South Korea’s Kospi stages historic rebound

US stock index futures were little changed this morning, having sold off modestly overnight. All the majors posted decent gains on Wednesday. The Dow ended 0.5% higher, the S&P 500 was up 0.8%, while the NASDAQ and Russell 2000 added 1.3% and 1.1% respectively. Once again, equities had a negative start to Wednesday’s session but went on to finish strongly.

Investors continue to respond to headline news concerning the US-Israeli attack on Iran with price action across the energy complex a major consideration. The US Senate supported the Trump administration’s actions against Iran.

Yet it remains unclear how long hostilities may last, and there are also concerns over Iran’s response as it retaliates by launching missile and drone attacks against near-neighbours. But worries eased after President Trump said the US would provide insurance and naval escorts for ships in the Persian Gulf, aiming to protect traffic through the Strait of Hormuz.

Earlier today, a US military official said that Iran had failed to close this important chokepoint for energy transport. In addition, Defence Secretary Pete Hegseth said the US is “winning decisively” in the conflict and that additional forces were arriving in the region.

Meanwhile, Treasury Secretary Scott Bessent confirmed that a 15% global tariff should take effect this week. Offsetting this, there have been some encouraging data releases. Yesterday brought a positive ADP Payroll update, which comes ahead of tomorrow’s official Non-Farm Payrolls. In addition, the ISM Services PMI came in significantly above expectations, adding to Monday’s decent ISM Manufacturing data.

US Treasuries have shown little evidence that they are in demand as a ‘flight to safety’ with the yield on the 10-year pushing up following a sharp dip on Monday. In terms of rate cut expectations, the CME’s FedWatch Tool indicates that ‘real money’ flows favour a 25-basis point (bps) cut in September, rather than June as previously forecast, while the probability of two rate cuts this year has dropped a touch.

This follows some hawkish comments from several Fed governors made prior to the start of US-Israeli military action on Saturday. The S&P 500 continues to give mixed signals. The index fell to a three-month low on Tuesday but has subsequently bounced. Yet it remains unclear whether US equities have regained enough upside momentum to resume a rally which could target resistance around 7,000 – the S&P’s all-time high last tested four weeks ago.

Source: TN Trader

Like the US, European stock indices have bounced back off the lows hit on Tuesday. But they were mixed in early trade this morning, albeit with a modest upside bias.  are set for a mixed open as investors monitor intensifying developments in the Middle East.

Source: TN Trader

Even Spain’s IBEX 35 has rebounded, despite President Trump’s threat to cut off trade with Spain following its refusal to allow US forces to use military bases for strikes on Iran. Are you watching, Sir Kier?

The US dollar continues to find support, although it has pulled back from the highs hit on Tuesday. Having traded above 99.30 earlier this week, the cash Dollar Index quickly dropped back below 98.50. But it found some support around this area and was once again pushing back up towards 99.00 in early European trade. There’s plenty of talk about the greenback regaining its ‘safe-haven’ role.

Source: TN Trader

It has certainly outperformed both the Swiss franc and Japanese yen, two currencies often in demand when investors look for safety. But the Swissy lacks the depth of the dollar, while the yen has issues of its own. On one side, there’s the Bank of Japan anxious to tighten monetary policy as inflation heads higher.

On the other hand, there is Prime Minister Sanae Takaichi, who wants to cut taxes and increase spending to boost economic growth. Meanwhile, the dollar has also benefited from hawkish comments from several Federal Reserve governors, along with a blast of short-covering as traders rushed to reduce their negative dollar exposure.

Gold was firmer this morning, although it had pulled back from the highs hit during the Asian Pacific session. Investors seem to be in two minds as to whether gold can still work as a safety trade, or if its January high represents a peak for now. Concerns still hover over financial markets as investors worry about hostilities escalating further across the Middle East.

Source: TN Trader

The US and Israel continue to carry out strikes on Iran, while the Iranian retaliation is reported to be weakening. This could be because Iran is running out of ordnance. But there’s also a fear that it may be holding back for now as it prepares for a major response.

Yesterday, a US submarine sank an Iranian warship, marking a significant escalation. While tentative reports of possible diplomatic outreach surfaced briefly, Tehran has denied any formal communication, keeping uncertainty elevated.

Gold has managed to recover a significant proportion of the losses made at the beginning of the week. This was when it briefly dropped below $5,000 per ounce. In contrast, silver’s recovery has been less impressive. It appears to be building some support around $80 per ounce, although it remains well below its all-time high above $121 from the end of January.

Source: TN Trader

Crude oil rallied sharply overnight. This saw front-month WTI top Tuesday’s multi-month high by a couple of cents. Oil prices remain elevated, and as things stand, there’s no sign that either WTI or Brent looks set to reverse direction and fill the price gap that opened up between Friday’s close and Monday’s open.

Source: TN Trader

This is despite President Trump’s assurance that the US will ensure affordable insurance rates for tankers passing through the Strait of Hormuz, along with providing naval protection. There was a modest dip after a US military official declared this morning that Iran had failed to close off the Strait.

Yet sentiment wasn’t helped after Iran launched a missile attack on Israel this morning, and after a US submarine torpedoed an Iranian frigate yesterday off the coast of Sri Lanka. Iran promised to retaliate, and there are unsubstantiated reports today that Iran has struck a US oil tanker. 

Oil has, perhaps more than any other market, been driven by headlines concerning the ongoing hostilities across the Middle East, particularly around the Strait of Hormuz.

Bitcoin rallied over 6% yesterday, briefly topping $74,000 to hit a four-week high. It was a touch softer overnight, but continues to press up against an area of resistance which held prices down between March and June 2024. This is a big test for the cryptocurrency as it attempts to hold above $70,000 on any pullback.

There have been strong flows into US Bitcoin exchange-traded funds so far this month, which is evidence of renewed investor interest. Despite the rally, traders remain cautious given ongoing geopolitical risks and the broader volatility backdrop.

Markets remain highly sensitive to geopolitical headlines as the US–Iran conflict enters its sixth day. Defence Secretary Pete Hegseth maintains that the US is “winning decisively,” while President Trump has secured Senate backing to continue operations. Treasury Secretary Scott Bessent confirmed that a 15% global tariff will begin this week, adding another macro layer for investors to assess.

Meanwhile, central banks globally face renewed inflation pressures as higher oil prices complicate the fight against rising consumer costs. Investors will monitor weekly Unemployment Claims, gas storage data, import prices and further Federal Reserve commentary, alongside earnings from major retailers including BJ’s Wholesale, Costco and Kroger.

The March VIX remains comfortably above 20, reflecting persistent volatility. With the cash US Dollar Index steady just south of 99.00 and oil prices closely watched for a potential move toward $100, markets appear to remain firmly driven by headlines in the near term.