Asian Pacific equities mixed

US stock index futures rallied sharply overnight. This came after reports suggested that the Trump administration may seek a quick exit from military operations in Iran, withdrawing even if the Strait of Hormuz remains shut. This follows hot on the heels of President Trump’s threats to target Iran’s energy infrastructure and even desalination facilities should the Strait remain blocked.

At the same time, US forces are arriving in the Middle East, and speculation continues to swirl about ‘boots on the ground’ even if this means a relatively limited objective of seizing Iran’s Kharg Island, the main terminus for the country’s oil exports, rather than invading the whole country.

Early in the Asian Pacific session, the S&P traded at lows last seen over six months ago, with the implied cash market dropping within a few points of 6,300. By mid-morning, it was back above 6,400, broadly mimicking yesterday’s early price action. On Monday, US stock index futures peaked at midday GMT and then proceeded to sell off to new cycle lows. We’ll see if there’s a repeat today.

Source: TN Trader

Federal Reserve Chair Jerome Powell spoke yesterday. He was generally upbeat, particularly over the medium to long term. He insisted that the US economy was dynamic and highly productive, although the labour market was likely to face pressures from longer-term secular forces.

He also said inflation remains in check and that there is currently no need for interest rate hikes. His comments led to a sharp rally in US Treasuries as yields dropped. There was also a big reversal in the CME’s FedWatch Tool.

While investors continue to forecast no change to interest rates this year, the probabilities of one hike versus a cut switched around after his comments. It now appears more likely that there will be a rate cut rather than the hike anticipated before his speech.

European stock indices opened in positive territory, boosted by early gains across the US stock index futures. The rally came despite continued strength across oil markets, which saw front-month WTI break and hold above resistance around $100 per barrel.

Source: TN Trader

Yet Brent crude managed to hold below its own band of resistance around $110. Traders continue to be buffeted by conflicting statements from President Trump concerning the next steps in the US/Israeli war with Iran.

Yesterday, President Trump said he may be willing to end military hostilities even if the Strait of Hormuz remains largely closed. Yet he had also threatened to attack Iran’s energy and desalination infrastructure should Tehran continue to block the Strait. There are concerns that forcing the reopening of this chokepoint could extend the conflict beyond its expected timeline.

US Secretary of State Marco Rubio told G7 leaders that Washington’s objectives in Iran would be achieved within weeks rather than months, with the suggestion that it should all be over by the end of April.

The US dollar was a touch weaker across the board this morning, giving back a modest amount of its recent gains. Overnight, the cash Dollar Index hit its highest level since May 2025, just a few cents short of 100.50. But it subsequently pulled back on profit-taking following a strong performance over the past week.

The pullback followed reports that the Trump administration may be willing to end military operations in Iran even if the Strait of Hormuz remains closed. Although this runs counter to the US build-up of troops and assets in the region. President Trump also warned that massive strikes on Iran’s energy infrastructure remain possible if the chokepoint is not reopened.

Meanwhile, Federal Reserve Chair Jerome Powell delivered an upbeat speech at Harvard yesterday afternoon. This proved to be more dovish than anticipated, leading to a sharp drop in US Treasury yields. It’s a testament to the dollar’s current strength that it pushed up even as rate hike forecasts were priced out for this year.

The USD/JPY continued to pull back below the 160.00 level as traders balanced mixed signals from inflation data and geopolitical developments. Softer Tokyo consumer inflation reduced expectations for immediate tightening by the Bank of Japan.

Source: TN Trader

However, hopes for potential de-escalation in the Middle East limited upside for the US dollar and helped cap gains in the pair. Intervention concerns also contributed to cautious positioning as traders remained wary of action from Japanese policymakers to strengthen the yen.

Gold was firmer again this morning, building on gains made since last Friday. At the end of last week, gold was trading south of $4,400. But overnight it rallied to $4,620 to hit its highest level in eleven days. It has since pulled back. But the chart does suggest some trading parameters, as it now looks as if there’s some decent support around $4,400.

A prolonged break below here would increase the risk of a retest of $4,000. But if gold can push through $4,600 again and then hold this level on any pullback, then technically, the chart will look as constructive as it did in late December.

Source: TN Trader

That's not to suggest for a minute that a rally to fresh all-time highs is likely. But it does increase the possibility of further gains to come. The big question now is whether gold can continue to make further upside progress, even if the dollar rally has legs.

Silver appears to have built its own base around $67-$68 per ounce. It pushed up to $73.50 this morning, leaving it still somewhat below last Wednesday’s high of $74.58. The big question now is whether silver can harness enough upside momentum to take it back up towards $80 per ounce. It does appear to be shrugging off recent dollar strength and once again marching to the beat of its own drum.

Source: TN Trader

But the situation across the Middle East is extremely fluid, and President Trump isn’t making it easy to analyse what may be about to happen next. Will the US end military operations without reopening the Strait of Hormuz?

Will it engage ground troops to seize Kharg Island, or will President Trump really unleash a full attack on Iran’s energy infrastructure and desalination facilities, thereby threatening Iranian citizens, rather than Tehran’s regime? All apparently unknowable as things stand.

Both Brent and WTI crude oil were firmer in early trade this morning. This saw front-month WTI continue to trade above the resistance of over $100 per barrel. The question is whether this is the precursor to higher prices from here, or if it is just a temporary overshoot, just like last week’s brief undershoot of support around $90.

Source: TN Trader

What is perhaps of greater importance, at least to those of us in the UK and Europe, is that front-month Brent remains a few dollars below its own key resistance area around $110. This is the world’s most important benchmark, as WTI deals with US production, and the US is largely self-sufficient.

The UK, Europe and Asian Pacific are heavily reliant on imported energy. Can we read much into this? Not on its own. However, looking at contracts for future delivery shows a market in sharp backwardation.

That means that supply is tight in the immediate-to-short term but is expected to loosen up considerably the further out you go. That suggests that the conflict in the Middle East may be over soon, according to the oil market, anyway.

Bitcoin was little changed this morning and continues to hold in the relatively tight range which has been building since early February. Save a brief bounce towards $76,000 a fortnight ago, that range has been marked by resistance around $72,500 with support coming in at $64,000.

So, from this perspective, with Bitcoin trading around $67,000 this morning, nothing has changed significantly.  But it is worth noting that crypto performance has stood out relative to equities. The NASDAQ 100 has lost around 7% over the past week, while Bitcoin has maintained its range and has not broken structurally lower during the conflict.

Investors must now consider whether the potential for de-escalation removes headline risk or if the continued closure of the Strait of Hormuz keeps inflation expectations elevated, thereby delaying interest-rate cuts.

Global stock indices are pointing up as markets enter the final trading day of the month and quarter, with attention focused firmly on inflation and energy prices.

Front-month WTI oil is above $100 and continues to represent a major concern for policymakers and investors, particularly as only six ships per day are currently passing through the Strait of Hormuz compared with around 135 during normal conditions.