplies—currently stranded near the Strait of Hormuz or rerouted away from the region—would need to begin flowing normally again for the dollar’s pullback to continue.
Elsewhere in currency markets, EUR/USD slipped 0.2% to 1.1609, while GBP/USD declined 0.1% to 1.3414.
Yen remains stable in Asian trading
The Japanese yen remained relatively steady in Asian trading, with the USD/JPY pair edging up 0.2% to 158.07. The currency continued to face pressure from a stronger U.S. dollar and concerns that disruptions to energy supplies could weigh on Japan’s economy. Japan relies heavily on oil imports that pass through the Strait of Hormuz.
Revised gross domestic product data for the fourth quarter showed that Japan’s economy expanded more than previously estimated, supported by robust capital investment and stable consumer spending.
The figures indicated a degree of resilience in the Japanese economy, although exports remained under strain. Private consumption growth was also revised higher but stayed close to its long-term average of roughly 0.3% quarter-on-quarter.
This economic resilience may provide the Bank of Japan with more room to raise interest rates. However, the central bank is unlikely to tighten policy in the near term given heightened uncertainty in global markets.
Financial markets have begun acting as if the conflict involving Iran is nearing its conclusion. However, no diplomatic resolution has been reached, fighting continues, and several critical strategic issues remain unsettled.
Oil markets reflected the shift first.
Crude prices surged to roughly $120 per barrel at the peak of escalation fears. Within days, prices dropped sharply, falling back below $90 after remarks from U.S. President Donald Trump suggested the war could end “very soon,” even though he indicated hostilities might persist beyond the coming week.
Equity markets reacted quickly. U.S. stocks advanced, with the S&P 500 and Nasdaq Composite both moving higher as investors returned to risk assets.
Asian markets soon followed. Major indices in Japan, South Korea, and Hong Kong rebounded after several cautious trading sessions dominated by geopolitical concerns.
These movements highlight how rapidly market sentiment can shift. Investors appear to be positioning for easing tensions in the Middle East, even though no ceasefire has been agreed upon and rhetoric from both sides remains confrontational.
By nature, financial markets look ahead. Prices attempt to anticipate future developments rather than simply reflect current conditions. Recent trading patterns suggest investors believe the worst escalation risks will remain contained. Oil falling below $90 while equities climb signals confidence that supply disruptions will be limited and that the conflict will not expand into a broader regional crisis. That confidence may ultimately prove correct. However, markets sometimes move ahead of geopolitical realities.
Energy markets offer a clear example of this sensitivity.
Iran produces around 3.2 million barrels of oil per day and sits beside the Strait of Hormuz, a narrow maritime passage through which roughly 20% of global oil consumption moves. Any perceived threat to this route tends to trigger immediate price surges. Traders initially rushed to price in disruption risks during the early stage of the conflict, pushing Brent crude more than 12% higher within days. The recent pullback illustrates how quickly geopolitical risk premiums can fade when expectations shift. Political signaling now plays a powerful role in shaping those expectations.
Comments from President Trump alone were enough to drive oil prices lower while lifting equity markets. Financial markets process political messaging almost instantly, adjusting prices well before underlying realities change. Modern trading technology accelerates this dynamic. Algorithmic systems monitor headlines and geopolitical developments in real time. Capital flows across asset classes within seconds as military developments, diplomatic statements, and political rhetoric are rapidly incorporated into market pricing. This speed magnifies every shift in sentiment.
Despite the market optimism, the strategic outlook remains uncertain. Iran’s Islamic Revolutionary Guard Corps responded firmly to President Trump’s remarks, stating that the end of the war ultimately rests “in Iran’s hands.” Such statements highlight a fundamental truth: decisions in Tehran will shape the trajectory of the conflict just as much as decisions in Washington, D.C..
Another factor also deserves close attention from investors: Iran’s leadership transition. Mojtaba Khamenei now holds the role of Supreme Leader following the death of Ali Khamenei. Ultimate authority over Iran’s armed forces and the Revolutionary Guard flows through that position. Leadership changes within Iran have historically influenced strategic priorities, military posture, and diplomatic decision-making.
Global investors have little experience with Mojtaba Khamenei’s strategic outlook. His willingness to tolerate a prolonged confrontation with the United States and its allies remains uncertain. A longer conflict aimed at draining financial and military resources cannot be ruled out. For now, markets appear comfortable assuming tensions will ease. Falling oil prices and rising equities both reflect this belief. Risk assets rarely perform well when investors expect prolonged military escalation.
Yet geopolitical conflicts rarely unfold according to market expectations. Political incentives, domestic pressures, and strategic calculations often shape decisions in ways markets struggle to anticipate. Recent weeks have demonstrated how quickly global conditions can become volatile. Sudden geopolitical developments can overturn prevailing market assumptions within hours.
Investors therefore face a delicate balancing act. Markets reward forward-looking positioning, but ignoring geopolitical risks can be costly. At the same time, excessive confidence in early signals carries its own dangers.
Current market behavior suggests investors believe escalation risks will remain limited and that the conflict could cool sooner rather than later. That assumption may ultimately prove correct.
However, alternative scenarios remain possible. Military incidents, political miscalculations, or changes in leadership strategy could quickly alter the course of events, forcing markets to reassess their assumptions at speed.
Financial markets often move first and confirm later. Recent trading indicates investors are already treating the end of the Iran conflict as a likely outcome. Geopolitical developments, however, have yet to validate that expectation.
The U.S. dollar pulled back on Monday after reaching a three-month high, following remarks from Donald Trump suggesting that the conflict with Iran could soon come to an end.
The greenback had earlier strengthened on safe-haven demand as tensions escalated in the U.S.–Israel conflict with Iran, which also drove a surge in oil prices. However, the currency reversed direction and moved sharply lower after Trump’s comments raised hopes of de-escalation.
As of 17:24 ET (21:24 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.1% at 99.557. Earlier in the session, the index had risen as much as 0.6%, briefly reaching its highest level since late November 2025 before surrendering those gains.
Dollar extends sharp gains in powerful run.
The U.S. dollar has surged in recent sessions, supported by safe-haven demand as a sharp rise in oil prices raised concerns about the outlook for global economic growth. The U.S. Dollar Index recorded its strongest weekly performance since early August 2025 on Friday.
“The Dollar Index has rallied significantly in a short period, so it may need to consolidate before attempting another move higher,” said David Morrison, senior market analyst at Trade Nation. “It tested the 100.00 level several times last year, particularly during November, but failed to break above it on each occasion.”
He added that the index would need to build substantial upward momentum to overcome that resistance. “While the U.S. dollar may have finally found a bottom, if the Dollar Index fails to break above 100.00, a retest of the January lows near 95.25 cannot be ruled out,” Morrison said.
Earlier in the day, crude prices surged to nearly $120 a barrel, approaching levels seen at the start of the Russian invasion of Ukraine. However, prices later trimmed gains and then fell sharply after Donald Trump told CBS that the war was “very complete, pretty much,” and that developments were progressing “very far” ahead of his administration’s initial four-to-five-week timeline.
Over the weekend, Israeli and U.S. airstrikes targeted Iranian oil facilities, while Tehran responded with missile strikes against several oil installations across the Middle East.
Iran also effectively shut down the Strait of Hormuz by attacking vessels passing through the shipping lane, a crucial route for oil supplies to much of Asia.
Even so, oil prices pared earlier gains on Monday after reports that the Group of Seven (G7) would discuss a potential coordinated release of emergency reserves to counter supply disruptions caused by the conflict.
Brent crude oil futures for May delivery initially surged more than 30% to a peak of $119.50 a barrel, while West Texas Intermediate crude futures jumped about 30% to an intraday high of $119.43. Both benchmarks later turned sharply lower following Trump’s comments to CBS.
Euro pressured by worries over economic growth.
In Europe, EUR/USD trimmed earlier losses to trade little changed at 1.1634. The single currency has come under pressure as rising oil prices highlight the eurozone’s reliance on imported energy, dampening expectations for economic growth in the region.
Analysts at ING Group noted that prolonged high energy prices could undermine the narrative of synchronized global growth in 2026 and weaken Europe’s efforts to catch up with the strong economic performance of the United States.
Economic data released earlier on Monday also pointed to weakness. Germany’s factory orders plunged 11.1% in January, far worse than the expected 4.2% decline and a sharp reversal from the 6.4% increase recorded in the previous month.
Meanwhile, German industrial production fell 0.5% in January after dropping 1.0% in the prior month, adding to concerns about the strength of the region’s largest economy.
Elsewhere, GBP/USD recovered slightly, edging up 0.1% to 1.3432. The British pound sterling had also been pressured earlier as surging energy costs prompted traders to shift toward the stronger U.S. dollar.
Yen stabilizes after recent volatility.
In Asia, USD/JPY fell 0.1% to 157.66, although the Japanese yen remained under pressure after heavy losses in the Nikkei 225 as surging oil prices weighed on investor sentiment.
The yen drew limited support from stronger-than-expected wage income data for January, which showed a notable increase in pay levels—a trend that could reinforce medium-term inflation expectations in Japan.
Meanwhile, USD/CNY rose 0.2% to 6.9066, moving above the 6.9 yuan level after a weaker daily midpoint fixing from the People’s Bank of China.
Government data also showed that China’s consumer price index increased 1.3% year-on-year in February, exceeding expectations of 0.9% and marking the fastest pace of inflation in three years.
