US unilateral efforts to de-escalate tensions in the Middle East are waning, as Iran has not backed any negotiation claims. Donald Trump’s 5-day ceasefire deadline was due to end today, but he decided to extend it to April 6. Just before that, he said the US would “keep blowing them away.” This is becoming increasingly difficult to follow.
With or without the US in the mix, attacks continue in the Middle East. Gulf countries have exchanged strikes throughout the week, and traffic through the Strait of Hormuz remains very limited. Iran’s so-called “gift” to Trump was the transit of 10 oil tankers this week — compared to roughly 100 ships that pass through this strategic waterway per day in normal times.
As such, the extension of Trump’s ceasefire does not necessarily point to material progress toward peace or an improvement in oil flows. However, it appears to reassure investors that the weekend could be less volatile than feared, in the sense that the US may refrain from further escalation after the market close.
This likely helped lift sentiment in Asia this morning, with Japan’s Nikkei 225, as well as US and European futures, moving higher following an ugly session that pushed the S&P 500 down 1.74% and the Nasdaq-100 by more than 2.3%.
Elsewhere in tech, memory chip makers came under pressure after Google published research on a new algorithm that could allow more efficient use of storage required for AI development. This could ease pressure on memory chip prices, which has surged in recent months (by triple-digit percentages in some cases), and weigh on memory chip makers’ profitability. SanDisk — a key name in the memory chip rally — fell 11% yesterday, while South Korea’s KOSPI slipped below its 50-day moving average. Further downside is possible, although the structural shortage in memory chips should help limit deeper losses, and keep memory chip makers in demand.
In Europe, the STOXX Europe 600 also came under pressure, albeit to a lesser extent, as European countries approved a trade deal with the US that would cap tariffs on European exports at 15%, while removing tariffs on US industrial goods.
Whether this is seen as fair is another question. European policymakers are already mapping US vulnerabilities to increase leverage in future negotiations — a sign that this deal may not be the endgame, and that further trade headlines are likely.
Interestingly, the exposure analysis shows that the US relies heavily on European chemicals and pharmaceuticals — bingo for Switzerland. The SMI is heavily weighted toward pharmaceuticals, with Roche and Novartis together accounting for roughly 35–37% of the index. This helps explain why the SMI fell just 0.6% yesterday, outperforming both European and US peers. Even the energy-heavy FTSE 100 dropped 1.33% despite rising oil prices.
In energy markets — the key driver for global financial markets right now — US crude rose to $96 per barrel yesterday and is trading closer to $94 this morning, while Brent crude has moved back above the $100 level and is consolidating gains. The pressure remains to the upside.
One bright spot this morning is China’s CSI 300, which is rebounding from its 200-day moving average after data showed industrial profits rising 15%.
Overall, however, the situation in the Middle East remains unchanged. Geopolitical risks persist, the conflict involving Iran has now extended beyond a month, and the prolonged disruption to oil and other supplies is posing a serious threat to global inflation. The OECD has revised its inflation forecast for this year from 2.8% to 4%, pointing to tighter global monetary conditions ahead.
Unsurprisingly, yesterday’s US 30-year bond auction was weak, with the yield pushing toward 5%. Globally, yields are rising on higher inflation expectations, tighter monetary policy, and increased military spending. Japan’s 10-year yield climbed to 2.36%, the highest since January, while benchmark European yields are pushing to levels last seen in 2011, and UK gilt yields are at highs since 2008.
Rising global yields are weighing on gold, as they increase the opportunity cost of holding a non-yielding asset. Gold’s recent weakness is also linked to US dollar strength. Central Bank of Turkey, for example, reportedly sold and swapped around 60 tons of gold in the first two weeks of the Iran conflict to support the lira — a dynamic that may be reflected in other central banks facing higher energy import costs. In a similar behaviour, investors also trimmed gold positions to cover losses elsewhere.
Gold is slightly firmer this morning on a softer US dollar, but downside risks remain. Technically, gold has tested a major support level — the 38.2% Fibonacci retracement of the rally since late 2023 — which coincides with the 200-day moving average. The broader bullish trend remains intact above this level, but a break below (around $4’115 per ounce) could open the door to a medium-term consolidation phase. Longer term, the outlook remains constructive, as central banks are likely to rebuild reserves, making dips attractive buying opportunities.
