Geopolitical tensions sent shockwaves across global markets

Stocks and precious metals plummeted globally early Monday due to escalating tensions in the Middle East, resulting in significant sell-offs. However, markets experienced a slight rebound after US President Trump instructed the Department of War to delay all military strikes against Iranian power plants and energy infrastructure for five days.

The recent geopolitical tensions escalated after President Trump issued an ultimatum to Iran, giving the country 48 hours to fully reopen the Strait of Hormuz. He warned that the United States would destroy Iranian power plants if Tehran failed to comply. In response, Iran cautioned that it would carry out retaliatory attacks on regional infrastructure if the U.S. followed through on its threat.

Gold tumbles while the dollar gains

The dollar index held a firm tone in early Monday trading as US-Iran tensions entered their fourth week. The US dollar continued its advance across the board, driven by safe-haven demand amid Hormuz tensions and hawkish signals from the Federal Reserve. The dollar is expected to maintain its upward trajectory in the coming hours due to escalating trade war tensions and global uncertainty.

Gold prices tumbled to their lowest level in four months, marking a significant decline as the elevated dollar weighed on bullion demand. Meanwhile, crude oil futures slightly retreated from early Asian highs. However, overall momentum remains neutral to bullish, as the closure of the Strait of Hormuz keeps oil prices elevated, pushing transport and manufacturing costs higher.

Volatility is expected to remain high this week

Volatility has gripped markets throughout this month. Looking ahead, geopolitical tensions in the Middle East and concerns about inflation continue to be the main factors influencing market activity this week. At the same time, investors are uncertain about the future trajectory of inflation and interest rates, especially after all major central banks maintained steady rates last week while reiterating their readiness to take action to curb inflation. Investors are also keenly awaiting the release of flash Purchasing Managers’ Index (PMI) data from Germany, the EU, the UK, and the US on Tuesday.

 

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