Markets Steady as Geopolitical Risks Clash with AI and NFP Jobs Data

The EUR/USD pair traded slightly higher near 1.1730 during Friday’s early Asian session, supported by improving sentiment over a possible peace agreement between the United States and Iran. However, market participants are expected to remain cautious ahead of the closely watched US Nonfarm Payrolls (NFP) report for April, due later in the day.

Investor sentiment improved after reports suggested progress toward easing tensions in the Middle East. The Trump administration is reportedly awaiting Iran’s response to a US proposal aimed at reopening the Strait of Hormuz and ending the ongoing conflict. An Iranian official stated on Wednesday that Tehran is reviewing the proposal, although key issues — including Iran’s nuclear program and the reopening of the strategic waterway — remain unresolved.

Reduced geopolitical tensions could weaken demand for traditional safe-haven assets such as the US Dollar, providing additional support for EUR/USD.

Attention now shifts to the release of the US April employment report. Economists expect the US economy to have added 62,000 jobs during the month, while the unemployment rate is forecast to remain unchanged at 4.3%. A stronger-than-expected labor market reading could reinforce expectations that the Federal Reserve will keep interest rates elevated for longer, potentially boosting the US Dollar against the Euro.

Gold prices held onto modest gains during Friday’s Asian trading session, remaining close to the more than two-week high reached a day earlier, as a softer US Dollar continued to support the precious metal. Investors are also closely monitoring the upcoming US Nonfarm Payrolls (NFP) report for further direction on Federal Reserve policy.

Market sentiment has been influenced by ongoing developments surrounding tensions between the United States and Iran. On Thursday, the US Central Command confirmed strikes on Iranian military facilities linked to attacks on vessels passing through the Strait of Hormuz. Iran, meanwhile, accused the US of breaching the ceasefire through additional strikes in and around the region. However, President Donald Trump stated that the ceasefire remained intact and emphasized that any collapse in the agreement would be immediately clear.

At the same time, geopolitical uncertainty continues to provide some underlying support for oil prices and safe-haven assets. Trump also warned that the US would respond more forcefully if Iran failed to reach an agreement soon. Meanwhile, persistent inflation concerns and resilient economic conditions have prompted investors to delay expectations for Federal Reserve rate cuts until late 2027 or early 2028, which could help limit further weakness in the Dollar and cap stronger gains in Gold.

Oil prices ended slighlty lower on Thursday after volatile trading, as markets reacted to reports that Saudi Arabia and Kuwait had eased restrictions on the United States’ use of regional airspace and military facilities. The move could allow Washington to resume naval escort operations for commercial vessels passing through the Strait of Hormuz as early as this week. However, oil prices rebounded sharply in post-settlement trading after Iran’s Fars news agency reported explosions near the southern city of Bandar Abbas, close to the Strait of Hormuz.

According to the Wall Street Journal, Saudi Arabia and Kuwait have lifted restrictions on US military access to their airspace and bases, citing both American and Saudi officials. The report added that the Trump administration is preparing to relaunch “Project Freedom,” an operation designed to protect commercial shipping through the strategically important Strait of Hormuz.

Sources familiar with the negotiations said Washington and Tehran are edging toward a limited and temporary framework agreement that would pause the conflict without resolving major disputes, including issues surrounding Iran’s nuclear program.

On the supply side, US Energy Secretary Chris Wright said Iran has already reduced oil production by around 400,000 barrels per day and may cut output further as storage capacity tightens. Meanwhile, geopolitical risks remain elevated after a Chinese-owned oil tanker was reportedly attacked near the Strait of Hormuz earlier this week, marking the first known strike on a Chinese oil vessel in the region.

US Treasury Secretary Scott Bessent also urged China to step up diplomatic efforts to persuade Iran to keep the Strait of Hormuz open to international shipping. He added that the issue is expected to be discussed when President Donald Trump meets Chinese President Xi Jinping next week.

Wall Street ended lower on Thursday as fading optimism over a near-term peace agreement between the United States and Iran weighed on investor sentiment. Markets also reacted to reports that Washington may restart naval escort operations for commercial ships traveling through the Strait of Hormuz, heightening concerns about renewed geopolitical tensions.

Earlier in the day, markets had been supported by reports suggesting that Washington and Tehran were working through mediators on a temporary framework agreement aimed at reducing tensions.

President Donald Trump stated on Wednesday that the US had effectively “won” the conflict and described recent talks with Tehran as constructive. However, mixed signals from Iranian officials kept investors cautious. While Iran’s foreign ministry said Tehran was still reviewing the US proposal, other reports characterized the American plan as unrealistic and overly one-sided.

Investors also digested fresh US labor market data ahead of Friday’s highly anticipated April nonfarm payrolls report. Challenger, Gray & Christmas reported that planned US job cuts rose 38% month-over-month to 83,387 in April, marking the highest level for the month since 2009. The technology sector continued to account for a large share of layoffs, with firms increasingly citing artificial intelligence spending and restructuring efforts.

Corporate earnings also remained a major market driver. Strong results from major technology and AI-focused companies have helped support US equities in recent weeks, with analysts pointing to broad-based earnings growth across sectors.