The stronger reading was largely driven by higher spending during the extended Lunar New Year holiday period, when demand for travel, services, and discretionary goods rose sharply.
However, producer price index inflation remained in contraction, leaving markets looking for further evidence on whether China’s inflation trend can continue beyond the holiday-driven boost. Elsewhere, AUD/USD edged up slightly to 0.7071, while NZD/USD gained 0.6% to 0.5932.
Gold prices increased during Asian trading on Tuesday but remained within a narrow range as investors looked for clearer signals about a potential de-escalation in the U.S.–Israel conflict with Iran.
The precious metal advanced alongside a broader improvement in market risk sentiment after U.S. President Donald Trump suggested the conflict with Iran could end soon and said Washington was also considering steps to help curb the recent surge in oil prices.
Spot gold climbed 0.8% to $5,175.48 per ounce as of 01:55 ET (05:55 GMT), while gold futures gained 1.6% to $5,184.79 per ounce. Spot prices had edged slightly higher on Monday after experiencing significant volatility throughout the session.
Gold stays within the $5,000–$5,200 range as safe-haven demand remains mixed.
Gold stayed firmly within the $5,000–$5,200 per ounce range set over the past week, as traders weighed a wave of uncertainty surrounding the global economy.
Although the conflict with Iran boosted safe-haven demand for gold, gains were limited by worries that the crisis could fuel inflation, potentially prompting more hawkish policies from major central banks.
Analysts at ANZ also pointed out that gold’s strong rally this year has faced bouts of profit-taking, as investors looked to raise liquidity during a sharp selloff in global equity markets.
Other precious metals moved higher on Tuesday, with spot silver climbing nearly 6% to $89.1915 per ounce, while spot platinum gained 0.7% to $2,201.48 per ounce. In the industrial metals market, LME copper futures rose 1.3% to $13,095.30 a tonne.
Trump signals Iran tensions may ease, boosting oil supply outlook.
Risk sentiment improved on Tuesday and oil prices declined after Donald Trump said several times on Monday that the war with Iran could soon come to an end. Trump also floated potential steps to reduce supply disruptions caused by the conflict, including temporarily easing sanctions on certain oil exporters, particularly Russia.
However, he did not provide a clear timeline for any de-escalation and continued to maintain a tough stance toward Tehran. Trump warned that the Islamic Republic would face severe consequences if it attempted to block the Strait of Hormuz.
“We will strike easily destroyable targets that would make it virtually impossible for Iran to rebuild as a nation again — death, fire and fury will follow,” Trump said.
Iran dismissed Trump’s statements and reiterated that it would continue blocking the Strait of Hormuz until attacks by the United States and Israel against Tehran cease.
The conflict entered its eleventh consecutive day on Tuesday, with tensions across the Middle East showing little sign of easing. A prolonged war is expected to keep supporting gold prices, as safe-haven demand remains strong amid rising inflation risks driven by disruptions in the oil market.
U.S. crude oil futures surged on Friday as the widening U.S.–Israeli conflict with Iran disrupted global oil supply expectations.
Brent crude settled at $92.69 per barrel, rising $7.28 or 8.5%, while West Texas Intermediate (WTI) climbed $9.89, or 12.2%, to close at $90.90 per barrel.
On a weekly basis, WTI jumped 35.6% and Brent gained about 27%, marking their strongest weekly advances since the early stages of the COVID-19 pandemic in spring 2020.
For the second straight day, U.S. crude futures outperformed Brent as refiners around the world rushed to secure alternative oil supplies to offset potential disruptions from the Middle East.
According to UBS analyst Giovanni Staunovo, refiners and trading firms are actively seeking substitute barrels, with the United States — the world’s largest oil producer — emerging as a key supplier.
Janiv Shah, vice president of oil analytics at Rystad Energy, noted that several factors contributed to the wider gains in WTI compared with Brent. Strong refinery activity supported by attractive refining margins, along with favorable arbitrage opportunities for shipments to Europe, helped drive demand for U.S. crude.
Could oil exceed $100?
Qatar’s energy minister warned in an interview with the Financial Times that Gulf energy producers might halt exports within weeks if the conflict escalates further. Such a move, he suggested, could push oil prices as high as $150 per barrel.
John Kilduff, partner at Again Capital, said the situation is increasingly alarming. “The worst-case scenario is unfolding right in front of us,” Kilduff said, adding that forecasts of oil reaching $100 per barrel now appear increasingly realistic.
Oil prices began their sharp rally after the United States and Israel carried out strikes on Iran last Saturday, which prompted Iran to halt tanker traffic through the Strait of Hormuz.
Around 20% of the world’s daily oil supply normally passes through this key shipping route. With the strait effectively closed for seven days, roughly 140 million barrels of crude — equivalent to about 1.4 days of global demand — have been prevented from reaching international markets.
The conflict has expanded across major energy-producing regions in the Middle East, disrupting production and forcing several refineries and liquefied natural gas facilities to shut down.
UBS analyst Giovanni Staunovo said oil prices are likely to continue rising for as long as the strait remains closed. He noted that markets previously believed U.S. President Donald Trump might eventually scale back the conflict to avoid higher oil prices, but the longer the situation persists, the greater the perceived supply risk becomes.
In an interview with Reuters on Thursday, Trump said he was not worried about rising gasoline prices in the United States linked to the conflict, commenting that “if they rise, they rise.”
Earlier on Friday, oil prices briefly dropped by more than 1% after speculation that the U.S. Treasury Department might take steps to counter the surge in energy costs.
On Thursday, the Treasury issued waivers allowing companies to purchase sanctioned Russian oil. The first approvals were granted to Indian refiners, which have since bought millions of barrels of Russian crude.
All major asset classes were still showing positive year-to-date returns as of Friday’s close. However, market conditions can shift dramatically over a single weekend.
The ongoing joint U.S.–Israel military operation against Iran is expected to persist for days, potentially even weeks. While the longer-term market impact remains uncertain, it is reasonable to expect that the prevailing bullish sentiment — already exhibiting signs of exhaustion in certain segments — may become another casualty of escalating tensions in the Middle East.
Through February 27, foreign equities and commodities had emerged as the top performers in 2026, based on ETF benchmarks. Yet assumptions that seemed firmly grounded just a week ago now appear outdated in light of rapidly evolving geopolitical developments.
The central issue now is the degree of vulnerability facing the global economy. In short, the longer the conflict persists, the greater the risk of economic blowback. At present, the likelihood of a swift resolution appears limited, particularly as the war expands across the Middle East, including Iran’s strike on Saudi oil infrastructure.
According to Torbjorn Soltvedt, an analyst at Verisk Maplecroft, the attack on Ras Tanura Refinery represents a meaningful escalation, placing Gulf energy infrastructure directly in Iran’s crosshairs. He noted that a prolonged period of instability is likely, as Iran attempts to inflict economic pressure by targeting tankers, regional energy facilities, trade corridors, and U.S. security partners.
Should the conflict drag on and oil prices remain elevated, the global economic impact could be substantial. In 2025, approximately 31% of all seaborne crude shipments passed through the Strait of Hormuz, according to analytics firm Kpler. Given Iran’s strategic positioning, it retains the capacity to disrupt — if not completely halt — shipping flows through this critical chokepoint.
Norbert Rücker, head of economics at Julius Baer, emphasized that the broader economic consequences hinge largely on the uninterrupted flow of oil and gas through Hormuz. The gravest risk, he suggested, is not necessarily a full closure, but significant damage to key regional energy infrastructure.
Kpler further cautioned that any meaningful shutdown — or even a prolonged de facto closure driven by insurers withdrawing coverage — would likely trigger simultaneous supply shocks across multiple commodity markets.
How long the conflict will endure remains highly uncertain. On Sunday, Donald Trump indicated that the military campaign could last “four weeks or less,” though such timelines in geopolitical conflicts are often fluid.
Energy markets are already reacting. Crude prices are climbing, with the international Brent Crude benchmark trading near $78 per barrel this morning — its highest level in more than a year.
The Trump administration’s stated objective of pursuing regime change in Iran points to the possibility of a protracted conflict. On Sunday, Donald Trump urged “Iranian patriots who yearn for freedom” to seize the moment and reclaim their country — rhetoric that signals ambitions extending beyond limited military strikes.
However, achieving regime change would be extraordinarily difficult. Although Iran’s Supreme Leader, Ali Khamenei, was reportedly killed in Saturday’s airstrikes, the Islamic Revolutionary Guard Corps remains a formidable power center. The Revolutionary Guard — Iran’s dominant military institution with vast economic holdings that help finance its operations — has likely prepared for sustained confrontation following years of tensions and prior strikes by the U.S. and Israel. Airpower alone is unlikely to dismantle what amounts to the regime’s praetorian guard.
According to Jonathan Panikoff, now affiliated with the Atlantic Council, the decisive factor will ultimately be internal dynamics. Once U.S. and Israeli strikes subside, any movement to end the regime would depend on whether rank-and-file security forces stand aside or align with popular unrest. Otherwise, those elements of the regime that retain control of weapons are likely to use force to preserve power.
Regime change in Iran is currently viewed as only moderately probable. Betting markets on Polymarket assign roughly a 42% likelihood to that outcome. The takeaway: expectations for a swift resolution appear limited, with the conflict likely to persist until one side concedes strategic ground.
