Global AI Rally Halts as Tech Heavyweights Lead Sharp Retreat

The euro remained largely unchanged early on Tuesday as traders adopted a cautious stance while monitoring the latest developments in the ongoing diplomatic discussions between the United States and Iran.

The EUR/USD pair stabilized after posting modest losses in the previous session, trading near 1.1430 during Asian trading hours. The currency pair continued to move within a narrow range as investors assessed progress in negotiations between Washington and Tehran, which are taking place in Bürgenstock, Switzerland.

Optimism surrounding the talks increased after US Vice President JD Vance said negotiations had achieved “great progress,” although he acknowledged that some areas of disagreement remain. Earlier, Vance revealed that Iran had agreed to allow the return of International Atomic Energy Agency (IAEA) inspectors. Iranian Foreign Minister Abbas Araghchi also expressed confidence, describing the discussions as having delivered “major progress.”

Meanwhile, the US dollar continued to receive support from expectations of a more hawkish Federal Reserve policy stance. The Fed recently kept its benchmark interest rate unchanged at 3.50%-3.75%, but updated economic forecasts and comments from Fed Chair Kevin Warsh, during his first policy meeting in the role, were viewed as more aggressive than markets had expected.

The euro, meanwhile, faces a more cautious outlook after comments from European Central Bank President Christine Lagarde. While she acknowledged that the current inflation shock is “too large to ignore,” Lagarde said there were no signs of unanchored inflation expectations or damaging second-round effects that could threaten the ECB’s inflation objectives.

Gold came under renewed selling pressure on Tuesday, falling back below the $4,150 level as a stronger US dollar and shifting expectations around Federal Reserve policy reduced demand for the precious metal.

The XAU/USD pair reversed much of the previous session’s gains during Asian trading hours as investors remained cautious despite signs of progress in US-Iran negotiations. The dollar maintained its recent strength, trading near a one-year high, supported by geopolitical uncertainty and the Fed’s increasingly hawkish stance.

Geopolitical risks remain elevated after US President Donald Trump emphasized that preventing Iran from developing nuclear weapons remains a priority despite potential economic costs. Meanwhile, Iran’s chief negotiator and parliamentary speaker Mohammad Bagher Ghalibaf stated that the Strait of Hormuz would remain under Tehran’s control, keeping concerns about regional stability alive and supporting demand for the US dollar as a safe-haven asset.

The gold market is also facing pressure from expectations of tighter Federal Reserve policy. The central bank indicated last week that further rate increases may be necessary if inflation remains persistent. Chicago Fed President Austan Goolsbee added that inflation trends were moving in the wrong direction and remained above the Fed’s 2% target.

Traders are now watching upcoming US economic releases, including flash Purchasing Managers’ Index (PMI) data and comments from Federal Open Market Committee (FOMC) officials, for further direction. Market attention will then turn toward Thursday’s US Personal Consumption Expenditures (PCE) inflation report and the final first-quarter GDP reading.

Oil prices continued to decline on Tuesday, extending losses from the previous session as investors awaited clearer evidence of a sustained recovery in crude flows through the Strait of Hormuz following recent US-Iran peace discussions.

The decline followed a more than 3% drop on Monday after the United States granted Iran a 60-day sanctions waiver following initial diplomatic talks. Market sentiment also improved after reports indicated a reduction in hostilities in Lebanon as part of broader regional de-escalation efforts.

Ship-tracking data showed that two crude tankers carrying nearly 2 million barrels of oil passed through the strategic waterway on Monday, signaling that traffic was beginning to recover after weaker flows over the weekend due to safety concerns.

Analysts said increased tanker movements are being closely monitored as a potential indicator of both physical oil supply recovery and progress in diplomatic negotiations. However, uncertainty remains, leaving markets caught between optimism over potential peace developments and concerns over unresolved geopolitical risks.

Meanwhile, attention is also turning toward US inventory data. A Reuters poll suggested that US crude stocks likely declined last week, along with gasoline and distillate inventories, reflecting tighter supply conditions.

Recent government data showed that crude held in the US Strategic Petroleum Reserve dropped to 331.2 million barrels last week, marking the lowest level since June 1983. The decline came as energy markets adjusted to supply disruptions linked to the US-Iran conflict.

Going forward, oil prices are expected to remain highly sensitive to developments surrounding the Strait of Hormuz, diplomatic progress between the US and Iran, and upcoming US inventory reports. Any further improvement in shipping activity could continue to pressure prices, while renewed geopolitical tensions may provide support.

US stock markets closed mixed on Monday as a sharp decline in Alphabet shares weighed on the technology and communication services sectors, while investors continued to assess developments in the Middle East and the potential impact of US-Iran diplomatic progress.

The communication services sector was the weakest performer among the 11 major S&P 500 sectors, pressured by losses in Alphabet. Meanwhile, real estate, energy, and healthcare were among the strongest-performing sectors.

Investor attention is now shifting toward upcoming US economic data, including purchasing managers’ index readings and revised first-quarter GDP figures.

The Federal Reserve’s recent policy signals remain a key market driver after its updated economic projections showed stronger support for potential interest rate increases if inflation remains elevated. Rising oil prices linked to geopolitical tensions have added to concerns about inflation pressures, reinforcing expectations for a more restrictive monetary policy stance.

Alphabet shares fell 5% on Monday, making the company one of the biggest decliners on both the US 500 and US Tech 100. The decline came after the company lost two senior artificial intelligence executives within a short period.The departures raised concerns about competition in the artificial intelligence sector, particularly as rivals continue to expand their AI capabilities.

Meanwhile, SpaceX shares extended their recent decline, falling 16.54% and marking a third consecutive day of losses following the company’s market debut earlier in the month. Despite previously achieving a significant valuation surge, the stock has faced pressure as investors reassess its growth outlook.