Asian Pacific indices close down

US stock index futures opened lower on Sunday night, contributing further to Friday’s sharp losses. Both the NASDAQ 100 and S&P 500 gapped down in the early hours of this morning, to hit their lowest levels since early August. But buyers then came in and pushed prices higher, carving out a path of least resistance, at least in the short-term. This saw the S&P 500 edge back above 6,400, having dropped close to 6,300 earlier in the session.

Source: TN Trader

On Friday night, all the US majors ended on their lows for the session, with the Dow, S&P 500 and NASDAQ closing at multi-month lows. Investors were anxious to reduce their exposure ahead of a weekend in which anything could happen. It’s also worth noting that tomorrow marks the end of the first quarter, and this is a holiday-shortened week, which, nonetheless, has an important Non-Farm Payroll release on Good Friday.  

Meanwhile, the Middle East war enters its fifth week. This appears to be escalating as more US ground troops arrive in the area. There is much speculation concerning the possibility that US forces may attempt to seize Kharg Island and thereby look to grab control of Iran’s oil output.

This would be a high-risk move, particularly as once captured, the island would need to be held. But it could be that this threat is part of a gambit to get the Strait of Hormuz reopened. Secretary of State Marco Rubio told G7 members to expect the war to continue for an additional two-to-four weeks, thereby managing expectations and looking for an end to hostilities by the end of April.

The closure of the Strait of Hormuz is causing huge issues across the globe, particularly for Asian Pacific and European countries reliant on energy and fertiliser components from Gulf States. Oil prices have picked up again today. But if investors feel confident that this could all be over in a month’s time, then that would take off some negative pressure. But it’s difficult to take face value as things stand.

Federal Reserve Chair Jerome Powell will speak at Harvard this afternoon. The Fed’s last monetary policy meeting saw the release of the latest ‘Dot Plot’. This indicated that FOMC members are still pencilling in one 25 basis point rate cut before year-end. But the CME’s FedWatch Tool is forecasting ‘no change’ in 2026, while the likelihood of a rate hike is well above the likelihood of a cut.

This has seen Treasury yields shoot up, with the 10-year Note hitting 4.48% last week, its highest level since last July. Traders will be anxious to hear Mr Powell’s views as he approaches the final two months of his tenure.

European stock indices were mixed on Monday morning. The UK’s FTSE 100 pushed into positive territory, regaining the 10,000 level, having crashed through it last Thursday. Oil giants BP and Shell gave the index a boost, although it remains a fair way below its record high above 10,900 from this time last month. The German DAX was a touch weaker.

Source: TN Trader

Tensions rose following comments from President Trump over the weekend suggesting the possibility of targeting Iran’s export hub at Kharg Island, while Yemen’s Houthi movement confirmed it had fired ballistic missiles at Israeli military sites in support of Iran and allied Hezbollah forces. The attack reminded investors that the Houthis can hit shipping as it passes up and down the Red Sea and through another regional chokehold, Bab el-Mandeb.

The Japanese yen was firmer across the board overnight. This saw the USD/JPY trade up above 160.00 to hit its highest level since July 2024, just after Japanese policymakers intervened to support the yen. The yen strengthened this morning after comments from Japanese officials raised expectations of a fresh intervention to stabilise the currency.

Statements from the Bank of Japan Governor and Japan’s Vice Finance Minister for International Affairs encouraged short covering in the Yen. This saw the USD/JPY pull back towards 159.50. However, economic uncertainty linked to the expanding Middle East conflict continues to limit the potential for significant yen appreciation.

Source: TN Trader

Otherwise, the US dollar traded near a two-week high despite a slight pullback in early Asian Pacific trade. This reflected a continued ‘flight-to-safety' as geopolitical tensions intensified. The cash Dollar Index sent a good chunk of the morning trading above 100.00.

It was supported by reports that the Pentagon is considering sending additional troops to the Middle East. Higher oil prices linked to the conflict are strengthening expectations that the Federal Reserve could leave interest rates unchanged in 2026 or even raise them. This is in stark contrast to the dovishness expressed earlier this year.

Gold hit $4,550 early in Monday’s European session, as traders came in to take advantage of its recent selloff. Just under a fortnight ago, support gave way at $5,000 to begin a move which saw gold plunge to $4,100 this time last week. Since then, it has made a jagged recovery, clawing its way back above $4,400.

Source: TN Trader

This should now be considered gold’s first significant line of support on any subsequent pullback. Investors increasingly expect major central banks to adopt more hawkish policy stances as energy-driven inflation pressures continue to build.

These concerns intensified over the weekend after it was suggested that US troops could attempt to seize Kharg Island and thereby take control of Iran’s oil exports. The conflict is also raising fears of disruption by Yemen’s Houthis of the route through the Bab el-Mandeb Strait. This would add to supply strains given the effective closure of the Strait of Hormuz.

Silver prices were also firmer during early European trading. This came even as speculation increased that central banks would be forced to tighten monetary policy to counter higher inflation due to the jump in oil prices.

Silver was supported by escalating geopolitical risks following direct missile strikes by Yemen’s Iran-backed Houthis on Israeli military sites. This boosted worries that oil prices could remain elevated for longer, reinforcing concerns about persistent global inflation.

Source: TN Trader

Crude oil has been edging higher ever since Wednesday morning. This time last week, front-month WTI again tested resistance around $100 per barrel. But it got rejected here and pulled back sharply before finding support around $85-$86. Overnight, it pushed above $100 for yet another attempt to break above resistance. This marks the top of a clear trading range which has been developing over the past three weeks.

Source: TN Trader

Support has come in around $90 for much of this time, although it looked as if it had broken at the beginning of last week. Perhaps there will be a mirroring of that move this week. If so, investors will have to be wary of reading too much into a break above $100. So much of crude’s price movements seem headline-driven, and this leads to a very volatile trading environment.

Bitcoin managed to reverse direction this morning, having dropped sharply late last night. It found support at $65,000 and proceeded to push up from here before running out of steam just below $68,000. Bitcoin has had a good run since hitting a four-month low of $60,000 in early February.

It managed to rally during the first two weeks of this month, even as other risk assets fell sharply due to concerns over higher energy costs, thanks to the US/Israeli war with Iran. Just under a fortnight ago, it peaked at $76,000, then dropped below $70,000 last Thursday.

But despite the two-week selloff, there hasn’t been any technical damage so far, with support holding around $64,000. The bulls need this level to hold and then see a prolonged break above $80,000 to have greater confidence that a sustainable rally can take hold.

Market volatility remained elevated. Overnight, the VIX ticked up to its highest level since last April, in the aftermath of the Trump Tariff Temper Tantrum. The VIX continues to reflect heightened uncertainty across global markets as the Middle East conflict expands and investors adjust expectations for inflation, interest rates and energy supply disruptions.

The Middle East war continues to dominate market sentiment as investors react to conflicting messaging around potential developments and the possibility of deeper US engagement. Reports suggesting military operations to extract Iran’s uranium and potential targeting of water and power facilities in Kuwait have reinforced concerns about further escalation.

Oil supply remains a central concern for markets, particularly as Yemen’s entry into the conflict adds a new dimension that could extend the timeline for hostilities. With the quarter ending tomorrow, traders are watching whether equities can recover some ground, while attention also turns to comments from Federal Reserve Chair Jerome Powell later today.