However, the longer-term outlook may look different. Sanam Vakil, director of the Middle East and North Africa Program at Chatham House, argues that over time the survival of the Islamic Republic in its current form is doubtful. In his assessment, the regime as it exists today may ultimately prove unsustainable.
If that scenario unfolds, the central question shifts to succession: what replaces the current leadership — and whether any transition ushers in greater stability or instead fuels further instability within Iran and across the broader Middle East.
The world’s most critical oil chokepoint has effectively gone offline — and energy markets are adjusting instantly.
Brent crude surged 13% to $82.37 per barrel on Monday morning, marking its largest one-day jump in four years. The rally followed coordinated U.S. and Israeli airstrikes on Iran over the weekend — an operation the Pentagon has labeled Operation Epic Fury. The strikes killed Supreme Leader Ali Khamenei, ending his 36-year rule and plunging the Islamic Republic into its most severe political upheaval since 1979. Tehran responded swiftly, launching attacks on U.S. bases across the region and, more critically for global markets, targeting oil tankers moving through the Strait of Hormuz.
That narrow passageway handles roughly 20% of global oil flows each day. By Monday morning, it was effectively shut. Maersk suspended all vessel transits. Over 200 oil and LNG carriers dropped anchor. Iran’s Islamic Revolutionary Guard Corps reportedly warned ships that no vessels would be permitted to pass. This is no longer rhetoric — it is a tangible supply shock.
Why the Oil Outlook Has Fundamentally Shifted
Oil markets are accustomed to geopolitical tension. They have repeatedly absorbed headlines without lasting disruption. What they cannot easily digest is the sudden loss of one-fifth of global supply with no clear timeline for restoration.
Just days ago, Brent was trading near $73, and the prevailing narrative centered on excess supply. The U.S. Energy Information Administration projected WTI crude would average $53 by year-end. OPEC+ was discussing potential production increases. Market bears appeared firmly in control.
That backdrop has flipped. Brent settled near $79 after briefly touching $82, while WTI climbed from $67 on Friday to $72. Diesel futures — a key barometer of industrial activity — spiked more than 20% intraday. U.S. gasoline futures advanced 9% to their highest level since July 2024. According to GasBuddy analyst Patrick De Haan, retail gasoline prices could rise by 10 to 30 cents per gallon in the near term, with some stations potentially increasing prices by as much as 85 cents.
The market is no longer pricing geopolitical risk. It is pricing physical disruption.
“The magnitude of the retaliation caught the market completely off guard,” said Jorge Leon, head of geopolitical analysis at Rystad Energy. “This is far removed from what investors had been pricing in.”
OPEC+ attempted to ease concerns on Sunday by announcing a relatively small output increase of 206,000 barrels per day for April. However, as Helima Croft of RBC Capital Markets noted, incremental barrels offer limited relief if transport routes remain compromised. “Accessing spare capacity becomes highly constrained when key waterways are effectively shut down,” she wrote.
From a broader market perspective, Dominic Wilson of Goldman Sachs emphasized that equities will be driven less by dramatic headlines and more by the duration of the energy shock. In a client note, he argued that only a prolonged and severe spike in oil prices would materially alter the global growth trajectory.
Meanwhile, analysts at JPMorgan outlined four key variables shaping the outlook: the scale of supply disruption, the length of the outage, the speed at which alternative production can be activated, and the credibility of a diplomatic resolution. On Sunday, Donald Trump suggested U.S. military operations could extend for “four to five weeks” — a timeframe that implies a potentially sustained period of elevated risk for energy markets.
How to Position for the Oil Shock
Energy equities are the clearest near-term beneficiaries, and capital is already rotating aggressively into the space. The Energy Select Sector SPDR Fund (XLE) notched a fresh 52-week high on Monday. Below are five vehicles to consider:
Exxon Mobil (XOM)
Trading near $155, just shy of its all-time high of $156.93, Exxon represents the most diversified large-cap exposure to elevated crude prices. The company produced 4.7 million barrels of oil equivalent per day last quarter, exceeded Q4 expectations with EPS of $1.71, and has earmarked $20 billion in buybacks for 2026.
Wells Fargo recently lifted its price target to $183 from $156. CEO Darren Woods reiterated on the latest earnings call that there is “no near-term peak Permian” for the company. With Permian breakevens around $35 per barrel and production in Guyana scaling, incremental oil price gains translate efficiently into free cash flow expansion.
Chevron (CVX)
Shares briefly reached a new 52-week high of $196.76 before closing near $193. Chevron’s estimated Brent breakeven — inclusive of dividends and capex — sits near $50 per barrel. At current levels around $79 Brent, the company is generating substantial surplus cash.
Bank of America raised its target to $206 from $188. Chevron is also reportedly in exclusive discussions to assume control of Iraq’s West Qurna 2 field from Lukoil, a move that would add meaningful production upside. CEO Mike Wirth recently characterized the company as “bigger, stronger, and more resilient than ever.”
ConocoPhillips (COP)
Up nearly 4% to roughly $118 and marking a new 52-week high, ConocoPhillips offers more direct leverage to crude prices given its pure upstream model.
Goldman Sachs added COP to its U.S. Conviction Buy List, arguing the stock is approaching a material re-rating. The Marathon Oil integration is enhancing scale, while a $2 billion asset divestiture is sharpening its Permian focus. At current oil prices, COP is generating approximately $7 in EPS, implying a sub-17x multiple — reasonable for a commodity cycle inflection.
Occidental Petroleum (OXY)
Trading near $54, Occidental offers higher beta exposure. Its more levered balance sheet amplifies upside in a sustained higher-price environment.
Berkshire Hathaway holds roughly 28% of the company, providing a credibility anchor via Warren Buffett’s long-term endorsement. While the Carbon Engineering acquisition adds energy-transition optionality, the immediate thesis is straightforward: if Brent sustains levels above $80, OXY’s earnings power expands rapidly, making a $70+ valuation plausible under that scenario.
Energy Select Sector SPDR Fund (XLE)
For investors seeking diversified sector exposure without single-name volatility, XLE remains the default allocation. Trading near $93 and at a 52-week high, the ETF is heavily weighted toward Exxon (~22%), Chevron (~17%), and ConocoPhillips (~8%), which together account for nearly half the portfolio.
XLE provides integrated exposure across oil, gas, and energy services in a single vehicle. Should the conflict extend for several weeks — as suggested by Donald Trump — the entire sector could undergo a structural repricing higher.
The Bear Case You Can’t Ignore
History shows that geopolitical shocks often produce violent spikes followed by equally sharp reversals. During the June 2025 “12-day war” between Israel and Iran, crude initially surged but retraced quickly once it became clear that physical supply flows were unaffected.
While this episode involves direct tanker strikes and the functional closure of the Strait of Hormuz, some analysts still see a limited-duration event. Max Layton of Citigroup argues the base case is a leadership shift in Tehran that brings the conflict to an end within one to two weeks.
A similar view comes from Landon Derentz at the Atlantic Council. He notes that regional energy infrastructure remains intact and that global supply capacity has not been structurally damaged. The oversupply dynamics that capped prices before the conflict have not disappeared. If Hormuz reopens quickly, crude could surrender much of its recent gains.
The Inflation Risk
There is also a macro layer that complicates the bullish narrative. Sustained higher oil prices feed directly into transportation, manufacturing, and consumer input costs. That dynamic could constrain the Federal Reserve, forcing policymakers to delay or abandon anticipated rate cuts.
Monday’s Institute for Supply Management manufacturing data showed input costs rising at their fastest pace since 2022. Treasury yields have begun to move higher in response. If oil remains elevated long enough to reignite inflation pressures, the Fed’s stance could shift from easing to holding — a headwind for equities broadly, even if energy stocks outperform on relative terms.
A Structural Repricing of Risk
That said, even a swift diplomatic resolution would not fully reset the clock. Markets were effectively assigning near-zero geopolitical risk premium to oil prior to this weekend. That complacency has been challenged.
Energy equities were already trading at modest multiples relative to free cash flow. Now they have a tangible catalyst. Even if the conflict de-escalates quickly, the perception of risk — and the embedded premium in crude pricing — is unlikely to vanish overnight.
What to Watch
Three catalysts in the next 72 hours. First, Iran’s response — Tehran’s next move over the next 24 to 48 hours will determine whether this is a two-week shock or a multi-month crisis. Any strikes on Saudi or UAE energy infrastructure pushes Brent toward $90 or beyond.
Second, the Strait of Hormuz reopening timeline. If shipping insurance companies begin covering Hormuz transits again this week, oil pulls back. If the effective closure extends past Friday, the supply disruption becomes real and sustained — and $80+ becomes the new floor.
Third, the U.S. Strategic Petroleum Reserve. The IEA said Monday it’s in contact with major producers about potential coordinated reserve releases. Any SPR drawdown announcement would cap oil’s upside temporarily but wouldn’t change the structural supply picture.
The energy sector just went from afterthought to the most important trade in the market. Whether this conflict lasts two weeks or two months, the companies producing oil at $35 to $50 breakevens and generating massive free cash flow at $70 to $80 Brent are going to reward shareholders. The question isn’t whether to own energy — it’s how much.
