Hopes for a swift resolution to the war in the Middle East were shattered over the weekend when US-Iran peace talks collapsed and President Trump announced plans to blockade the Strait of Hormuz. Tehran reportedly baulked at several American red-line demands during Saturday’s negotiations, refusing to dismantle uranium-enrichment facilities, halt funding for regional proxies, or guarantee free passage through the Strait. Within hours of Trump’s threat, US Central Command said American forces would begin enforcing the blockade “impartially against vessels of all nations entering or departing Iranian ports and coastal areas” from 10:00 am Eastern time today. Markets have reacted violently: Brent crude is up more than 8%* relative to Friday’s close, global yields are climbing, and equity futures are down as investors revert to hedging against a prolonged stagflationary shock. The dollar is again outperforming its major peers, climbing against the pound, Swiss franc,...

• US/Iran conflict. Weekend talks ended without an agreement. Energy prices jumped this morning. USD firmer. AUD & NZD lose ground.• Macro risks. US threatens to blockade the Strait of Hormuz. Downside risks to global economy remain. Volatility expected to continue for a while yet. Global Trends Market sentiment was underpinned last week by the US/Iran ceasefire news. There was a solid rebound in global equities (the S&P500 rose ~3.6% last week, its best weekly result since last November), bond yields declined, and oil prices pulled back. However, hope can only go so far. Weekend developments have once again highlighted how fragile the situation in the Middle East is. Talks between US and Iranian officials in Pakistan ended without an agreement. According to Vice President Vance Iran would not commit to not seeking a nuclear weapon, a key ‘red line’ for the US. In response, President Trump stated the US will blockade the Strait of Hormuz. This could further exacerbate global...

Headline consumer price growth jumped by the most since June 2022 in the United States last month while measures of underlying pressure remained tame, underscoring the challenge facing the Federal Reserve as it struggles to balance labour market vulnerabilities against war- and tariff-related inflation risks. According to data published by the Bureau of Labor Statistics this morning, the all-items consumer price index rose 0.9 percent in March from the prior month, and 3.3 percent over the same period last year. This matched consensus estimates among economists polled by the major data providers ahead of the release, with a 20.2-percent jump in gasoline costs—the biggest since 1967—doing the bulk of the heavy lifting. Underlying core inflation—excluding volatile food and energy prices—was more subdued, helping reduce the likelihood of a sharp policy pivot, rising 0.2 percent for a second month and climbing 2.6 percent from a year prior. Yesterday’s personal consumption expenditures...

Markets are giving back some of yesterday’s gains as doubts mount over Tuesday’s US-Iran ceasefire agreement, with Israel pressing its assault on targets in Lebanon, Tehran showing no sign of easing its grip on the Strait of Hormuz, and all sides remaining far apart on basic terms. Both the Brent and West Texas Intermediate global crude oil benchmarks are knocking on the $100 threshold once again, front-end Treasury yields are pushing higher, equity futures are pointing to losses, and the dollar is back to outperforming its higher-beta and carry-driven counterparts. There’s little evidence to suggest that the agreement is translating into an improvement in global energy supply dynamics. Although the tempo has decreased, drone and missile strikes are continuing across the Middle East, Israel is stepping up its attacks on Iranian proxies, and units of the Republican Guards are demanding a toll* from ships seeking to navigate the Strait. Iranian state media are saying that the strait is...

• Holding up. Markets held onto yesterday’s gains stemming from the US/Iran ceasefire news. However there wasn’t much additional follow through in FX.• AUD & NZD. AUD near top of its ~2-week range. But lingering issues are a headwind. RBNZ’s ‘hawkish’ vibes may help NZD recoup more lost ground. Global Trends Risk sentiment has remained positive over the past 24hrs on the back of yesterday’s US/Iran ceasefire news. However, in a reflection of how fragile the situation still is most asset classes remained range-bound overnight after yesterday’s knee-jerk repricing as the initial headlines came out. That said, there have still been some meaningful moves such as the: drop in oil (Brent crude is now ~$96.70/brl, ~13% from this week’s peak); ~14% fall in European natural gas prices; decline in bond yields as central bank rate hike expectations were pared back (European 2yr bond yields tumbled ~22-25bps); jump in equities (the US S&P500 rose 2.5% while...

A tentative relief rally is unfolding across global markets after the US and Iran agreed to a two-week ceasefire, with yields falling, equities climbing, and the dollar tumbling against its major rivals in early action. US president Donald Trump yesterday threatened to hit civilian targets across Iran, wiping out a “whole civilization,” but reversed direction before his self-imposed deadline, claiming that Pakistan had brokered a compromise and saying “Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two week period will allow the Agreement to be finalized and consummated”. Both global crude benchmarks are off more than 16 percent relative to yesterday’s highs, Treasury yields are sharply lower, and the euro, British pound, Swiss franc, and Japanese yen are all up more than a full percentage point against the greenback. Tail risks have been reduced, but price action could lose momentum in the coming hours. Military action...