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US dollar, 10-Year Treasury yield, gold, and oil climb as geopolitical tensions intensify
Global asset volatility surged following a significant escalation in the conflict involving the United States, Israel, and Iran. Following coordinated strikes by US and Israeli forces on Iranian territory, Tehran retaliated with bilateral attacks on Israeli targets and US military installations across the Middle East.
Geopolitical friction in the Middle East has triggered a spike in the prices of oil, gas, and gasoline, as market participants price in potential supply chain disruptions.
Gold prices are approaching record highs as investors seek refuge from escalating regional instability.
European stock markets closed with significant losses, while US indices finished the session mixed amidst the prevailing uncertainty.
Market focus is also attuned to several high-impact economic releases scheduled for this week, most notably the US employment report.
US dollar, 10Y Treasury yield, gold, and oil rally on geopolitical escalation
The geopolitical risk premium has expanded considerably following the coordinated US-Israeli operation against Iranian territory initiated on Saturday, 28 February. In response, Tehran launched strikes against Israeli territory—supported by Hezbollah in Lebanon—while targeting US military bases across the Middle East. Critically, Iran has announced the closure of the Strait of Hormuz, a strategic maritime artery through which approximately 20% of the world's oil supply transits. Analysts warn that should the conflict persist or widen, it risks evolving into a broader regional conflict. As a result, gold, crude oil, the dollar index, and US Treasury yields, appreciated significantly as the session closed.
In the energy markets, the Brent crude futures contract (BRNK26) surged 6.68% to $77.74 per barrel, while the West Texas Intermediate (WTI) contract (CLJ26) increased 6.38% to $71.25 per barrel. Traders and hedgers are actively covering positions amid growing expectations of prolonged supply disruptions stemming from the potential closure of the Strait of Hormuz, as well as potential logistical complications that could face key crude exporters in the region.
Simultaneously, the gold futures contract (GCJ26) appreciated 1.20% to settle at $5,315 per ounce, placing it within reach of the $5,355 all-time high. The precious metal continues to draw safe-haven inflows as the military situation shows no signs of immediate de-escalation.
Regarding the US financial environment, the US Dollar Index (DXY) rose by 0.92% to 98.55 points. Concurrently, the 10-year Treasury yield advanced by 9 basis points to 4.03%. Investors are factoring in the inflationary implications of higher energy prices resulting from the conflict. Sustained high oil prices would likely pressure the Federal Reserve to maintain elevated interest rates or potentially consider further tightening to curb energy-driven inflation.
European stocks slump while US indices finish mixed
The threat of a regional conflict in the Middle East weighed heavily on European equities, which dropped in tandem. Spain’s IBEX 35 fell 2.64% to 17,875 points, Germany’s DAX 40 decreased 2.56% to 24,638, France’s CAC 40 retreated 2.17% to 8,394, and the UK’s FTSE 100 depreciated by 1.20% to 10,780.
In contrast, while US equity indices opened with a significant bearish gap, they demonstrated uncertainty to close the day mixed. The S&P 500 edged up 0.04% to 6,881, and the Nasdaq 100 appreciated 0.13% to 24,992. However, the Dow Jones Industrial Average bucked the trend, declining 0.15% to 48,904 points.
Quarterly financial results
The corporate earnings season continues this week with several major retailers and technology firms scheduled to report. These releases may introduce further volatility into the US equity landscape:
- Tuesday: Ross Stores (ROST), Target (TGT), Best Buy (BBY)
- Wednesday: Broadcom (AVGO)
- Thursday: Costco (COST)
Key economic events this week
During this week, several key economic indicators will be released. Some of the most important are the following:
Monday
- US: ISM Manufacturing PMI
Tuesday
- European Union: Inflation Rate
Wednesday
- Australia: GDP Growth Rate
- China: Manufacturing PMI
- Japan: Consumer Confidence
- US: ISM Services PMI
- US: ADP Employment Change
- US: EIA Crude Oil Stocks Change
Thursday
- Australia: Balance of Trade
- US: Continuing Jobless Claims
Friday
- US: Non Farm Payrolls
- US: Unemployment Rate
- US: Retail Sales