Over the weekend, the United States and Israel launched coordinated missile and drone strikes on Iran, targeting key military facilities in an attempt to curb Tehran’s nuclear ambitions. The operation reportedly killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, marking a dramatic escalation and sharply increasing regional tensions. Iran responded swiftly with a wide-ranging missile campaign aimed not only at Israel but also at several Gulf states, including Qatar, the United Arab Emirates, and Bahrain. The fallout rippled across the region, prompting multiple Gulf nations to close their airspace and suspend equity trading.
Energy markets were also disrupted. Shipping activity through the Strait of Hormuz—a strategic chokepoint responsible for roughly 20% of global oil flows—slowed dramatically as tanker operators rerouted vessels for security reasons. Meanwhile, Qatar temporarily halted liquefied natural gas production at the world’s largest export terminal following a drone strike. U.S. President Donald Trump indicated that American military operations would persist, suggesting tensions could remain elevated in the near term.
From a market standpoint, energy represents the primary transmission channel of this crisis into global financial assets. Prolonged or severe disruptions to oil and gas supply could push up inflation expectations, dampen business sentiment, and heighten cross-asset volatility. Simply put, the longer and more intense the geopolitical shock, the greater the potential market fallout.
This dynamic was visible when markets reopened Monday. Brent crude briefly climbed to $82 per barrel amid concerns over tighter supply. Sustained price strength would likely reinforce inflation pressures, with knock-on effects for equities and interest rates. However, for oil to remain structurally elevated, investors would likely need confirmation of a more extended—or even complete—closure of the Strait of Hormuz. Such a development would mark a significant escalation beyond current disruptions and warrant a larger risk premium in energy markets. Political factors within Iran, particularly how the Islamic Revolutionary Guard Corps (IRGC) chooses to respond, will be critical. Whether the IRGC de-escalates or intensifies its actions will determine how much of the current market reaction reflects temporary risk pricing versus a genuine physical supply shock.
Oil Rallies After Tanker Flows Stall in the Strait of Hormuz
With developments unfolding quickly, tracking energy prices remains one of the clearest ways to gauge both the intensity and staying power of the geopolitical risk. Oil and natural gas markets typically react swiftly to new headlines, making them a real-time indicator of whether tensions are easing, stabilizing, or escalating further. As a result, close monitoring of these markets will be crucial in assessing how the conflict may shape global financial conditions in the coming days and weeks.
The United States has built up its most significant military footprint in the Middle East since 2003, deploying two aircraft carriers and F-22 stealth fighters. Indirect negotiations in Geneva between US envoys Steve Witkoff and Jared Kushner and Iranian officials concluded Thursday without progress. The Trump administration has cautioned that Iran will face “drastic consequences” if it fails to agree to meaningful nuclear concessions.
Israel has activated bomb shelters and warned Lebanon that its infrastructure could be targeted if Hezbollah becomes involved in any US–Iran confrontation. The US State Department authorized the departure of non-essential personnel and family members from the US Embassy in Israel on February 27, following similar instructions for the embassy in Beirut issued on February 23. Meanwhile, reports suggest the US 5th Fleet in Bahrain has been scaled back to fewer than 100 essential personnel.
China has urged its citizens to leave Iran immediately. South Korea escalated its advisory to a “Level 3” red alert, instructing nationals to depart. Australia has offered voluntary departure to diplomatic dependents in the UAE, Qatar, and Jordan, citing a worsening security environment. Several European countries, including Finland, Sweden, and Serbia, have also recommended that their citizens evacuate Iran.
Commercial carriers such as KLM have begun suspending regional flights. Governments are encouraging citizens to exit while commercial routes remain available, warning that air corridors could close quickly if hostilities erupt.
Does this mean a US–Israel strike on Iran is imminent? Possibly—but diplomatic channels remain active. The State Department confirmed that Secretary of State Marco Rubio will travel to Israel early next week. Meanwhile, reports indicate that Omani Foreign Minister Badr Al Busaidi is set to meet Vice President JD Vance and other US officials in Washington in previously undisclosed talks aimed at preventing escalation.
Oil markets are ending February on firm footing, with prices rising about $1 per barrel during the final trading week as tensions intensify. This week’s indirect talks in Geneva produced no tangible outcome, and Trump’s 10–15 day deadline is fast approaching. At the same time, attention to the upcoming OPEC+ summit has been muted—potentially opening the door for Saudi Arabia to surprise markets with another production increase for April.
The recovery in oil prices, combined with a reshuffling of global equity allocations, has recently delivered a notable lift to US energy ETFs (see chart). However, today’s modest $1.50 rise in crude suggests markets may have already priced in the risk of a swift conflict—or remain unconvinced that one is imminent.
Saudi Arabia could still opt to raise output, but much of that additional supply would need to transit the Strait of Hormuz, a critical chokepoint that Iran has repeatedly threatened to shut down.
Between 2023 and 2025, the 10-year US Treasury yield moved largely in tandem with the price of Brent crude (see chart), reflecting a strong correlation between energy prices and long-term interest rates.
In recent weeks, however, that relationship has diverged. While oil prices have climbed, the 10-year yield has declined. This shift suggests that investors may be rotating into bonds as a safe haven, anticipating that a renewed conflict in the Middle East could trigger broader geopolitical instability and economic uncertainty.
It was notable that the 10-year yield slipped below 4.00% today, even after a stronger-than-expected PPI inflation print.
More broadly, both nominal and real 10-year yields have traded within a relatively narrow range since 2023 (see chart). In our view, that sideways pattern is likely to persist through the remainder of the year.
Inflation measurement sits at the core of modern macroeconomics. Interest-rate policy, asset valuations, fiscal planning, and central-bank credibility all hinge on how price pressures evolve. Yet the benchmark most policymakers rely on — the Consumer Price Index (CPI) — is a monthly government report designed for a far less digitized and fast-moving economy.
Increasingly, market participants are supplementing that traditional gauge with real-time alternatives. Among them, Truflation has emerged as the most widely cited live inflation index. Built from millions of observed prices and updated continuously, it offers a near real-time snapshot of price dynamics. In early 2026, its signal diverges meaningfully from official CPI data.
Methodology and Structural Differences
Truflation was launched in December 2021 amid frustration over the lag in official inflation reporting. While CPI is released monthly and relies heavily on surveys, sampling, and statistical smoothing, Truflation applies a bottom-up, digitally native methodology.
The index aggregates data from more than 30 million items across 30+ licensed providers — including online retailers, housing platforms, and consumer-data firms. Prices update daily and are secured through decentralized oracle infrastructure on the Chainlink network, increasing transparency and reducing the risk of retrospective revisions.
Like CPI, Truflation tracks twelve broad consumption categories. However, its category weights are recalibrated annually using observed spending patterns rather than fixed survey-based assumptions. This allows the index to adjust more quickly to shifts in consumer behavior and pricing trends.
Historically, that responsiveness has mattered. Empirical comparisons suggest Truflation has often led CPI turning points by roughly 40 to 75 days, flagging inflection points in inflation momentum well before they appear in official releases.
Institutional Validation
Skepticism toward alternative measures is natural. Still, Truflation has begun clearing some of the credibility hurdles required for broader institutional adoption.
Throughout 2024 and 2025, its short-term forecasting accuracy was notable. In many instances, its readings anticipated CPI outcomes within approximately ±0.1 percentage points. That degree of precision has encouraged growing usage among macro hedge funds and systematic trading strategies.
Institutional validation advanced further in early 2026 when Truflation was integrated into the Bloomberg L.P. terminal ecosystem — a quiet but meaningful step that elevated it from a crypto-native experiment into a recognized macro data input.
Transparency also strengthens its appeal. Daily updates, publicly documented methodology, and auditability offer advantages in markets that reprice continuously, where a 30-day lag can materially affect positioning.
The 2026 Divergence
By mid-February 2026, the spread between Truflation and official CPI readings had widened to one of the largest gaps since the index was created:
Official CPI (January 2026): 2.4% year-over-year
Truflation (Feb 1–18, 2026): ~0.7%
Core CPI: ~2.5%
Truflation core proxy: ~1.3%
Such a divergence presents a challenge: either real-time data are signaling a rapid disinflationary shift not yet captured by government statistics, or the high-frequency approach is temporarily underestimating sticky components embedded in CPI.
If historical lead times hold, markets may need to reassess the inflation trajectory sooner rather than later.
The widening gap between the two measures points to fundamentally different interpretations of current inflation momentum. The central source of divergence is housing.
Truflation incorporates real-time asking rents pulled from active market platforms, capturing the recent cooling in rental prices as it happens. By contrast, official CPI relies heavily on “Owner’s Equivalent Rent,” a survey-based estimate that typically lags actual rental-market conditions by six to twelve months.
In effect, the two gauges are measuring different time horizons. Truflation reflects present housing dynamics, while CPI still embeds rental trends from prior quarters.
The macro implications are significant. If the real-time signal is more accurate, the U.S. economy could be moving closer to disinflation — or even deflationary — conditions, historically associated with rising recession risk. Meanwhile, official data continue to portray a controlled soft landing, with inflation appearing comfortably near target.
Explaining the Reluctance
Despite its growing track record, many economists remain hesitant to incorporate Truflation into formal macro frameworks. The resistance tends to rest on three main arguments.
1. Institutional inertia. CPI has decades of embedded usage. Forecasting models, policy rules, asset-allocation frameworks, and academic research are all synchronized to its monthly release cycle. Integrating a daily inflation measure would require reworking not only projections, but established institutional workflows.
