Escalating US-Iran tensions trigger market panic

The Euro gained against the US Dollar for a second consecutive session early on Thursday, with EUR/USD trading near 1.1430 during Asian trading hours. The shared currency found support ahead of Germany’s upcoming Trade Balance report, while investors also looked ahead to Friday’s Harmonized Index of Consumer Prices (HICP) data for fresh clues on the Eurozone inflation outlook.

The US Dollar remained under pressure after the Federal Reserve’s June meeting minutes highlighted growing divisions among policymakers. During the June 16–17 meeting, some officials suggested that the benchmark interest rate—currently at 3.50%–3.75%—could remain unchanged or even decline by the end of the year. Others, however, maintained that persistent inflationary pressures could require an additional rate hike before year-end.

Despite the mixed views, markets continue to expect the Fed to keep monetary policy restrictive for longer to contain inflation.

At the same time, escalating geopolitical tensions between the United States and Iran may help limit further losses in the US Dollar by boosting demand for safe-haven assets. After two days of renewed US military strikes, Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that any additional US action would prompt an immediate response from Tehran. He also emphasized that Iran maintains control over the strategically important Strait of Hormuz, heightening concerns over potential energy supply disruptions and renewed inflationary pressures.

Gold prices remained under pressure for a fourth consecutive session during Asian trading hours on Thursday, hovering near the one-week low of around $4,020 reached in the previous session. Renewed tensions between the United States and Iran have revived inflation concerns and reinforced expectations that the US Federal Reserve could raise interest rates in 2026, weighing on the non-yielding precious metal during Asian trading hours.

The US Dollar, however, continued to trade with a softer tone after the minutes of the Federal Reserve’s June 16–17 policy meeting failed to deliver a decisively hawkish message, helping to limit downside pressure on Gold.

Despite the mixed signals, markets continue to price in roughly a 70% probability of a September rate hike, reflecting expectations that the Fed will maintain a restrictive policy stance for longer.

Geopolitical developments also remained in focus. The latest escalation in the US-Iran conflict followed a fresh wave of US military strikes in response to attacks on commercial vessels in the Strait of Hormuz. Iran retaliated by targeting US military facilities and assets in Bahrain and Kuwait, while US President Donald Trump declared on Wednesday that the ceasefire with Iran had ended.

The combination of persistent inflation concerns, elevated rate hike expectations, and heightened geopolitical risks continues to support the US Dollar and limits the potential for a sustained recovery in Gold prices. Investors now await the release of the US Weekly Initial Jobless Claims report and comments from Federal Reserve officials for additional policy signals, while developments in the Middle East are likely to remain the primary driver of market sentiment and precious metal prices.

Oil prices remained elevated on Thursday, although gains eased from the previous session’s sharp rally, as investors continued to assess the risk of supply disruptions following renewed hostilities between the United States and Iran and growing concerns over shipping through the Strait of Hormuz.

Crude prices stayed well above levels seen earlier in the week after both benchmarks posted huge gains on Wednesday. The rally followed US President Donald Trump's announcement that the US-Iran ceasefire had effectively ended, accompanied by fresh military strikes on Iranian targets and warnings of further action. In response, Iran threatened shipping through the Strait of Hormuz, raising fears over potential disruptions to global oil supplies.

Although Gulf oil exports have not yet been significantly affected, market participants remain cautious after several commercial vessels were attacked near the Strait of Hormuz in recent days. The incidents prompted some tanker operators to delay or reroute shipments through the strategic waterway.

Supporting the bullish outlook, recent US government data showed another significant decline in gasoline and distillate inventories alongside record fuel exports. Although commercial crude inventories increased last week, the drawdown in refined fuel stocks and resilient downstream demand continue to provide support for oil prices.

Market attention remains focused on developments in the US-Iran conflict, security conditions in the Strait of Hormuz, and any signs of further disruptions to Middle East oil exports, all of which are expected to remain key drivers of crude prices in the near term.

US stocks ended mixed on Wednesday after President Donald Trump declared that an interim agreement aimed at ending the conflict with Iran was "over," renewing concerns about escalating geopolitical tensions and their potential impact on global markets.

Speaking at a NATO summit in Turkey, Trump said he had no interest in further negotiations with Iran and warned that the United States was likely to launch additional military strikes later in the day. His remarks dampened investor sentiment, as markets continued to grapple with shifting signals surrounding the conflict after several failed attempts to reach a lasting ceasefire.

Broadcom surged 4.9% after Apple announced plans to spend more than $30 billion under a recently signed chip supply agreement with the company. Nvidia also gained 3.65% following reports that China intends to permit leading artificial intelligence firms to purchase a limited number of the company's H200 AI chips.

Meanwhile, major technology stocks came under pressure. Microsoft and Alphabet each declined more than 1%, while Meta Platforms lost 2%. The broader market weakened as investors weighed the economic implications of renewed Middle East tensions.

Minutes from the Federal Reserve's June policy meeting also highlighted persistent inflation concerns among policymakers, reinforcing expectations that interest rates could remain elevated for longer. According to CME FedWatch data, traders continue to price in the likelihood of a Fed rate hike by December.