Asian Pacific markets mixed

US stock index futures pushed higher early this morning following a negative session on Friday when all the US majors ended at their lows. For the week overall, the Dow fared worse as it posted a 2% loss. The NASDAQ, S&P 500 and Russell 2000 fell 1.3%, 1.6% and 1.8%, respectively.

Source: TN Trader

The selloff across stock indices has largely been driven by surging oil prices and rising geopolitical risks linked to the conflict involving the United States, Israel and Iran.

On Friday, President Trump ordered strikes against Iranian military assets on Kharg Island, which handles around 90% of Iran’s oil exports, making it a critical component of global supply. He also warned that additional attacks on crude facilities located there remain possible.

Rising energy prices have increased concerns over the global economic outlook. And there will be no relief until the US military can wrest control of the Strait of Hormuz from Iran. This is a key shipping route responsible for roughly one-fifth of global oil and Liquefied Natural Gas flows.

President Trump has called on other nations to lend a hand in securing the safety of shipping passing through the Strait, since so many depend on the route for their energy supplies.

Elevated energy prices have raised fears that inflation is set to take off again. Yet even before the war started at the end of last month, several Federal Reserve governors were expressing concerns over growing inflationary pressures.

On Friday, the Fed’s preferred inflation measure, Core PCE, came in at 3.1% year-on-year, hitting its highest level in just under two years. This remains well above the Fed’s 2% target, and this is before the data takes account of the surge in energy prices.

It was also instructive to see that Financials were the worst performing S&P 500 sector last week. This comes as investors start to worry about lending standards in private credit, along with what the implications may be for banking and insurance.

Aside from this, there remain question marks over spending pledges and the return on investment related to AI. So, there are some serious issues which are weighing on investor sentiment. But the bears should be cautious.

Recent weakness could reverse suddenly, especially if Middle Eastern hostilities were suddenly to end. Investors are also monitoring corporate developments, including Nvidia’s highly anticipated GTC conference, which begins today.

There is also a clutch of rate decisions due this week with monetary policy meetings from the Reserve Bank of Australia, the US Federal Reserve, the Bank of Japan, the Bank of England and the European Central Bank.

European stock indices began the week on a slightly firmer footing despite persistent geopolitical uncertainty and elevated energy prices. All the European majors, along with the UK’s FTSE 100, were in positive territory early on as investors took some comfort from strength across US stock index futures.

Source: TN Trader

Yet investors remain cautious as the conflict in the Middle East continues to pose risks for energy markets, and by extension, the outlook for global growth. However, attention is also shifting toward an unusually busy week for global central banks. The Reserve Bank of Australia, the US Federal Reserve, the Bank of Japan, the European Central Bank and the Bank of England are all scheduled to hold monetary policy meetings this week.

Aside from expectations of a 25-basis point hike from the Reserve Bank of Australia, all the others are expected to keep interest rates unchanged. But central bank members are likely to address the economic implications of rising energy costs, geopolitical instability and stubbornly high inflation.

The US dollar was weaker across the board this morning as it took a breather after last week’s rally. This culminated with the cash Dollar Index making an impressive break above significant resistance at 100.00, a level which looked to be an insurmountable barrier back in November.

On Friday, the Index closed above 100.00, near its high for the day, and at its best level in ten months. It has pulled back below 100.00 this morning, but investors are watching closely to see if it can break and hold above here on its next rally attempt. The trigger for the pullback was a report saying that US Energy Secretary Chris Wright expects the conflict between the United States, Israel and Iran to end within the next few weeks.

Separately, Kevin Hassett, director of the US National Economic Council, said that the conflict was set to last four-to-six weeks in total, suggesting it should all be over by the end of this month, or by mid-April at worst. Despite these predictions, the greenback remains broadly supported by risk-averse sentiment and concerns that prolonged strength in energy prices could push inflation higher.

Meanwhile, the Japanese yen strengthened modestly ahead of a crucial week for central banks. Japan has also begun releasing oil from its strategic reserve to manage supply disruptions as the country remains heavily dependent on Middle Eastern energy imports.