2. Volatility bias. Because Truflation updates continuously, it can display sharp short-term swings. A rapid daily decline may be dismissed as noise, even when it reflects genuine pricing shifts. By comparison, CPI’s smoothed profile feels more stable — even if that stability comes at the expense of timeliness.
3. Composition differences. Truflation assigns slightly less weight to housing than CPI. Critics argue this could understate inflation during periods of accelerating rents. Yet the reverse also holds true: when rental markets cool quickly, CPI may overstate underlying price pressure — which appears to be the present dynamic.
Ultimately, the hesitation is less about data availability and more about comfort. A measure that moves faster and smooths less inevitably challenges established interpretive habits.
Conclusion: Why the Signal Matters
If Truflation’s current reading is directionally correct, monetary-policy expectations could be misaligned with underlying inflation trends. The Federal Reserve may have greater scope to ease than prevailing consensus assumes, even as headline data suggest economic resilience.
This does not mean Truflation should replace CPI as the official benchmark. But when divergences persist and widen, dismissing the alternative becomes increasingly difficult.
More broadly, the debate underscores a structural issue: inflation cannot be treated solely as a once-a-month statistic in an economy where prices adjust continuously. Measurement tools must evolve alongside market speed.
Truflation’s importance does not rest on perfection. Its value lies in timeliness, transparency, and the growing challenge of ignoring what it is signaling.
The global energy industry is preparing for its most serious upheaval since the 2022 invasion of Ukraine. As tensions in Iran intensify, the Strait of Hormuz — the world’s most vital transit route for liquefied natural gas (LNG) — has effectively come to a standstill.
Vessel-tracking data shows that at least 11 large LNG carriers have suspended their journeys. Major Japanese shipping firms, including Nippon Yusen K.K. (TYO:9101) and Mitsui OSK Lines Ltd (OTC:MSLOY), have reportedly instructed their ships to remain in safer waters. Iranian state media has characterized the passage as “virtually closed,” leaving roughly 20% of global LNG supply stranded behind what amounts to a naval blockade. Unlike oil, which can sometimes be diverted through pipelines, the immense volumes of Qatari gas moving through this narrow corridor have no viable alternative route.
Asia’s exposure and price shock
Asian nations are at the forefront of the fallout. Buyers in China, India, and Japan — the largest importers of Qatari gas — are said to be urgently seeking substitute cargoes from other suppliers. Yet in an already tight market, traders expect a sharp surge in spot LNG prices, potentially undoing a year of relative price stability within days.
The strain extends beyond spot purchases. Many long-term LNG agreements are linked to crude benchmarks, so any spike in Brent Crude would quickly drive up costs even for contracted volumes, raising energy bills for households and industrial users alike.
Supply risks and broader regional strain
The disruption is also creating operational risks for producers. LNG export terminals depend on a continuous rotation of tankers to maintain cooling systems; without outbound shipments, producers in Qatar and the UAE could face partial or full production shutdowns.
The ripple effects are spreading beyond the Gulf. With Israeli gas fields closed and Iranian pipeline exports to Turkey under pressure, countries such as Egypt are being pushed into the higher-cost seaborne LNG market.
The result is a global scramble for the limited cargoes still available, setting the stage for an international bidding war. Whether the conflict widens or remains contained, the financial burden is likely to be passed on to consumers around the world.
The United States and Israel carried out coordinated strikes on Iran on Saturday, killing Supreme Leader Ali Khamenei and triggering a fresh wave of conflict across the Middle East.
The attacks unsettled neighboring Gulf Arab oil producers as concerns mounted over further escalation, particularly after Iran retaliated with missile launches toward Israel.
According to four trading sources, several major oil companies and leading commodity traders temporarily halted crude and fuel shipments through the Strait of Hormuz following the strikes.
Key Reactions from Analysts
Helima Croft, Head of Commodities Research, RBC Capital:
Croft said the long-term impact on oil prices will depend on whether the IRGC retreats under sustained airstrikes or escalates further, potentially increasing the costs of what she described as Washington’s second regime-change effort in just over two months.
She added that regional leaders had cautioned Washington about the spillover risks of renewed confrontation with Iran, warning that oil prices above $100 per barrel would pose a serious threat.
Croft also emphasized that OPEC’s ability to cushion supply shocks is limited. Aside from Saudi Arabia, most OPEC+ members are already producing near capacity, meaning any announced output increase may have little practical effect.
Jorge Leon, SVP and Head of Geopolitical Analysis, Rystad Energy:
Leon noted that while alternative infrastructure exists to bypass the Strait of Hormuz, a prolonged disruption could effectively remove 8–10 million barrels per day from the market—significant in a world consuming roughly 100 million barrels daily.
He suggested countries with strategic petroleum reserves may release supplies if the disruption drags on. Absent quick de-escalation, he expects oil prices to reprice sharply higher at the start of the week.
Eurasia Group energy analysts:
They anticipate oil prices will surge when markets reopen. If fighting continues into Sunday, prices could jump $5–$10 above the current $73 level, especially given Iran’s claim that it has closed the Strait of Hormuz and reports of tanker disruptions.
Barclays energy analysts:
Barclays warned that markets may confront worst-case supply fears on Monday. Brent crude could climb to $100 per barrel as traders assess the risk of major supply interruptions amid intensifying regional instability.
Vishnu Varathan, Head of Macro Research (Asia ex-Japan), Mizuho, Singapore:
Varathan said recurring regional attacks may become the new norm, keeping oil prices elevated as both production and transit routes remain vulnerable. OPEC could face pressure to boost output, though a 10–25% risk premium on oil prices would not be excessive—even without a full blockade of the Strait of Hormuz, which he described as a potential 50% premium event.
Christopher Wong, Strategist, OCBC, Singapore:
Wong expects geopolitical risk premiums to rise as markets open. Safe-haven assets like gold are likely to gap higher, while oil could strengthen on supply concerns. Meanwhile, risk assets and high-beta currencies may experience early volatility, particularly if retaliation or regional spillover intensifies.
Nick Ferres, CIO, Vantage Point Asset Management, Singapore:
Ferres argued that energy remains undervalued and should rally at the start of the week—alongside gold.
Thunderous explosions and massive fireballs from missiles launched by Iran across the Gulf underscored a long-feared reality for regional leaders: Tehran can carry the fight directly to their territory. The attacks are likely to solidify Arab governments’ backing for joint action by the United States and Israel.
Even on the Palm Jumeirah — Dubai’s most exclusive enclave — blasts shook buildings and struck a luxury hotel, sending residents scrambling as missiles and interceptors streaked overhead. The scenes made clear that the conflict had spilled beyond Iran’s borders, just as Tehran had cautioned.
“What has now been demonstrated is that we — not the United States — are directly exposed,” said Ebtesam Al-Ketbi of the Emirates Policy Center. “When Iran attacked, it hit the Gulf first, claiming it was targeting U.S. bases.”
Analysts say Tehran’s strikes are designed to show that no American ally in the region is out of reach and to increase the price of supporting Washington’s campaign. But they warn that any error in judgment could turn calibrated signaling into full-scale war.
Gulf officials argue that by hitting oil-producing neighbors, Iran is widening the battlefield and putting global energy supplies at risk, not merely regional stability. For rapidly expanding economies such as Saudi Arabia, Qatar and the United Arab Emirates — all reliant on open skies, safe sea lanes and steady trade — a broader confrontation would be severely destabilizing.
By casting the confrontation as a campaign for regime change in Iran, President Donald Trump has raised the stakes, increasing the likelihood that Tehran could retaliate more aggressively, observers say.
If Iran were to misjudge and directly attack Gulf Cooperation Council states, the nature of the conflict would shift dramatically. Regional governments would be under intense pressure to respond as lives and strategic assets come under threat.
Some Gulf analysts contend that Iran is undermining its own strategic interests by striking neighboring states. While Tehran insists it is targeting U.S. military installations, Gulf capitals view the attacks as clear violations of sovereignty.
In recent indirect talks with Washington aimed at defusing tensions, Iran signaled willingness to negotiate over its nuclear program but refused to discuss its ballistic missile arsenal or its backing of regional militias. Tehran has suggested that such issues be handled in a regional dialogue excluding the United States — a proposal Gulf states argue would weaken rather than strengthen the existing security framework, given their longstanding reliance on U.S. protection.
From their perspective, Iran’s missile capabilities and network of proxies pose immediate threats. Without external security guarantors, they see little credibility in a regional-only arrangement.
Meanwhile, Trump’s rhetoric has shifted notably. Whereas he previously described potential U.S. strikes as leverage to secure a nuclear agreement, he has more recently framed them in terms that imply regime change. Unlike the large-scale 2003 invasion of Iraq under George W. Bush, which involved a prolonged troop deployment and occupation, the current strategy appears focused on limited air operations designed to achieve swift, visible outcomes while minimizing American casualties and domestic political fallout.
The bet is that a short, decisive campaign would yield political benefits, whereas a drawn-out war — especially one disrupting oil flows or the broader economy — could carry heavy costs.
Should the conflict expand to include U.S. bases, diplomatic missions, energy infrastructure, or the crucial maritime corridor of the Strait of Hormuz, the economic and political repercussions for the United States, the Gulf, and global markets would escalate sharply.
In a post on Truth Social, Donald Trump warned Iran not to carry out any additional retaliatory strikes against the United States or its Middle East allies. He said Tehran had threatened large-scale attacks on neighboring countries seen as aligned with Washington.
