Asian Markets Rebound Following Temporary Diplomatic Relief

The Euro weakened further against the US Dollar on Thursday as heightened geopolitical tensions continue to underpin demand for the Greenback.

Ongoing conflict involving the United States, Israel, and Iran remains a key driver of market sentiment. Efforts to de-escalate tensions have stalled after Iran rejected a proposed US-led framework aimed at ending hostilities, insisting that any agreement must align with its own strategic conditions, including security assurances and control over the Strait of Hormuz.

Market expectations now suggest that the Federal Reserve will hold interest rates steady through 2026 as it navigates a complex macroeconomic backdrop. Inflation remains above the central bank’s 2% target, with upside risks persisting, while the labor market shows signs of softening. This dual pressure is expected to keep the Fed firmly data-dependent, balancing inflation control with emerging growth risks.

Meanwhile, the European Central Bank faces its own policy challenges. Although inflation in the Eurozone is relatively contained, the region’s heavy dependence on energy imports leaves it particularly vulnerable to sustained increases in oil prices, which could weigh on economic growth and consumer spending.

Economic indicators released this week have reinforced concerns about slowing momentum in the Eurozone. Germany’s GfK Consumer Confidence index for April declined to -28, falling short of expectations, while the Ifo Business Climate index dropped to 86.4 in March, its lowest level in over a year. Additionally, recent PMI readings point to weakening business activity, further highlighting downside risks to growth.

Gold prices edged higher during Thursday’s early European session, supported by a modest pullback in the US Dollar, though the broader upside remains constrained by expectations of tighter monetary policy.

The US Dollar came under slight pressure after US President Donald Trump announced a delay in planned strikes on Iran’s energy infrastructure, while extending the deadline for reopening the Strait of Hormuz to April 6. The move eased immediate market tensions, providing some support to the precious metal.

Despite this, gains in Gold appear limited as investors increasingly anticipate a more hawkish stance from major central banks. Persistent geopolitical risks continue to drive energy prices higher, reinforcing global inflation concerns and prompting expectations that interest rates will remain elevated for longer.

Mixed signals surrounding the US-Iran conflict continue to cloud market sentiment. While US officials have suggested that diplomatic progress may be possible, Iranian authorities have denied engaging in negotiations and dismissed the likelihood of any agreement. Reports of additional US troop deployments have further intensified concerns about a potential escalation.

These ongoing geopolitical uncertainties are likely to sustain demand for the US Dollar as a global reserve currency, limiting the scope for sustained gains in Gold prices.

Oil prices trimmed earlier gains on Thursday after US President Donald Trump announced a 10-day suspension of planned strikes on Iran’s energy infrastructure, while signaling that diplomatic efforts remain underway.

The decision helped ease immediate supply concerns, though uncertainty around the trajectory of the US-Iran conflict continues to drive volatility across energy markets.

Recent price action has been heavily influenced by disruptions in the Strait of Hormuz, a critical artery for global energy flows.

Market sentiment remains fragile as conflicting developments continue to emerge from the geopolitical front. Earlier in the week, oil prices declined after the United States proposed a 15-point peace framework aimed at ending hostilities. However, Iran has pushed back against the proposal, signaling limited progress toward a ceasefire.

In a potential goodwill gesture, Trump revealed that Iran had allowed 10 oil tankers to pass through the Strait of Hormuz without interference. The move offers temporary relief to global supply chains, as the waterway typically handles roughly one-fifth of the world’s oil and natural gas shipments.

With geopolitical risks unresolved and energy markets tightly balanced, oil prices are expected to remain highly sensitive to both diplomatic developments and supply dynamics. Investors are likely to monitor progress in US-Iran negotiations closely, as well as any further disruptions to key shipping routes.

US equities ended Thursday’s session firmly in negative territory as renewed uncertainty for a potential US-Iran agreement unsettled investors, while rising oil prices added further pressure to risk assets.

Market sentiment deteriorated after US President Donald Trump signaled uncertainty over whether Washington would pursue a peace agreement with Iran, despite ongoing diplomatic efforts. While he later confirmed a 10-day extension to the suspension of US strikes on Iran’s energy infrastructure, mixed messaging continued to cloud the outlook for de-escalation.

Markets have adopted a highly reactive, headline-driven trading pattern, swinging between gains and losses as investors respond to conflicting developments to the Middle East conflict. Although optimism for a resolution has surfaced intermittently, inconsistent signals from both sides have undermined confidence.

Rising US Treasury yields also contributed to Thursday’s decline, with higher borrowing costs weighing on valuations and adding to broader market headwinds.

On the corporate front, technology stocks were among the biggest laggards. Memory-related companies came under renewed pressure following reports of a breakthrough by Google researchers that could reduce artificial intelligence-related memory demand.

Shares of Micron Technology, Western Digital, Seagate, and SanDisk declined sharply, with losses ranging between 6% and 11%. Meanwhile, Meta Platforms dropped 8% after court rulings held the company liable for harms linked to social media addiction among younger users.

With geopolitical uncertainty unresolved and energy prices elevated, markets are likely to remain sensitive to incoming headlines. Until clearer direction emerges on US-Iran relations, trading conditions are expected to stay volatile and driven more by geopolitical developments than underlying fundamentals.