Geopolitical Risks and Jobs Data Drive Global Market Volatility

The Euro edged lower against the US Dollar in early Asian trading on Tuesday, with EUR/USD slipping toward the 1.1775 level as investors remained cautious ahead of the upcoming US inflation data and renewed geopolitical uncertainty in the Middle East.

Market sentiment weakened after fresh comments from both Iranian and US officials raised concerns over the durability of the fragile ceasefire between Washington and Tehran. According to Reuters, Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Iran’s armed forces are prepared to respond to any future aggression following escalating regional tensions.

Meanwhile, US President Donald Trump described the ceasefire as being on “massive life support” after rejecting Iran’s latest peace proposal, calling it “unacceptable.”

Despite the downside pressure, expectations of further monetary tightening from the European Central Bank (ECB) may help limit losses for the single currency. ECB Governing Council member Martin Kocher said there is little reason to postpone additional interest rate increases if energy prices fail to ease in the near term.

Investors are now largely expecting the ECB to raise rates by 25 basis points at its June meeting, with markets pricing in a strong probability of further tightening through the end of 2026, according to Reuters.

Gold prices pulled back on Tuesday after briefly reaching a three-week high during the Asian trading session, as investors turned cautious ahead of the latest US Consumer Price Index (CPI) report.

The precious metal faced pressure from a firmer US Dollar, which gained support amid rising geopolitical tensions in the Middle East and growing expectations that the US Federal Reserve could maintain a hawkish policy stance for longer.

Concerns over the conflict between the United States and Iran intensified after President Donald Trump rejected Tehran’s latest proposal aimed at ending the prolonged dispute surrounding Iran’s nuclear program and the Strait of Hormuz. Reports also suggested that frustration within the White House over stalled negotiations and the continued disruption in the strategic shipping route has increased speculation about a possible escalation in military action.

At the same time, markets are still pricing in the possibility that the Federal Reserve could deliver another interest rate increase before the end of the year, particularly if energy-driven inflation accelerates further. Higher interest rate expectations tend to weigh on non-yielding assets such as gold.

Investor attention is now firmly focused on the upcoming US CPI data, which could provide fresh clues on the Federal Reserve’s next policy moves and shape near-term direction for both the Dollar and bullion prices.

Oil prices moved higher in early Asian trading on Tuesday as uncertainty surrounding negotiations between the United States and Iran continued to raise concerns about global energy supplies.

Market sentiment remained supported after US President Donald Trump said the ceasefire with Iran was effectively “on life support,” citing major disagreements between the two sides.

Iran also reiterated its control over the Strait of Hormuz, a critical shipping route responsible for roughly 20% of global oil and liquefied natural gas flows. Ongoing disruptions and restrictions around the strait have heightened fears of tighter global supply conditions.

Supply concerns have already impacted production levels. A Reuters survey indicated that OPEC oil output in April fell to its lowest level in more than two decades, partly due to disruptions linked to restricted shipping activity in the region.

Meanwhile, the Trump administration announced plans to release 53.3 million barrels of crude oil from the US Strategic Petroleum Reserve (SPR) in an effort to ease pressure on energy markets.

In a separate development, Washington imposed sanctions on several individuals and companies accused of facilitating Iranian oil exports to China, including firms based in Hong Kong, the United Arab Emirates, and Oman.

US stocks ended modestly higher on Monday, supported mainly by gains in semiconductor shares, although broader market momentum remained cautious amid renewed tensions between Washington and Tehran and ahead of key US inflation data later this week.

Technology and chip-related stocks once again led the market higher, with investors continuing to favor artificial intelligence-linked companies and semiconductor firms. However, that broader participation in the rally remained uneven, with gains concentrated in a relatively narrow group of large-cap technology names.

Investor sentiment was restrained by growing uncertainty surrounding the ongoing conflict between the United States and Iran. The diplomatic setback raised concerns over further disruption to global energy markets, particularly around the Strait of Hormuz, a key shipping route responsible for roughly one-fifth of global oil and gas flows.

Markets are now closely watching upcoming US inflation reports, including the Consumer Price Index (CPI) and Producer Price Index (PPI), which are expected to provide important signals on the Federal Reserve’s policy outlook.

Investors will also be monitoring President Trump’s upcoming visit to China later this week, where discussions with Chinese President Xi Jinping are expected to include the ongoing Iran conflict and broader geopolitical issues.

On the corporate front, upcoming earnings reports from major companies including Alibaba Group, Cisco Systems, and Applied Materials are expected to remain in focus.