Philly Fed Manufacturing Index, FOMC Monetary Policy Report

The EUR/USD pair ended the session on Thursday with minor gains as markets weighed the implications of the Federal Reserve’s decision to hold interest rates steady, along with escalating tensions in the Middle East. Deteriorating risk sentiment and renewed speculation about U.S. involvement in the regional conflict have kept traders cautious, although the White House clarified that no immediate action will be taken on Iran, with a decision expected "within the next two weeks."

On Wednesday, the Federal Reserve left rates unchanged and revised its economic outlook. Fed Chair Jerome Powell emphasized a cautious, data-dependent approach, describing current monetary policy as “modestly restrictive.” He noted that as long as the labor market remains strong and inflation trends lower, maintaining current rates is appropriate. Powell also highlighted the unknown effects of tariffs, warning that their impact "will depend on the level."

Across the Atlantic, European Central Bank (ECB) policymakers voiced concerns about monetary policy risks and the euro’s role in global finance. ECB's Olli Rehn warned that an escalation in the Israel-Iran conflict could expose the EU to a stagflation shock. François Villeroy de Galhau called the normalization of policy “a very positive step,” while also leaving room for further adjustments. Joachim Nagel echoed calls for enhancing the euro’s global appeal.

The ECB is not expected to cut its Deposit Facility Rate by 25 bps at the upcoming July meeting, according to market participants.

Looking ahead, traders will be watching for the Philadelphia Fed Manufacturing Index in the U.S., while German Industrial Production data for May will be in focus in the Eurozone.

Bitcoin ended the session with minor losses on Thursday, continuing to trade within a narrow range as growing speculation over potential U.S. military involvement in the Israel-Iran conflict kept market participants risk-averse.

Market anxiety intensified following a Bloomberg report that U.S. officials are preparing for a potential strike against Iran. While the report did not confirm whether such action is imminent, it added to the cautious tone gripping financial markets.

In political developments, President Trump voiced strong support for the GENIUS Act, a stablecoin regulation bill that passed the Senate and now awaits a vote in the House.

The bill’s momentum boosted sentiment around crypto regulation, particularly benefiting crypto-related equities.

With geopolitical tensions mounting and the Fed signaling a slower pace of monetary easing, crypto markets may remain range-bound in the near term, as traders await further clarity on both the macroeconomic and political fronts.

Oil prices edged higher on Thursday as the conflict between Israel and Iran intensified, stoking fears of broader geopolitical fallout and potential U.S. intervention. Light trading volumes, due to a U.S. federal holiday, did little to temper the market's bullish momentum.

The upswing came after Israel reportedly struck nuclear-related targets inside Iran, prompting retaliatory missile and drone attacks from Tehran, including one that hit an Israeli hospital overnight. With no clear path to de-escalation, both sides remain entrenched: Israeli Prime Minister Benjamin Netanyahu vowed Tehran would “pay the full price,” while Iran issued a stark warning against “third-party” involvement.

The White House confirmed Thursday that President Donald Trump will decide within two weeks whether the United States will become directly involved in the conflict—a prospect increasingly anticipated by market participants.

Iran, OPEC’s third-largest oil producer, currently extracts around 3.3 million barrels per day. Its southern coast borders the critical Strait of Hormuz, a chokepoint through which 18 to 21 million barrels per day of oil and oil products transit. Any disruption to that flow would have outsized impacts on global energy supply.

Meanwhile, Russia’s Deputy Prime Minister Alexander Novak said OPEC+ should proceed with its planned production increases, citing rising seasonal demand. Speaking at the St. Petersburg International Economic Forum, Novak urged calm, adding that OPEC+ should avoid market “scare tactics” or dramatic forecasts.

As geopolitical risk continues to drive volatility, traders are bracing for more headline-driven moves in the energy markets. The possibility of a broader regional conflict and U.S. intervention remains the key wildcard shaping near-term price dynamics.

U.S. stock index futures edged lower in Thursday trading, with investor sentiment dampened by President Donald Trump’s decision to postpone a potential military response to Iran and renewed hawkish signals from the Federal Reserve. Trading volumes remained subdued due to the Juneteenth holiday.

Markets continued to trade cautiously after the White House confirmed Thursday that President Trump will decide within two weeks whether the U.S. will directly engage in the ongoing conflict between Israel and Iran.

While Trump has floated the idea of a direct strike on Iranian targets, he has also expressed interest in rekindling nuclear talks with Tehran. However, he remains firmly opposed to Iran’s nuclear enrichment activities, citing concerns over potential weapons development.

Adding to investor anxiety were hawkish signals from the Federal Reserve. While the central bank left interest rates unchanged at its policy meeting on Wednesday, Chair Jerome Powell reiterated a cautious, data-dependent approach to future rate cuts.

U.S. equity markets remained largely rangebound through the week, with investors refraining from significant positioning amid geopolitical risks and an ambiguous monetary policy outlook.

With market direction likely to hinge on developments in the Middle East and further macroeconomic data, traders remain cautious heading into the next session. Inflation, central bank policy, and geopolitical tensions will continue to be the dominant themes guiding sentiment.