Markets Rally on Middle East Hope – Dow up 1.4%
Global financial markets experienced one of their most volatile trading sessions of the year overnight, as conflicting updates surrounding developments in the Middle East drove sharp moves across financial products. President Trump advised of progress on a ceasefire, before the Iranians denied any talks had taken place. US equity indices finished the session higher, with the Dow Jones rising 1.38% to close at 46,208, while the S&P 500 gained 1.15% to end at 6,581. The Nasdaq also advanced 1.38%, finishing the day at 21,946. In currency markets, the US dollar ultimately dropped, with the DXY falling 0.38% to 99.13. Meanwhile, US Treasury yields moved lower across the curve, with the 2-year yield declining 4.8 basis points to 3.853%, while the benchmark 10-year yield eased 3.8 basis points to 4.342%. Energy markets remained the key driver of volatility throughout the session. Despite the sharp intraday swings, oil prices still finished significantly lower, with Brent closing down 10.63% at $100.26 per barrel, while WTI fell 9.49% to settle at $88.90 per barrel. Gold also saw dramatic price action during the day. The precious metal dropped close to 10% at one stage before staging a strong recovery later in the session. By the close, gold was down a more modest 1.89%, finishing at $4,407.18 per ounce, having hit a low just under $4,100.
Markets Swinging Wildly on Geopolitical Updates
Financial markets are swinging wildly on geopolitical updates in the current environment, and traders are expecting to see more volatility on claim and counterclaim regarding the Middle East conflict in the days ahead. Yesterday, comments from President Trump suggesting progress toward a ceasefire—including an extension to a proposed deadline on potential strikes against Iranian energy infrastructure—initially sparked a strong risk-on move. Oil prices plunged more than 14% at one stage, equities rallied, while US Treasury yields and the US dollar fell sharply. However, those moves were partially reversed after Iranian sources denied that any negotiations had taken place, leading to significant intraday volatility across markets. Despite the back-and-forth price action, markets ultimately settled with a more constructive tone by the close. However, much will now depend on the actual truth of the matter, and while traders have to respond to updates, the next longer-term moves will only come once there is confirmation on the real state of play in the Gulf.
Data Ahead on the Calendar, but Geopolitics to Dominate
Looking ahead, today’s macroeconomic calendar is dominated by a series of flash PMI releases across both Europe and the United States, setting the tone for what is expected to be another volatile trading session. The Asian session is relatively quiet in terms of data releases. An update from Anna Breman, Governor of the Reserve Bank of New Zealand, has already been delivered, although it has had limited market impact following the significant overnight moves. With little else on the calendar, price action is expected to remain driven by external factors, keeping markets choppy.
The calendar is busier once Europe opens, where a raft of flash manufacturing and services PMI data will be released. Key updates are due from France, Germany, the Eurozone, and the United Kingdom. In the New York session, flash manufacturing and services PMI data are scheduled shortly after the open, followed shortly after by the Richmond Manufacturing Index, with expectations set for a -5 print. Later in the session, Martin Schlegel, Chairman of the Swiss National Bank, is due to speak at an event in Zurich. Overall, with a heavy data calendar and ongoing global uncertainty, markets are expected to remain volatile throughout the day.
