Energy prices are ratcheting higher once again as fighting in the Middle East rages unabated, suggesting that President Donald Trump’s efforts to find a diplomatic off-ramp have not met with success thus far. Brent crude is trading above $100 a barrel, West Texas Intermediate is clinging to the $90 threshold, and European gas benchmarks are climbing, reversing yesterday’s retreat* which came after the president claimed “productive discussions” were underway to end the conflict—only to be contradicted by Iranian officials later in the day**. This morning, Treasury yields are little changed, equity futures are pointing to modest gains at the North American open, and the dollar is inching higher amid a slow-motion flight to safety. The Canadian dollar is back to levels that prevailed ahead of yesterday’s surge in optimism. The euro is trading with a defensive bias after private sector activity fell to a ten-month low, suggesting that hopes for a stimulus-led rebound...

• Risk reversal. Comments by Pres. Trump saw oil prices fall & sentiment improve. USD weaker. AUD ticked up, but AUD also underperforms on crosses.• Fragile markets. Situation in Middle East remains fluid. More volatility likely. Impact on global economy from the energy supply shock still in the pipeline. Global Trends Markets continue to be whipped around by developments in the Middle East, although the mood and moves were more positive overnight on the back of a shift in thinking that the conflict could be nearing an end. Yesterday’s bout of risk aversion reversed course when, just before US markets opened for trading, President Trump posted that the US and Iran have had “very good and productive conversations regarding a complete and total resolution” of hostilities, and as a result military strikes against Iranian power plants and energy infrastructure have been postponed for five days. Officials from Iran denied they had been in talks, however media reports indicating other...

Oil prices are tumbling and currency markets are snapping back toward pre-war levels after President Donald Trump said that Washington and Tehran had held “very good and productive conversations” over the preceding two days, and that he had ordered the Pentagon to postpone planned strikes on Iranian power plants and energy infrastructure for five days. The announcement, which came just hours before his own 48-hour ultimatum to Iran was set to expire, has led to a circa-15-percent drop in the global Brent crude benchmark, with similar moves playing out in West Texas Intermediate, along with European gas futures. Since US and Israeli strikes began on February 28, Brent crude has surged more than 50 percent to levels not seen since mid-2022, the Strait of Hormuz has been effectively closed to commercial tanker traffic, and the International Energy Agency has warned that the world faces the largest supply disruption in the history of the global oil market. In foreign exchange...

• Market nerves. Concerns about the duration of the Middle East conflict & global economy remain. Equities fell on Friday, bond yields rose. AUD underperforms.• Risk radar. Situation in Middle East remains in the driver’s seat. More volatility likely. Macro headwinds for AUD & NZD still in place. Global Trends Developments in the Middle East and energy markets remain in the driver’s seat. Heightened concerns about the state of play and outlook weighed on sentiment at the end of last week. The news flow hasn’t really improved over the past few days with both sides hurling threats at each other which have reinforced worries the conflict (which is entering its 4th week) could be a protracted affair. Over the weekend President Trump set a 48hr deadline for Iran to open the Strait of Hormuz or the US will “obliterate” Iran’s power plants. This saw Iran threaten to close the Strait “completely” and target US/Israeli infrastructure across the region if attacked. Added to that,...

Global energy benchmarks are approaching last weekend’s panic-driven highs as the Middle East conflict shows signs of spiralling out of control. Brent is trading above $115, West Texas Intermediate is flirting with $100, and European natural gas futures are up another 25 percent after Iran struck infrastructure targets in Kuwait and Saudi Arabia and carried out missile attacks on critical natural gas facilities in Qatar, causing what officials described as “significant damage” in retaliation for yesterday’s Israeli strike on the South Pars gas field. Treasury yields are pushing higher, US equity markets are in retreat, and the dollar is holding firm as measures of implied volatility climb. Grappling with the mounting economic and political costs of the conflict, President Trump made an apparent effort to defuse the situation in a social media post last night. On Truth Social, he claimed the “United States knew nothing about this particular attack”, and said Israel would...

• Negative vibes. Another jump in energy prices & upward repricing in interest rates dampened risk sentiment. USD firmer. AUD & NZD underperform.• Macro news. Asia exposed to higher energy costs. Growth in Australia set to slow. US Fed looks to be in no hurry to cut again. AU jobs report out today. Global Trends The positive sentiment that ran through markets over recent days gave way overnight, with the harsh reality of the situation in the Middle East and a few macro factors dampening the mood once again. European and US equities declined with the S&P500 shedding ~1.4%, while bond yields rose (US rates increased ~7-10bps across the curve), and the USD strengthened. EUR (the major USD alternative) dipped towards its multi-month lows (now ~$1.1452), GBP weakened (now ~$1.3257), and USD/JPY edged up to the top of the range it has occupied since mid-2024 (now ~159.86). Cyclical growth linked currencies like the NZD (now ~$0.5788) and AUD (now ~$0.7023) underperformed. Oil...