It is only the beginning of Wednesday and markets are already experiencing one of the most volatile weeks in recent months. The primary driver is the escalation involving Iran, which has triggered violent moves across commodities and broader financial markets.
The most dramatic action has been in oil. Both Brent Crude and West Texas Intermediate opened Monday with a massive bullish gap and surged more than 20% in a single move. That rally was quickly followed by an aggressive reversal, with prices dropping almost 30%. Tuesday extended the downside move, and today oil is trading more or less flat after those two extremely volatile sessions.
Precious metals are showing a mixed picture. Gold is slightly higher, reflecting ongoing geopolitical uncertainty. Silver, however, is lagging behind and is actually trading slightly lower today, showing weaker momentum compared with gold.
Equity indices have also been extremely volatile. Monday produced a sharp V-shaped reversal after an initial drop, and yesterday’s session was far calmer with mostly sideways movement. The key takeaway is that after the strong rebound, sentiment on equities remains constructive for now.
In the currency market we can see strength in the Australian dollar and weakness in the Japanese yen. European currencies are broadly stronger at the start of the European session, while the US dollar is under visible pressure and struggling to gain traction.
Looking at the macro calendar, the key release today will be US inflation data. CPI on a yearly basis is expected to remain at around 2.4%. Given the current weakness of the dollar, this number could become a significant catalyst for FX markets.
Geopolitical headlines have also influenced sentiment. Donald Trump stated earlier that the conflict may not last very long and emphasized that the Strait of Hormuz should remain open. According to his comments, the United States is taking steps to ensure that the strait remains unblocked. These remarks helped calm markets earlier in the week and supported the rebound in risk assets.
For now, however, attention is shifting temporarily from geopolitics back to macro data. With US inflation numbers due later today, traders will likely focus on the CPI release before returning their attention to developments in the Middle East.