The remarks suggest that Iran’s military capabilities remain operational despite the reported killing of its Supreme Leader, Ali Khamenei. The wave of retaliatory strikes indicates that Tehran has not been deterred by his death.
Iran reportedly targeted the United Arab Emirates, striking Dubai International Airport and the Burj Khalifa, the world’s tallest building. It also launched attacks on Bahrain’s capital, as well as Qatar and Kuwait. In response, several Gulf states have warned they may retaliate against Iran.
Qatar has shut down its main airport in Doha, while Dubai International Airport has also been closed following the strikes.
It remains uncertain whether Trump’s threat to respond with significantly greater force will deter further escalation. It is also unclear what he meant by saying, “We will hit them with a force that has never been seen before.”
Impact of the Conflict on Global Trade and the Energy Sector
Earlier today, we noted that the sudden closure of Dubai International Airport caused widespread flight cancellations due to its vital role as a global transit hub. Leading Gulf airlines — Emirates, Qatar Airways, and Etihad Airways — have suspended services indefinitely.
In addition, three major Japanese shipping companies have halted operations in the Gulf following a U.S. naval warning. These include Nippon Yusen (TYO:9101), Mitsui O.S.K. Lines (OTC:MSLOY), and Kawasaki Kisen Kaisha (TYO:9107).
Analysts at RBC Capital Markets say that U.S. strikes on Iran and Tehran’s counterattacks have created a cascading effect across the Gulf. The Strait of Hormuz is now viewed as “effectively closed,” disrupting roughly 20% of global LNG exports and about 90% of Japan’s crude oil imports.
They warn that crude oil prices could spike sharply as tensions intensify and diplomatic efforts remain stalled. Investors are advised to closely track developments in the region and assess their potential implications for oil and LNG markets.
UK markets return to the spotlight on Friday following Labour’s surprise defeat in the Gorton and Denton by-election. Labour’s candidate finished third, while the Greens secured a commanding win over both Labour and Reform. Investors in gilts and sterling must now assess the longer-term implications of the result — including whether it signals growing traction for the radical left within UK politics — and what it could mean for Keir Starmer’s leadership.
Sterling initially strengthened earlier this morning but has since slipped to fresh lows, testing $1.3450. It is currently the weakest performer in the G10 on Friday and the second weakest over the week. Despite heightened political uncertainty, the decline in the pound has been relatively contained so far. Notably, gilts outperformed on Thursday, with yields falling sharply.
Why Starmer may remain secure — for now
Earlier this month, speculation that Starmer could face an internal challenge sparked some volatility in the gilt market. However, that uncertainty faded quickly after senior cabinet members publicly backed him. Although calls for his resignation may intensify within parts of the party, we do not expect Labour heavyweights or cabinet members to support such moves.
It seems unlikely that Starmer would be ousted on the back of this result alone. Few potential rivals would want to assume leadership ahead of next week’s Spring Statement. Moreover, possible successors such as Wes Streeting and Angela Rayner face their own challenges — Streeting could encounter a Green surge in his constituency, while Rayner continues to contend with questions surrounding the stamp duty issue. Cabinet members have already cautioned against overinterpreting the by-election outcome, suggesting Starmer’s position is stable for the time being.
Why a leftward shift may not help Labour
Some within Labour may argue for a sharper move to the left in response to this defeat. However, Gorton and Denton represents just one constituency and is not necessarily indicative of national sentiment. It is far from clear that adopting more left-leaning policies would strengthen Labour’s prospects in the May elections. According to recent YouGov data, the economy remains voters’ primary concern, and more progressive policies may do little to address rising unemployment, particularly among younger people.
Why gilt volatility may remain contained
Although the by-election presents a political test for the gilt market, it is unlikely to trigger significant volatility at week’s end. The broader impact of the May election results is likely to matter more. Additionally, there is speculation that next week’s Spring Statement could see the Office for Budget Responsibility reduce its forecast for gilt issuance this year, following strong tax receipts earlier in the year. That could help ease upward pressure on yields and offset any market reaction to Labour’s loss.
Technical focus: GBP/USD
Sterling is broadly weaker today, though the by-election result has not sparked a full-scale sell-off. GBP/USD is hovering around its 200-day simple moving average at $1.3447. A decisive break below this level would represent a significant technical deterioration and suggest downside momentum is building.
Netflix rallies after abandoning Warner Bros Discovery bid
European equity futures point to a firmer open on Friday, capping another week in which European indices are set to outperform US markets. Netflix is in focus after confirming it has withdrawn its bid for Warner Bros Discovery. The stock jumped 8% in post-market trading on Thursday and could recover much, if not all, of its roughly 10% year-to-date decline.
Investors will also monitor European inflation data, with attention on France to see whether CPI rebounds following a sharp drop earlier in the year.
Most Asian currencies slipped on Friday as investors weighed a mixed interest rate outlook across the region. The Australian dollar was on track for a solid monthly gain, while the Japanese yen remained under pressure.
The Chinese yuan declined after Beijing lowered a key reserve requirement to make dollar purchases cheaper domestically, though the currency continued to hover near three-year highs.
Meanwhile, the dollar index and dollar index futures edged down about 0.1% in Asian trading. Despite the dip, the greenback was up 0.7% for February, supported by safe-haven demand and lingering uncertainty over the direction of interest rates.
Japanese yen subdued after weak Tokyo CPI, February decline in focus
The Japanese yen saw the USD/JPY pair slip 0.2% on Friday and was on track to gain 0.7% for February.
Pressure on the yen intensified as uncertainty grew over the timing of the Bank of Japan’s next interest rate hike. Those doubts deepened following softer-than-expected consumer price index data from Tokyo for February.
The reading—often viewed as a leading indicator for nationwide inflation—showed core CPI falling below the BOJ’s 2% annual target for the first time in nearly four years, potentially complicating the central bank’s plans for further rate increases.
The yen had weakened earlier in February amid concerns about the fiscal implications of Prime Minister Sanae Takaichi’s proposed stimulus measures and tax cuts. However, she appeared to gain momentum for advancing her fiscal agenda after her ruling coalition secured a supermajority in Japan’s lower house of parliament.
Chinese Yuan slips after PBOC lowers FX risk reserve ratio
The Chinese yuan’s USD/CNY pair rose 0.2% on Friday after the People’s Bank of China removed a key foreign exchange risk reserve requirement for certain forward contracts—a step that makes dollar purchases cheaper domestically.
The move follows a strong rally in the yuan against the dollar in recent months, partly fueled by exporters offloading the greenback amid a robust trade surplus with the United States.
However, rapid appreciation of the yuan can weigh on Chinese exporters by shrinking returns on overseas sales. Friday’s decision suggests the central bank may be aiming to curb further strength in the currency.
The yuan had approached a three-year high on Thursday before pulling back.
Australian dollar set for February gains on hawkish RBA outlook
The Australian dollar’s AUD/USD pair climbed 0.25% on Friday, ranking among Asia’s top performers for the month.
The Aussie was on track to advance 2.3% in February, largely supported by a more hawkish stance from the Reserve Bank of Australia. The central bank raised interest rates by 25 basis points earlier in the month and signaled it would tighten further if inflation fails to ease.
Stronger-than-expected January CPI data released this week reinforced expectations that the RBA could deliver additional rate hikes.
Elsewhere in the region, most Asian currencies edged lower on Friday. The South Korean won’s USD/KRW pair ticked up slightly but remained down 1.3% for February.
The Indian rupee’s USD/INR pair steadied after climbing back above the 91-per-dollar mark, though it was still 0.8% weaker this month, despite gaining support from a U.S.–India trade agreement.
Meanwhile, the Singapore dollar’s USD/SGD pair was little changed on the day and down 0.7% for February.
Most Asian currencies traded in a tight range on Thursday as lingering uncertainty over U.S. trade policy kept sentiment cautious, though the Chinese yuan and Japanese yen stood out on domestic drivers.
The US Dollar Index slipped 0.1% during Asian trading hours, with its futures also down 0.1% as of 00:22 ET (05:22 GMT).
Chinese yuan surges to 34-month high on policy hopes
China’s onshore yuan strengthened, with USD/CNY sliding 0.5% to a new 34-month low of 6.834 ahead of the country’s annual parliamentary session, the National People’s Congress. Markets are betting on fresh policy backing as investors look for growth targets and potential fiscal stimulus signals that will shape Beijing’s economic agenda for the year.
The offshore yuan also advanced, with USD/CNH touching its weakest level since mid-April 2023.
Elsewhere in the region, currencies were mostly subdued as concerns over U.S. tariffs persisted. President Donald Trump’s 10% global tariffs came into force earlier this week, with plans underway to raise them to 15%.
The South Korean won was little changed after the Bank of Korea kept its benchmark rate steady at 2.5%, in line with expectations. The Singapore dollar edged 0.1% higher against the greenback, while the Indian rupee gained 0.1%. The Australian dollar rose 0.2%.
Yen rebounds on BOJ rate hike expectations
The Japanese yen strengthened, with USD/JPY falling 0.4%, after Kazuo Ueda, Governor of the Bank of Japan, said policymakers would carefully assess incoming data at their March and April meetings, leaving room for another rate hike if inflation and wage growth remain solid.
His comments bolstered expectations that Japan will stay on a gradual path toward policy normalization.
