Geopolitical Tensions Drive Energy Markets

Market sentiment remains focused on geopolitical tensions in the Middle East, with investors closely monitoring traffic through the Strait of Hormuz as a key indicator of energy supply risk. Escalating conflict concerns are steering oil and European gas prices, with analysts noting that the market reaction to geopolitical developments is currently overshadowing other fundamental news, such as changes in OPEC+ membership.

Gold Gains Capped by Inflation Concerns

Gold prices edged higher on safe-haven demand amid the fragile risk environment, but the gains remained modest. Analysts report that gold's traditional link to oil prices is currently being expressed through inflation expectations, as higher energy costs fuel concerns about a "higher-for-longer" interest rate outlook, limiting the precious metal's upside.

US Dollar Finds Support as a Safe Haven

The US Dollar received bids as a safe-haven asset due to lingering conflict risk, though the US Dollar Index (DXY) remained in a consolidation range. The currency's trajectory is also being influenced by domestic economic data, including reports showing a decline in US job openings for March and a slight easing in the ISM Services PMI for April.

Central Banks Navigate Inflation and Growth Risks

Central banks continue to signal divergent policy paths, with the Reserve Bank of Australia hiking rates but delivering a dovish message that suggests a future pause. In contrast, the European Central Bank indicated it does not yet see the inflation impact from oil prices as warranting a rate hike, while the effect of Japanese FX intervention was seen as fading against fundamental headwinds for the yen.