It’s been the case for a few weeks now. We start the week with some sense of renewed optimism only for it to be dashed through the coming days and then markets choosing to de-risk into the weekend. Will this week be the same? There’s certainly an air of familiarity to it.
US president Trump gave Iran a deadline to later today before all hell breaks loose. However, is this all just another empty threat though? We shall see. From overnight and earlier:
As the deadline draws closer to an end, markets are getting anxious and angsty again now. That especially as Iran remains defiant, at least on official channels, that they won’t be conceding to Trump’s ceasefire proposal.
Heading into European trading, oil prices are pushing fresh one-month highs while risk trades are slipping on the day. WTI crude is up over 3% to above $116 now, its highest since the spike on 9 March. Meanwhile, S&P 500 futures are down 0.5% as the bounce in the past week might start to come undone.
WTI crude oil daily chart ($/bbl)
As we look to the day ahead, nothing matters more than what will come next on the US-Iran conflict.
But the way I see things going, it will be tough for markets to really feel optimistic in the big picture. If Trump really escalates the geopolitical conflict, it will increase the uncertainty and timeline on the war coming to an end. That is unless somehow he incapacitates Iran to the point where the war is over, by some way or miracle.
So unless that happens, it’s a negative for risk and it doesn’t do anything to alleviate the situation around the Strait of Hormuz.
And even if whatever military intervention he is planning mainly reaffirms the current status quo, kicking the can down the road is not a solution either.