The yen had weakened a day earlier following reports that Prime Minister Sanae Takaichi adopted a cautious stance on further tightening and after two more dovish-leaning members were nominated to the BOJ board.
Analysts at ING said the addition of new board members would broaden the range of views in policy discussions, though no single perspective is likely to dominate. They added that a June rate hike appears more likely than one in April, pending confirmation of strong spring wage gains and April inflation data.
The U.S. dollar recovered on Tuesday after the prior session’s slide, supported by upbeat economic data, while investors stayed cautious amid fresh volatility tied to President Donald Trump’s tariff policies.
At 15:24 ET (20:24 GMT), the Dollar Index—measuring the greenback against six major currencies—rose 0.2% to 97.86, after falling as much as 0.5% a day earlier.
Strong data underpin dollar
Encouraging economic releases lent the dollar some backing. ADP reported a gain of 12.8K in private payrolls last week, exceeding the previous reading. In addition, the Conference Board’s consumer confidence index for February surprised to the upside at 91.2.
According to José Torres, senior economist at Interactive Brokers, the stronger-than-expected figures nudged both the dollar and yields modestly higher, with a bear-flattening move led by shorter-dated maturities that are more sensitive to monetary policy.
He noted that firmer labor data are pushing rates up, as improving employment conditions weaken the case made by dovish Federal Reserve members for interest rate cuts based on softening job trends.
Trade tensions cloud outlook
Despite the rebound, uncertainty surrounds the U.S. currency as Trump’s revised tariff plans take shape following a Supreme Court ruling that his use of a 1977 emergency law to impose tariffs overstepped his authority.
In response, Trump said he would lift a temporary import tariff from 10% to 15% on goods from all countries. The move has cast doubt on the reliability of trade agreements reached prior to the ruling. Reflecting this uncertainty, the European Parliament delayed a vote on the European Union’s trade pact with the United States due to the new import tax.
Trade concerns have resurfaced at a time when questions are also emerging over the durability of heavy investment in artificial intelligence and the resilience of the U.S. economy after last week’s weak growth data.
Euro steady; Yen under pressure
In Europe, EUR/USD slipped 0.1% to 1.1779, with the euro largely steady after ECB President Christine Lagarde reiterated in Washington that the European Central Bank’s rate policy remains in a “good place,” while emphasizing the need for flexibility.
GBP/USD edged up 0.1% to 1.3501 ahead of parliamentary testimony from four Bank of England rate-setters, which may shape expectations before the March policy meeting.
In Asia, USD/JPY jumped 1% to 155.76 as expectations for near-term tightening by the Bank of Japan softened. The yen was also pressured by a Nikkei report suggesting U.S. authorities led recent rate-check efforts aimed at supporting Japan’s currency.
USD/CNY fell 0.4% to 6.8830 after the People’s Bank of China kept its one-year and five-year loan prime rates unchanged, signaling Beijing’s preference for calibrated support while balancing growth and financial stability. Chinese markets reopened Tuesday following the Lunar New Year holiday.
Elsewhere, AUD/USD rose 0.1% to 0.7060, while NZD/USD advanced 0.2% to 0.5967.
The U.S. dollar weakened on Monday as investors assessed the implications of the Supreme Court of the United States decision to strike down tariffs introduced by Donald Trump, along with the administration’s subsequent response.
Traders were also monitoring renewed nuclear negotiations between Washington and Tehran.
As of 14:12 ET (19:12 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — was down 0.2% at 97.65. The currency had posted a gain of roughly 1% last week, marking its strongest weekly advance in more than four months.
Dollar pressured by mounting trade uncertainty
The Supreme Court of the United States ruled on Friday that sweeping tariffs introduced by Donald Trump exceeded his authority. In response, Trump criticized the court and unveiled a blanket 15% levy on imports.
The new duties are set to remain in place for 150 days, but it remains unclear whether the U.S. government must reimburse importers for tariffs already collected, as the Court did not address that issue.
The uncertainty could trigger prolonged legal battles and further confusion as Trump explores alternative mechanisms to reinstate broad-based global tariffs on a more permanent footing.
Thierry Wizman, global FX and rates strategist at Macquarie, said the firm’s bearish U.S. dollar outlook for 2026 was based on the view that tariffs signal U.S. “disengagement” from the rules-based order underpinning free trade. He added that tariff conflicts themselves generate uncertainty centered on the United States — a negative for the dollar.
“In that sense, while the Supreme Court ruling may have strengthened institutional checks, it also heightens uncertainty, as Trump is likely to revive the tariff war through different — and more legally grounded — channels that have yet to be detailed. We see no reason to revise our broader expectation for a weaker USD in 2026,” Wizman said.
Beyond trade policy, investors are also watching a U.S. military buildup in the Middle East aimed at pressuring Iran to abandon its nuclear ambitions, with further talks between Washington and Tehran expected later this week.
Euro advances as confidence in Europe strengthens
In Europe, EUR/USD rose 0.2% to 1.1799, with the single currency drawing support from trade-driven weakness in the dollar.
Growing confidence in the region’s economic outlook also underpinned the euro, following data on Friday showing eurozone business activity expanded faster than expected this month, as manufacturing returned to growth for the first time since October.
Momentum was reinforced on Monday as Germany’s Ifo business climate index climbed to 88.6 from 87.6 the previous month, signaling improving sentiment in Europe’s largest economy.
Meanwhile, GBP/USD added 0.1% to 1.3497, with sterling firming ahead of key event risks this week — including testimony before the Treasury Committee by Andrew Bailey, governor of the Bank of England, and Thursday’s UK by-election in Gorton and Denton.
Yen edges higher
In Asia, USD/JPY fell 0.4% to 154.48, with the Japanese yen supported by its traditional safe-haven appeal as investors remained cautious about the economic impact of higher U.S. tariffs. Trading volumes were thinner due to a public holiday in Japan.
USD/CNY was little changed at 6.9087, with Chinese markets shut for New Year holidays. Elsewhere, AUD/USD declined 0.3% to 0.7060, while NZD/USD also dropped 0.3% to 0.5961.
Thierry Wizman of Macquarie said that while the dollar could remain under pressure amid persistent U.S.-driven uncertainty, some currencies — such as the yuan and the euro — may outperform, whereas others, including the Canadian and Mexican pesos, could lag. He added that even in the face of potential credit rating actions, long-term U.S. Treasury yields might rise due to uncertainty over revenue replacement, and equities could come under strain if higher yields lead to valuation compression.
Oil prices edged higher during Asian trade on Tuesday, remaining just under the seven-month peaks reached in the prior session, as markets looked ahead to upcoming U.S.–Iran discussions later this week. Ongoing uncertainty surrounding trade tariffs continued to temper investor sentiment.
At 22:22 ET (03:22 GMT), Brent crude futures climbed 0.8% to $72.04 per barrel, while U.S. West Texas Intermediate (WTI) crude futures also advanced 0.8% to $66.81 per barrel.
Both benchmarks had approached seven-month highs in the previous session before ending slightly lower.
Market participants are holding back ahead of US – Iran talks scheduled for later this week.
Markets stayed tense ahead of a third round of nuclear talks between Washington and Tehran set for Thursday in Geneva. Strains have persisted since last week amid indications that the situation could escalate. The U.S. pulled some non-essential embassy staff from Beirut, underscoring concerns that diplomacy might collapse and spark conflict.
President Donald Trump warned in a social media post on Monday that it would be a “very bad day” for Iran if no agreement is reached.
“In the event of a deal, we would likely see a significant unwinding of the risk premium currently built into prices — though securing such an agreement is far from straightforward,” analysts at ING noted.
A failure in negotiations could heighten worries about stricter sanctions enforcement or potential disruptions in the Strait of Hormuz, a crucial corridor for global crude shipments. Fears of a possible military clash contributed to a 6% surge in oil prices last week.
Tariff tensions under Donald Trump weigh on demand outlook
Oil markets are also contending with wider macro uncertainty after the Supreme Court of the United States invalidated an earlier round of tariffs introduced under emergency powers.
Donald Trump has since sought to reinstate duties of up to 15% using alternative legal provisions and cautioned that countries that “play games” in trade negotiations with the U.S. could be hit with steeper tariffs.
The risk of renewed trade tensions has darkened the global growth and fuel demand outlook, limiting oil’s advance even as geopolitical concerns continue to lend support to prices.
Oil prices fell more than 1% in Asian trading on Monday, taking a breather after last week’s sharp rally, as investors assessed the likelihood of a third round of U.S.-Iran nuclear negotiations and renewed uncertainty around U.S. trade policy.
By 20:50 ET (01:50 GMT), Brent crude for April delivery dropped 1% to $71.03 a barrel, while WTI crude declined 0.9% to $65.75 a barrel.
Both benchmarks had climbed nearly 6% last week amid signs of a potential U.S.-Iran confrontation and an unexpected drawdown in U.S. crude inventories, which supported prices.
Traders watch third round of U.S.- Iran nuclear talks
Iran and the United States are expected to hold a third round of nuclear discussions on Thursday in Geneva, raising hopes that tensions may ease.
Iranian Foreign Minister Abbas Araghchi told CBS’s “Face the Nation” on Sunday that there is a strong possibility of reaching a diplomatic resolution, adding that an agreement is within reach. Markets viewed the remarks as a signal of potential compromise.
