Market Summary

Global financial markets ended last week with heightened volatility as geopolitical tensions in the Middle East continued to drive safe-haven demand for the U.S. dollar while pushing energy prices sharply higher.

The U.S. Dollar Index (DXY) climbed above the 100 level for the first time since November, closing at 100.52 and marking its third consecutive day of gains. The rally was largely fueled by investors shifting capital toward safer assets amid escalating conflict involving Iran.

Meanwhile, U.S. Treasury yields remained elevated, with the benchmark 10-year yield closing at 4.282%, while the 2-year yield, which closely reflects expectations for Federal Reserve policy, settled at 3.734%.

Currency markets also witnessed significant moves, with USD/JPY approaching the key 160 level, its highest level since July 2024, increasing speculation about potential intervention from Japanese authorities.

Gold Falls Below $5000 as Dollar Strength Weighs on Safe Havens

Gold prices continued to retreat despite ongoing geopolitical risks, highlighting the overwhelming influence of the strengthening U.S. dollar and rising inflation concerns.

Spot gold fell 1.14% on Friday, marking the second consecutive weekly decline, with total losses approaching 2.9% for the week. During early Asian trading on Monday, gold briefly fell below the psychological $5000 level, touching $4967.44 per ounce, the lowest level in nearly a month.

Many investors initially expected gold to benefit significantly from geopolitical tensions, but the combination of a stronger dollar and rising inflation expectations has reduced demand for the precious metal.

Market analysts note that while gold remains a traditional hedge against uncertainty and inflation, rising interest rates often weaken its attractiveness since the metal does not generate yield.

Oil Prices Surge as Strait of Hormuz Remains Blocked

Energy markets experienced a powerful rally as the Strait of Hormuz remained blocked, raising fears of significant supply disruptions in one of the world’s most critical oil transit routes.

WTI crude oil surged 3.04%, closing at $99.29 per barrel, while Brent crude briefly climbed above $100, finishing the session at $100.90 per barrel.

Oil futures also posted strong weekly gains, with Brent rising more than 11% and WTI increasing around 8% during the week.

Iran’s new Supreme Leader Mojtaba Khamenei stated that the country would continue to block the Strait of Hormuz as a strategic response against the United States and Israel.

Additionally, Iraqi security officials reported that two oil tankers anchored in Iraqi waters were attacked by Iranian vessels carrying explosives, forcing oil ports to halt operations entirely.

These developments have significantly heightened fears of a prolonged disruption to global energy supplies.

Trump Signals Possible Strike on Iran

Adding further uncertainty to the geopolitical landscape, U.S. President Donald Trump announced that the United States could launch “very severe strikes” against Iran within the next week.

At the same time, Washington introduced a 30-day temporary license allowing certain countries to purchase stranded Russian oil, an attempt to stabilize global energy markets during the conflict.

According to U.S. Treasury officials, the measure could involve approximately 100 million barrels of Russian crude, although analysts believe it will only partially ease supply concerns.

The primary market risk remains the possibility that energy infrastructure could be damaged during the conflict, which would create long-term disruptions to global oil supply.

Dollar Strength Pressures Euro and Yen

The dollar’s rally has put significant pressure on other major currencies, particularly those tied to energy-importing economies.

The euro fell 0.6% to $1.14395, as investors grew cautious ahead of the upcoming European Central Bank policy meeting later this week.

Economists remain hesitant about aggressive monetary tightening in economies heavily dependent on imported fuel, prompting some banks, including Rabobank, to revise their euro forecasts lower.

Meanwhile, the Japanese yen weakened to 159.67 per dollar, approaching levels that previously triggered government warnings about currency intervention.

Japan’s Finance Minister stated that authorities are prepared to take necessary measures if excessive volatility continues in currency markets.

Analysts suggest that rising oil prices are particularly damaging for Japan because the country relies heavily on energy imports, which increases pressure on its trade balance and currency.

Gold Market Outlook

Although gold prices have declined recently, analysts remain divided about the metal’s long-term prospects.

Independent precious metals traders argue that the structural drivers for gold—including geopolitical uncertainty and inflation risks—remain supportive over the long term.

However, Commerzbank analysts emphasized that rising expectations for tighter monetary policy are currently the primary factor weighing on gold prices.

Recent U.S. economic data reinforced this narrative. Consumer spending in January exceeded expectations, while core inflation remained elevated, strengthening the view that the Federal Reserve may keep interest rates higher for longer.

Market Outlook

Markets are entering a crucial period as geopolitical tensions, rising oil prices, and resilient U.S. economic data reshape expectations for global monetary policy.

The ongoing conflict in the Middle East continues to drive volatility across commodities, currencies, and equities. While oil prices are benefiting from supply fears, gold has struggled under the weight of a stronger dollar and rising interest rates.

Investors will now closely monitor central bank signals and geopolitical developments to determine whether the current trends—stronger dollar, weaker gold, and higher oil prices—will continue in the coming weeks.