Escalating Middle East Tensions Fuel Market Uncertainty

Market sentiment soured as prospects for a US-Iran truce diminished, with reports of missile and drone threats from Iran against the United Arab Emirates. The conflict is centered around the Strait of Hormuz, and the IMF has warned of a "much worse outcome" for the global economy, including higher inflation, if the war drags on.

US Dollar Strengthens on Safe-Haven Demand

The US Dollar strengthened against a basket of major currencies as geopolitical fears in the Middle East prompted a flight to safety among investors. Consequently, currencies such as the Euro, Pound Sterling, Australian Dollar, and New Zealand Dollar faced selling pressure and traded at lower levels. The Japanese Yen, however, held steady, influenced by both the regional tensions and caution regarding potential currency intervention.

Crude Oil Prices and Commodity Currencies React to Conflict

Crude oil prices were elevated due to the escalating conflict, although West Texas Intermediate (WTI) prices saw some moderation as the US Navy moved to restore shipping in the Strait of Hormuz. The higher crude prices provided support for the commodity-linked Canadian Dollar, which strengthened against its US counterpart.