Iran is a major producer within OPEC and possesses some of the largest proven oil reserves globally. The country also borders the Strait of Hormuz, a vital chokepoint that handles about one-fifth of the world’s seaborne oil. Any escalation involving Iran could disrupt shipments and drive up freight and insurance costs.
Trump raises global tariffs to 15%
Meanwhile, U.S. President Donald Trump unveiled new global tariffs, initially imposing a 10% duty on imports for 150 days after the U.S. Supreme Court invalidated his previous, broader tariff plan.
The administration increased the rate to 15% on Saturday—the maximum permitted under the applicable law—adding fresh uncertainty to global trade and demand prospects.
Higher tariffs can strain supply chains and prompt retaliatory actions from trade partners. Slower trade activity and weaker industrial production typically weigh on fuel consumption.
The Australian government has pledged to “consider every possible response” after President Donald Trump raised the standard import tariff to 15%. The abrupt increase came just a day after an initial 10% rate was announced, surprising global markets.
Trade Minister Don Farrell described the decision as “unjustified” and suggested it could strain relations between the long-standing strategic partners. The move follows a U.S. Supreme Court ruling that invalidated the administration’s earlier targeted tariff system as unlawful.
In reaction, the President shifted to a universal global tariff. The first 10% duty is scheduled to take effect at 12:01 a.m. EST on February 24, but the implementation date for the additional 5% remains uncertain, leaving exporters with goods already in transit facing heightened uncertainty.
Economic repercussions and Australia’s reaction
For Australia, the implications are significant. As a leading exporter of iron ore, LNG, and agricultural commodities, a 15% tariff could erode the competitiveness of Australian products in the U.S. market. Trade Minister Don Farrell confirmed that officials are coordinating closely with Australia’s embassy in Washington to evaluate the potential impact.
Analysts note that keeping “all options on the table” may involve filing a formal complaint with the World Trade Organization (WTO) or imposing reciprocal, tit-for-tat duties on American imports. Such action would represent an unusual trade clash between AUKUS allies.
The across-the-board 15% tariff reflects a broad, uniform policy that overlooks customary bilateral arrangements. Should Canberra proceed with countermeasures, it could affect multi-billion-dollar energy and defense agreements that are currently being negotiated.
Market turbulence and the investor outlook
Investors are already responding to the uncertainty. The Australian Dollar (AUD) came under immediate pressure as traders assessed the potential blow to the nation’s trade balance, while mining and energy shares adopted a more cautious tone.
Should the full 15% tariff be implemented without carve-outs, Australian exporters may have to accelerate their shift toward Asian markets, potentially deepening the divide between Western trading partners.
Attention is now fixed on the February 24 deadline. If the White House does not clarify whether allies will receive exemptions, the risk of a formal trade conflict increases. Analysts caution that much of the added cost could ultimately be passed on to American consumers, heightening concerns about renewed inflation.
Thursday’s headline from the United States Department of Commerce showed the U.S. trade deficit widening sharply to $70.3 billion in December and reaching $901.5 billion for full-year 2025. December imports jumped 3.6% to $357.6 billion, while exports fell 1.7% to $287.3 billion. Economists had projected a $55.8 billion gap, making the release a significant downside surprise that prompted many to cut fourth-quarter GDP forecasts. Following the data, the Federal Reserve Bank of Atlanta lowered its Q4 GDP estimate to 3% from 3.6%.
The Commerce Department’s preliminary report showed the economy expanded at just a 1.4% annualized pace in Q4, well below the 2.8% consensus estimate. Federal government spending dropped 16.6% during the quarter — largely due to the shutdown — subtracting roughly one percentage point from growth. The wider trade deficit further weighed on output. For all of 2025, GDP rose 2.2%. Treasury yields drifted lower after the report, increasing expectations that the Federal Reserve may move toward another rate cut.
One potential obstacle to near-term easing is inflation. The Personal Consumption Expenditures (PCE) index rose 0.4% in December and 2.9% year-over-year. Core PCE, excluding food and energy, also climbed 0.4% on the month and 3% annually. On a positive note, consumer spending advanced 0.4% in December, offering some support for future growth momentum.
In financial markets, private credit came under scrutiny after Blue Owl Capital permanently restricted redemptions from one of its retail vehicles, Blue Owl Capital Corp II. The move triggered declines in alternative asset managers including Ares Management, Apollo Global Management, KKR, Blackstone, and TPG. Adding to concerns, BlackRock recently marked down portions of its private credit portfolio. Former PIMCO CEO Mohamed El-Erian publicly questioned whether this could signal a broader stress point for the sector.
In a separate development, The Wall Street Journal reported that President Donald Trump ordered the release of government files related to UFOs and unidentified aerial phenomena following heightened public interest. The directive reportedly came after comments by former President Barack Obama referencing extraterrestrial topics. Christopher Mellon, who previously helped publicize the “Tic Tac” military footage, suggested the move could have far-reaching implications.
Taken together, the combination of a widening trade deficit, softer GDP growth, persistent inflation, and emerging private credit strains presents a complex macro backdrop — one that leaves markets balancing expectations of further rate cuts against lingering structural risks.
When President Donald Trump returned to the White House in January 2025, he reaffirmed tariffs as the core instrument of his economic strategy — a blend of leverage, protectionism, and industrial revival. That strategy is now facing meaningful strain.
The recent ruling by the Supreme Court of the United States that Trump exceeded his authority in imposing sweeping global tariffs without congressional approval represents more than a procedural setback. It challenges the legal scaffolding underpinning a trade agenda that has shaped U.S. economic and foreign policy over the past year.
Markets have taken note — but without panic.
The contrast is notable. A defining pillar of presidential economic policy has been curtailed, yet equity markets remain resilient. Volatility has surfaced intermittently, but capital has not fled risk assets. Understanding this requires separating political drama from financial mechanics.
In theory, tariffs were meant to rebalance trade and accelerate reshoring. In practice, they largely operated as a cost-transfer mechanism. Importers absorbed part of the burden; consumers absorbed another portion through higher goods prices. Manufacturers dependent on global inputs faced margin compression. Retailers recalibrated pricing strategies. Supply chains, already strained in prior years, became more complex.
Economic data reflect this friction. Growth momentum has slowed from last year’s pace. Manufacturing surveys show uneven demand. Trade-sensitive capital expenditure has cooled. Meanwhile, inflation remains sticky — particularly in services — and goods categories exposed to import costs have seen renewed firmness. The anticipated mix of rapid expansion and stable prices has not materialized.
Markets, however, trade forward expectations — earnings trajectories and liquidity conditions — rather than political symbolism.
Large-cap U.S. equities continue to attract global capital, particularly in AI and advanced technology. Investment in semiconductors, cloud infrastructure, and computing capacity remains strong despite macro uncertainty. Earnings concentration in these sectors offsets weakness in more cyclical areas.
Investors see deceleration, not collapse. Corporate balance sheets remain broadly healthy. Employment is moderating but not deteriorating sharply. Financial conditions are tighter than in prior cycles, yet not restrictive enough to signal systemic stress.
Against this backdrop, a potential scaling back of tariffs introduces nuance rather than shock.
If trade barriers are diluted or subject to firmer congressional oversight, input costs could ease over time. That may gradually relieve goods-based inflation pressures. Supply chain planning could improve. Corporate forecasting may gain clarity — and clarity reduces risk premiums.
Bond markets reflect this balance. Treasury yields have fluctuated as investors weigh persistent inflation against moderating growth. Should tariff-driven price pressures fade, longer-term yields may stabilize. However, fiscal deficits and wage resilience continue to exert upward pressure. The tension remains unresolved.
Currency markets face competing forces. Reduced trade escalation could temper safe-haven demand for the dollar. Yet relative U.S. growth and yield differentials still offer structural support. Conviction remains limited.
Emerging markets are unlikely to move uniformly. Economies closely tied to U.S. demand may feel slower export momentum if domestic growth softens. Commodity exporters could benefit if inflation expectations anchor raw material prices at elevated levels. Capital allocation is becoming more selective.
None of this implies smooth conditions ahead.
Political backlash to the court’s decision could generate renewed volatility. Legislative countermeasures remain possible. Trade partners will recalibrate strategy in response to shifting U.S. authority.
Markets tend to resist escalation but adapt to adjustment.
Trump’s tariff strategy was presented as transformative. The measurable economic payoff has been less decisive. Growth has moderated, inflation has persisted, and structural trade imbalances remain largely intact.
Investors are pragmatic. A policy losing legal footing does not automatically trigger liquidation. If the outcome is reduced uncertainty and steadier price dynamics, equities can continue advancing even as political narratives fragment.
Cautious optimism defines the current tone.
Risk appetite remains conditional. A renewed acceleration in inflation would alter expectations quickly. A material deterioration in employment would challenge confidence. Fiscal expansion without corresponding growth would intensify long-term sustainability concerns.Markets are not celebrating policy unraveling — they are recalibrating probabilities.
The assessment is sober: an economy that is softer but not broken; inflation that is persistent but not runaway; profitability concentrated but durable in structurally advantaged sectors.Trade authority may now face clearer constitutional limits. Structural investment in innovation continues.
Capital ultimately flows toward earnings visibility and long-duration growth themes. Tariffs have dominated headlines. Technology and AI dominate capital expenditure.
Investors are adjusting exposure and preparing for volatility — but not retreating.The tariff agenda is under pressure. Financial markets, for now, are looking past it.
THE ETERNAL SOVEREIGN 