General selloff across Asian Pacific indices

US stock index futures were all modestly lower in early trade this morning. The drop followed a strong rebound in equities on Wednesday following the announcement after Tuesday’s close of a two-week ceasefire in hostilities across the Middle East.

Source: TN Trader

It’s obvious from the market reaction that investors were looking for any catalyst to justify extending their exposure to risk assets. And this pause in the US/Israeli bombardment of Iran fitted in perfectly, even as the holes in it are wide enough to steer an oil tanker through – unlike the Strait of Hormuz, which remains closed to most shipping.

On Tuesday night, President Trump confirmed that the US would pause attacks for two weeks after receiving Iran’s 10-point proposal. Tehran agreed to reopen the Strait of Hormuz provided hostilities stopped, and media reports indicated Israel also supported the ceasefire framework.

But yesterday Iran accused the US of violating the agreement through Israel’s continued strikes on Lebanon, a drone entering Iranian airspace and restrictions on uranium enrichment. Israel maintains that Lebanon plays no part in the ceasefire. It’s worth repeating that the Strait of Hormuz remains closed to most shipping.

It appears that investors remain wedded to the belief in TACO, that is, ‘Trump Always Chickens Out’. Taking this to its logical conclusion, this would imply that the ‘hot war’ between the US and Iran is now over, and that the current two-week ceasefire will be continuously rolled over until everyone in the US forgets that it has ever been at war in the Middle East. Israel may be a wild card here.

But the glaring problem with this is that, once again, the Strait of Hormuz remains closed. Worse than that, it is totally within Iranian control, irrespective of whether Iran lets shipping through or not. Arguably, this puts Iran in a stronger position than it was before the US/Israeli attack at the end of February. And economically, that’s bad for everyone, except perhaps China, Russia and North Korea. What the investing implications of this are is anyone’s guess.

On top of everything else, today’s key economic data releases include Core PCE (Personal Consumption Expenditures), which is the Federal Reserve’s preferred inflation gauge, along with weekly Unemployment Claims.

European stock indices were mixed in early trade on Thursday, albeit with a slight negative bias. The unbridled euphoria which greeted the two-week ceasefire between the US/Israel and Iran on Tuesday night has started to fray around the edges. It began showing signs of strain less than 24 hours after being announced.

Source: TN Trader

Yesterday afternoon, Iran’s parliamentary speaker stated that the US had already violated key elements of the truce agreement, and that Israel continued to bombard Lebanon. Both the US and Israel insist that Lebanon was not part of the deal.

Meanwhile, Iran continues to control the Strait of Hormuz, which is proving to be the ‘Trump’ card in this whole brouhaha. President Trump has blown hot and cold over this issue, at one point insisting that the Strait’s closure was of no importance to the US and then insisting that it is the key issue which could lead to the obliteration of a civilisation.

Mr Trump has reiterated that US military forces will remain deployed in and around Iran until Tehran complies fully with the peace plan, warning that any further violations could trigger a stronger response. Investors appear to be looking past this for now, having convinced themselves that the worst is over.

FX markets had another quiet start to the day. Traders sat on their hands ahead of key US inflation updates today and tomorrow, as the ceasefire between the US/Israeli coalition and Iran showed signs of fraying. The cash Dollar Index continued to trade just south of 99.00 after three consecutive days of declines.

The greenback was supported by renewed safe-haven demand as uncertainty surrounding the ceasefire agreement increased. Despite this, US Vice-President JD Vance signalled that the Strait of Hormuz could begin reopening as he prepares to lead a US delegation to Islamabad for talks with Iran later this weekend.

Minutes from the Federal Reserve’s March meeting were released last night. These showed that FOMC members broadly supported keeping interest rates unchanged and viewed policy as already close to neutral. This suggests that there is currently a high bar for additional tightening.

Source: TN Trader

In the early hours of Wednesday morning, gold broke above $4,850 to hit its highest level in three weeks. The rally came as investors poured into risk assets following the announcement of a two-week ceasefire between the US/Israeli coalition and Iran. But it didn’t take long for prices to come under renewed selling pressure.

By Wednesday evening, the precious metal had given back all its earlier gains to trade around $4,700. So far, this level has held as support. But investors appear unwilling to take on much more risk now as uncertainty surrounding the ceasefire saw the US dollar rebound.

Source: TN Trader

Arguments concerning the terms of the ceasefire continue to be made. Israel carried out a large wave of air strikes across Lebanon, and the Trump administration insisted that Lebanon was not included in the two-week ceasefire agreement with Iran. Tehran responded by blocking the transit of most shipping through the Strait of Hormuz.

Traders should keep a close eye on the US dollar, particularly around the release of key inflation data, with Core PCE later today and the CPI update tomorrow afternoon.

Silver has been on a similar journey to gold this week. It shot higher on Tuesday night following the announcement of the ceasefire as the US dollar tanked. It peaked at around $77.50 yesterday afternoon and has since sold off.

But it has managed to find some support around $74.00 so far this morning. Investors appear to be content to sit on their hands ahead of the first round of talks concerning a permanent ceasefire currently scheduled for Saturday in Pakistan.

Source: TN Trader

Silver had suffered some selling pressure over the past few weeks as oil prices surged following the closure of the Strait of Hormuz. Higher energy prices strengthened expectations of tighter monetary policy globally, which weighed on non-yielding assets.

But those expectations eased after the announcement of the two-week ceasefire, with the CME FedWatch Tool now showing a 71% probability that the Federal Reserve will keep interest rates unchanged this year.

Oil prices pushed higher on Thursday after Iran accused the US of violating elements of the two-week ceasefire agreement. This increased concerns that tensions could escalate again and disrupt global energy supplies. Despite this, both front-month Brent and WTI remain below $100 per barrel, and significantly below the multi-year highs hit four weeks ago.

Source: TN Trader

This morning’s rebound followed the sharp decline yesterday, which was triggered by the announcement of a two-week ceasefire across the Middle East late on Tuesday.

However, yesterday a senior Iranian policymaker accused the US of breaching three elements of Iran’s 10-point proposal, citing Israel’s continued strikes on Lebanon, a drone entering Iranian airspace and what he described as a denial of Iran’s right to enrich uranium. He said the repeated violations reinforced Tehran’s deep historical distrust of the United States. The Strait of Hormuz remains closed to most shipping and in Iran’s control.

Along with other risk assets, Bitcoin soared late on Tuesday following the announcement of a two-week ceasefire between the US/Israeli coalition and Iran. The rally continued into yesterday’s trade and saw Bitcoin hit a three-week high above $72,800 in the early afternoon.

It has pulled back and consolidated since then as conditions holding the ceasefire together appear both contradictory and fragile, with reports of strikes taking place across Iran and the Gulf States. Bitcoin’s moves mirrored those of global equity markets, which rallied after confirmation of a temporary ceasefire agreement just as escalation risks had been rising sharply.

Crucially, the Strait of Hormuz has not reopened to all shipping. In addition, while the US and Israel argue that Lebanon is not a factor within the current peace deal, Iran insists that it is.

Financial markets have given back some of their early gains, which came in the wake of Tuesday’s ceasefire announcement. The initial relief rally has morphed into a more cautious consolidation phase as investors reassess the credibility and durability of the pause in Middle Eastern hostilities and how this relates to the risk of more persistent inflation pressure from elevated energy prices.

The baseline expectation is that the war is effectively over, and that any temporary ceasefire will, as with Trump’s tariffs, be extended indefinitely. Time will tell if this is a correct assumption.

Investors will also pay attention to today’s key US data releases, which include Core PCE, the Fed’s preferred inflation measure, and weekly Unemployment Claims.