Source: TN Trader

Gold sold off sharply overnight, breaking under $5,000 to hit its lowest level in nearly a month. But it recovered as the European session progressed, making back all its earlier losses to push back above $5,000 per ounce – a level which should still be seen as intermediate support, for now.

Gold prices struggled in the face of rising oil prices and stronger inflation expectations, as these both reduce the likelihood of near-term interest rate cuts from major central banks. But buyers came back in to push it back above support, encouraged by this morning’s pullback in the US dollar.

Source: TN Trader

Having tested $90 per ounce as resistance earlier last week, silver went on to post a succession of losing sessions. Despite this, it closed out on Friday above the key $80 mark, roughly the bottom end of its recent trading range, and therefore an area highlighted as a possible area of support. But it broke below here overnight, despite the weaker dollar, coming within a few cents of $77 in early European trade.

Investors are wary of taking on fresh long-side exposure to silver, following its parabolic rise at the end of January, which was the precursor to a 40% slump on the following day.

Silver has also come under some downside pressure on increased expectations that the Federal Reserve looks likely to maintain interest rates at current levels for an extended period.

Source: TN Trader

The Sunday before last, oil prices gapped higher as they reopened after the weekend. Front-month WTI hit its highest level since June 2022, just below $116 per barrel. It proceeded to pull back sharply, dropping 34% to trade near $76 last Tuesday. That filled in the gap on the chart, and since then, oil prices have rebounded again, with both Brent and WTI topping $100 per barrel overnight.

Source: TN Trader

The latest leg of the rally has been driven by the ongoing blockage of tanker traffic through the Strait of Hormuz, a narrow maritime corridor that typically carries about 20% of the world’s oil supply. The conflict escalated over the weekend after US forces targeted Iranian military facilities on Kharg Island, a hub responsible for roughly 90% of the country’s crude exports.

While President Trump stated that oil infrastructure was not directly struck, he warned that the United States could target crude facilities if Iran continues to attack shipping routes in the region. Washington is also pushing allied nations to assist in safeguarding the critical shipping lane.

According to reports, the White House could soon announce a multinational coalition to escort oil tankers through the Strait of Hormuz. The escalating tension has dramatically reshaped global energy markets and remains one of the most significant risks facing the global economy.

Bitcoin and Ether continue to build on gains, taking their recent rally into its second week. Earlier this morning, Bitcoin broke back above $74,000, taking it up to highs last seen in early February. It was a similar story for Ether as it pushed up above $2,250. Investors are left wondering whether the lows may now be in for cryptos and that a new bullish dawn is emerging, just in time for Spring.

In this regard, some analysts have been trying to explain what may be behind this renaissance, as tech stocks are hardly supportive of crypto strength, while a positive correlation to the US dollar is also a touch counterintuitive. Instead, it’s best to consider cryptos in isolation.

Both Bitcoin and Ether were looking oversold in early February, and they have taken over a month to start to steady and consolidate. The daily MACDs are looking constructive from a bullish perspective. But bulls should be careful now, as any reversal increases the danger of a break to fresh cycle lows.

The week ahead is shaping up to be one of the most important of the year for global markets. A packed central bank calendar includes policy decisions from the Federal Reserve, Bank of England, European Central Bank, Reserve Bank of Australia and Bank of Japan, all arriving against the backdrop of surging oil prices and escalating geopolitical tensions.

While markets expect policymakers to leave interest rates unchanged (except the Reserve Bank of Australia, which may raise rates), investors will closely examine forward guidance to understand how rising energy costs and the Middle East conflict could influence inflation and economic growth expectations.

For now, oil remains the dominant market driver, with WTI moving back above the $100 level and complicating the inflation outlook for central banks. US futures suggest a bullish fight-back to start the week, but sentiment remains fragile as geopolitical headlines can quickly shift market direction. With the ongoing Strait of Hormuz disruption and central banks preparing to update their outlooks, traders face a highly uncertain environment.