Asian Pacific equities recover

US stock index futures rallied on early trade this morning in a move which saw the S&P 500 push back above 6,600. This boost to sentiment followed reports that the US had sent Iranian officials a plan that could help bring the conflict to an end.

Source: TN Trader

The New York Times reported that Washington delivered a 15-point peace proposal to Iran via Pakistan, citing two unnamed officials. Earlier, President Trump said that Tehran was eager to reach an agreement, raising hopes that the situation may be improving following a weekend when it appeared that hostilities were about to escalate.

Yesterday, most US stock indices ended in the red. The Dow fell 0.2%, the S&P 500 dropped 0.4%, while the tech-heavy NASDAQ ended the session 0.8% lower. The small cap Russell 2000 managed a gain of 0.5%. US equities had already rallied strongly on Monday after President Trump said the US and Iran had held constructive talks aimed at ending hostilities. But it didn’t take long for Iranian state media to deny those claims.

The bottom line for risk assets is that the Trump administration wants an ‘off ramp’ to end the war, bring down oil prices and reboot equity markets. But Iran is in no hurry, given that its regime is in an existential crisis. And its trump card is that it continues to control traffic through the Strait of Hormuz. In other words, it can ‘humble’ the US by holding out for as long as it can.

President Trump is in a bit of a bind. He may declare victory at any time, as his war aims have been relatively vague. But if he does this while leaving the regime in place, he will have made a bad situation even worse. It sounds as if troops will have to go into force regime change, but that may be a step too far for the President.

European stock indices were firmer across the board on Wednesday as investors responded to US efforts to de-escalate the conflict with Iran. President Trump has insisted that negotiations with Iran were underway and that he had stepped back from threats to target energy infrastructure because discussions were ongoing. This pause is expected to conclude on Friday and was initially dependent on Iran reopening the Strait of Hormuz.

However, the Trump administration may now pivot to ongoing negotiations as a reason for holding off on attacking Iran’s oil and gas facilities. It has been reported that Washington has sent a peace plan to Tehran, although an Iranian military spokesman said the US was effectively negotiating with itself. Much still depends on the price of oil.

Both Brent and WTI were down about 5% this morning, although crucially, the Strait of Hormuz remains closed and controlled by Iran.

UK inflation held steady at 3% year on year, matching expectations, while core inflation rose to 3.2% from 3.1% previously. The reading reflected the final monthly data before the US and Israeli airstrikes on Iran began in late February.

The UK remains particularly exposed to rising global energy prices because of its reliance on oil and gas imports, limited storage capacity and a reluctance to redevelop oil and gas fields in the North Sea.

Source: TN Trader

It was yet another quiet start across FX markets this morning, with most of the major pairs little changed. The US dollar was a touch firmer against the euro, sterling and Japanese yen, and this helped to keep the cash Dollar Index above 99.00 for now.

Yet it has still failed to break and hold above key resistance at 100.00. If it continues to pull back after every attempt to rally through here, then that increases the possibility that it may have another lurch lower.

But the bulls should be encouraged by the US dollar’s relative resilience, given the Trump administration’s efforts to find an off-ramp and extricate itself from its war with Iran. At the outset of hostilities, the dollar rallied sharply on safe haven demand, and it remains significantly above pre-war levels.

Source: TN Trader

President Trump said Iran had offered a goodwill gesture linked to energy flows through the Strait of Hormuz, while reports suggested the US was seeking a one-month ceasefire to facilitate discussions.

Despite these developments, traders remained cautious after Iran rejected claims of diplomatic progress. Although a senior Iranian source confirmed messages had been exchanged through Pakistan, reports indicated a possible in-person meeting could take place in the coming days.

In the early hours of Monday, gold briefly dropped below $4,100 to trade at its lowest level since late November. The move extended a decline which began late last week after support around $5,000 per ounce finally crumbled.

Early this morning, the precious metal edged past $4,600 but then pulled back. Gold’s initial sell-off was linked to recent strength in the US dollar. Many investors were surprised that it was the greenback, rather than gold, which was sought out as a haven amid the chaos across the Middle East.

But gold’s parabolic rise at the end of January, followed by its dramatic collapse, meant it was no longer viewed as a safe and solid asset in times of uncertainty.

Source: TN Trader

Could this week’s early flush-out now set the stage for a rethink? Well, there’s still plenty of price volatility. But the bulls may be encouraged by the pullback in the dollar, and as gold has managed to push back comfortably above $4,400.

On the other hand, many investors are no longer expecting rate cuts this year from the Fed, and some think the next move could be a hike. That may weigh on gold sentiment to some extent.

Silver extended its winning streak for a third consecutive session. Having dropped to a four-month low of $61 per ounce on Monday, silver has exploded higher. It traded above $74.50 in the early hours of this morning before pulling back. Trading more than 2% higher around $73 during the European session, as diplomatic efforts to end the conflict supported expectations for improved energy supply conditions.

Monday’s selloff could prove to be the shake-out that silver needed; a move that drove out the weaker holders. If so, then it’s possible that the current rally has some legs, with $80 the next obvious upside target.

But silver remains volatile, and while there are signs that the daily MACD is trying to curl up from relatively oversold conditions, no one should be surprised if we see another lurch to the downside

Source: TN Trader

Both Brent and WTI declined sharply to trade south of $100 per barrel after President Trump said that the US and Iran were negotiating for the end of hostilities, while suggesting that Tehran was keen to reach a peace agreement. The New York Times reported the US delivered a 15-point peace proposal via Pakistan, although it remains unclear how widely the plan has circulated among Iranian officials or whether Israel would support it.

Source: TN Trader

Despite this, the news was the clearest signal yet that the Trump administration is looking for a way to bring hostilities to an end. Crucially, that should lead to the reopening of the Strait of Hormuz, which would mean the safe passage of oil, gas, helium, fertiliser components and all the other vital commodities required for the global economy. That’s the good news.

The bad news is that an early end to the war is likely to leave the hated Iranian regime in place. Not only will that mean an ongoing threat to Iranian civilians, but also to Iran’s neighbours around the Persian Gulf, Israel, the wider Middle East, Europe, the UK and the US itself. That’s not a good outcome. But then neither is a full-blown US/Israeli military invasion. What a mess.

Meanwhile, front-month WTI and Brent have clear resistance at $100 and $110, respectively. A break below $80 and $90, respectively, would be a healthy first step to restoring some stability to oil prices.

Bitcoin, along with other significant cryptos such as Ether and Solana, continues to show resilience. Bitcoin pushed above $71,000 this morning and is once again butting up against a band of resistance between $71,200 - $71,500. This month has seen a couple of significant higher highs and higher lows.

This has been reflected in the steady upside progress of the daily MACD, which suggests that momentum remains to the upside, despite some flattening-out around the neutral level this week. In the bigger picture, there’s significant support around $60,000, while $80,000 is the next major upside target.

The VIX remains elevated but has shown limited directional movement during the session so far. This reflects a market environment that remains cautious but relatively stable while investors wait for further clarity on negotiations between Washington and Tehran.

Markets appear relatively calm as investors wait for further clarity on President Trump’s proposed peace plan and the prospects for negotiations with Iran. Gold has found renewed support while oil trades broadly flat, but well below $100 per barrel, as traders assess whether diplomatic progress can reduce supply disruption risks linked to the Strait of Hormuz.

European markets opened constructively from a bullish perspective. Markets remain sensitive to news headlines and the price of oil.