Markets Shift as Middle East Ceasefire Undermined

An extension of the US-Iran ceasefire initially boosted risk appetite in financial markets, leading to a weaker US Dollar against currencies like the Australian Dollar, Euro, and Japanese Yen. US President Donald Trump stated there was no set timeframe for a peace proposal from Iran while vowing to maintain a blockade on Iranian ports.

Hormuz Tensions Reverse Sentiment, Bolster US Dollar

The early risk-on mood quickly dissipated following reports that Iran had fired on three ships in the Strait of Hormuz just a day after the ceasefire was extended. This escalation created significant uncertainty, causing a flight to safety that strengthened the US Dollar Index. Consequently, risk-sensitive currencies like the Australian Dollar reversed their earlier gains.

Silver Prices Fall Amid Geopolitical Turmoil

Precious metals reacted to the shifting geopolitical landscape, with silver prices declining as the tensions in the Hormuz strait reportedly fueled inflation concerns. In contrast, crude oil prices remained elevated due to the heightened Middle East risk, which in turn had a mixed impact on currencies like the Canadian Dollar.

Asian Economic Data and Central Bank Watch

Amid the geopolitical headlines, markets also digested key economic updates from Asia. The People’s Bank of China set a slightly weaker midpoint for the yuan against the dollar. Separately, Japanese factory activity was reported to have expanded at its strongest pace in four years, while traders also monitored for potential changes in the Bank of Japan's policy stance.