Geopolitical Tensions Dominate Market Sentiment

Heightened geopolitical tensions between the US and Iran remain a primary focus for markets, with an extended ceasefire offering only limited relief to risk sentiment. The situation is widely viewed as a temporary pause rather than a resolution, creating persistent uncertainty and keeping major currency pairs like EUR/USD and USD/JPY trading cautiously within established ranges.

Oil Shock Revives Stagflation Concerns

The geopolitical friction has fueled a significant energy supply shock, pushing Brent crude oil towards $100 a barrel and reviving fears of stagflation. Analysts note the combination of rising inflation and slowing growth is a particular risk for the Eurozone, while weaker growth signals are also emerging in Australia.

Central Banks Face Complicated Policy Outlook

Rising energy prices are complicating the path for global central banks, with inflation data impacting policy expectations. In the UK, higher inflation is expected to keep the Bank of England on hold, while the European Central Bank faces pressure to temper any rate hike urgency due to growing economic risks.

US Dollar Strengthens as Fed Rate Cut Expectations Pushed Back

The US Dollar has found support from a combination of safe-haven flows tied to geopolitical risk and shifting monetary policy expectations. Renewed inflation risks are causing economists to push back the timeline for potential Federal Reserve rate cuts to September, while the dollar's resilience is also attributed to its appeal amid tightening global financial conditions.

Gold Holds Ground Amid Cautious Trading

Gold prices have been trading in a range, finding support from the ongoing geopolitical uncertainty even as traders assess the next steps in the US-Iran conflict. The precious metal trimmed some earlier gains but remains supported by underlying safe-haven demand as the deadlock persists, keeping market participants cautious.