Middle East Tensions Boost Oil and the US Dollar

Renewed tensions in the Middle East dominated market sentiment after hopes for a US-Iran deal faded, causing crude oil prices to jump. The deteriorating geopolitical situation spurred a risk-off mood, leading to a broad-based strengthening of the US Dollar as investors sought safe-haven assets. This dynamic was further supported by stronger-than-expected US manufacturing data, which reinforced confidence in the American economy.

Gold Prices Decline on Inflation and Rate Fears

Gold prices fell below $4,500, retreating as the market processed the implications of rising geopolitical risk. Concerns that surging oil prices will fuel inflation and reinforce expectations for elevated interest rates from the Federal Reserve weighed on the non-yielding precious metal. The stronger US Dollar also created a significant headwind for gold, which typically moves inversely to the greenback.

Mixed Global Economic Signals and Policy Divergence

Outside of the US, economic data presented a complex picture, with reports on China showing dynamic exports but sluggish domestic demand and ongoing stress in the property sector. Central bank policies continue to diverge, as sharp swings in rate expectations for European banks contrast with Japan's ongoing struggle against a weakening yen. Meanwhile, the Reserve Bank of New Zealand remains one of the few developed market central banks with a hawkish bias.