Middle East Tensions Drive Energy Market Volatility

Geopolitical tensions centered on the Middle East remain a key market focus, with reports of stalled US-Iran talks adding to uncertainty. While Iran has reportedly proposed a deal linked to the Strait of Hormuz, the ongoing conflict threatens energy market disruptions for Gulf countries and has pushed Brent crude oil back above $100 per barrel. The economic fallout is also being monitored in Europe, with Germany’s finance ministry reportedly open to suspending its debt brake due to the conflict.

Gold Pressured by Rate Outlook Despite Softer US Dollar

Gold prices struggled to gain traction as the prospect of higher-for-longer interest rates weighed on the non-yielding metal, despite a broadly weaker US Dollar providing some support. Market sentiment saw some improvement following reports of a diplomatic proposal from Iran, which capped safe-haven demand. The softer greenback was observed as it lost ground against several major currencies.

Divergent Central Bank Policies Create Market Uncertainty

Major central banks appear to be on diverging paths as they navigate inflation and growth risks. While analysts still expect one more Federal Reserve rate cut this year, the European Central Bank is now seen as potentially hiking rates in June in response to the energy shock. Elsewhere, the Bank of England has adopted a more hawkish stance on sticky inflation, contrasting with the Bank of Japan's continued caution despite rising inflation data.