Ceasefire Uncertainty Sparks Concerns Across      Markets

The EUR/USD pair edged lower on Wednesday, as the Euro came under pressure against a firmer US Dollar amid escalating uncertainty in the Middle East.

Tensions in the region remain elevated despite a recently announced ceasefire between the United States and Iran. Reports of continued clashes, including in Lebanon, have raised doubts about the durability of the agreement. Iranian officials have reportedly described ongoing peace negotiations as “unreasonable” under current conditions, signaling a potential setback in diplomatic efforts.

Heightened geopolitical risks have bolstered demand for safe-haven assets, providing underlying support for the US Dollar.

Market participants are now turning their attention to the upcoming US Consumer Price Index (CPI) data for March, due on Friday. Headline inflation is expected to accelerate to 3.3% year-over-year, up from the previous 2.4%, largely driven by rising oil prices linked to the conflict. A stronger-than-expected inflation print could further reinforce the Greenback and weigh on EUR/USD in the near term.

In the Eurozone, a more hawkish stance from the European Central Bank may help limit downside pressure on the common currency. Policymakers, including Pierre Wunsch and Dimitar Radev, have indicated that a rate hike at the April meeting remains possible, although a move in June is still seen as more likely.

Market expectations have shifted significantly, with traders now pricing in two rate increases and assigning more than a 50% probability to a third hike by year-end—marking a sharp reversal from earlier expectations of potential rate cuts before the escalation in geopolitical tensions.

Gold prices edged lower to around $4,705 during Thursday’s early Asian session, as easing geopolitical tensions—following a temporary ceasefire between the United States and Iran—dampened demand for the safe-haven metal.

The truce, announced earlier this week, includes a two-week pause in hostilities. Donald Trump stated that the United States had agreed to suspend military actions against Iran on the condition that Tehran reopens the Strait of Hormuz, a critical global oil transit route.

Despite the ceasefire, underlying tensions remain unresolved. Sporadic clashes continue across the Middle East, including in Lebanon, with Iranian officials accusing Israel of breaching the agreement. The fragile nature of the truce has limited downside in gold, as investors remain cautious.

Market sentiment has also been influenced by expectations surrounding US monetary policy. According to the latest Federal Open Market Committee (FOMC) minutes, Federal Reserve officials still anticipate interest rate cuts later this year, even as geopolitical risks and inflation uncertainties persist. Policymakers emphasized the need to remain “nimble” in assessing the evolving economic outlook.

Analysts suggest that easing tensions could reduce inflationary pressures, particularly if energy prices stabilize, potentially giving the Fed more room to ease policy—an outcome typically supportive for gold.

However, the precious metal has faced intermittent selling pressure in recent weeks. Rising oil prices linked to the conflict have fueled inflation concerns, which in turn could delay rate cuts and weigh on non-yielding assets such as gold.

While gold remains a key hedge against geopolitical risk, its lack of yield makes it less attractive in a higher interest rate environment. As a result, the near-term outlook for bullion will likely hinge on both developments in the Middle East and evolving expectations for US monetary policy.

Oil prices rebounded on Thursday following their steepest one-day decline since April 2020, as ongoing disruptions in the Strait of Hormuz and renewed geopolitical tensions in the Middle East raised fresh concerns over global supply.

The recovery comes after both benchmarks plunged more than 13% in the previous session, triggered by Donald Trump announcing a temporary ceasefire agreement with Iran.

Despite the announcement, the situation on the ground remains highly unstable. Israeli airstrikes in Lebanon intensified, casting doubt on the scope and effectiveness of the ceasefire. Israeli officials signaled that operations targeting Hezbollah fall outside the agreement.

While markets initially reacted positively to the ceasefire announcement, analysts caution that the sell-off may have been premature. Structural damage to infrastructure and ongoing logistical bottlenecks across the region could take months to resolve, keeping supply risks elevated.

On the supply side, the latest data from the Energy Information Administration showed a surprise build in US crude inventories. Stockpiles increased by 3.1 million barrels to 464.7 million barrels in the week ending April 3—the highest level in nearly three years—contrary to expectations for a draw. In contrast, refined product inventories declined. Distillate stocks, including diesel and heating oil, fell by 3.1 million barrels amid strong export demand, while gasoline inventories dropped by 1.6 million barrels.

Oil markets are likely to remain highly sensitive to geopolitical developments in the near term. Traders will continue to monitor both the stability of the ceasefire and the pace at which supply disruptions in the Middle East can be resolved.

U.S. equities surged on Wednesday, driven by growing optimism over a potential de-escalation in the Middle East conflict after Donald Trump announced a temporary ceasefire agreement with Iran.

Investor sentiment was further supported by a sharp decline in oil prices after Washington postponed planned strikes against Iran for two weeks. The drop helped ease concerns over energy-driven inflation, reviving expectations that the Federal Reserve could resume interest rate cuts later this year.

Markets had been on edge ahead of a U.S.-imposed deadline for Iran to reopen the Strait of Hormuz. However, a diplomatic intervention by Pakistan led to a two-week ceasefire proposal, which was ultimately accepted by Washington.

Despite the positive momentum, uncertainty persists. Israel has continued military operations against Hezbollah in Lebanon, emphasizing that these actions fall outside the scope of the ceasefire. Prime Minister Benjamin Netanyahu backed the U.S. decision but confirmed that strikes in Lebanon would continue.

The sharp pullback in crude prices weighed heavily on energy stocks. In contrast, travel and airline stocks rallied strongly as lower fuel costs improved the sector’s outlook.

While markets have welcomed the ceasefire, analysts caution that the situation remains fluid. Ongoing geopolitical risks, potential supply disruptions, and uncertainty over the durability of the truce could continue to drive volatility across global markets in the near term.