The ceasefire in the Middle East has been extended, yes, despite Donald Trump’s early threats that it was ‘unlikely’ to be extended and that he would step up his aggressive stance in case of no deal. That is yet another proof that the US could be losing control in the region, and it’s important to look past the noise that’s injected in the markets by tweets or even official announcements, because they seem to carry an increasingly lighter weight.
US futures are higher this morning following a retreat in yesterday’s session, while European equity futures are pointing to a lower start and the Asian equity complex is trading with little conviction on worries that this conflict is prolonging dangerously, the situation around the Strait of Hormuz remains highly uncertain, the US has put itself in a very difficult position that it can no longer easily justify politically or geopolitically, and no one knows what’s next.
What we know is that energy reserves are tightening. It is said that Europeans may be left with only a few weeks (roughly 6 weeks) of oil and energy reserves, after which we might see disruptions hitting the shore – beyond just prices – we could see energy scarcity, mass flight cancellations and so on.
Despite elevated risks, energy prices are showing a relatively muted reaction to the ceasefire extension—one that Iran reportedly did not request. US crude, which jumped more than 5% and tested key technical resistance, is slightly lower this morning, with WTI trading just below $93 per barrel. The tightening supply narrative is increasingly being counterbalanced by demand destruction, limiting the upside during rallies. From a technical perspective, the $94 level—around the 38.2% Fibonacci retracement of the year-to-date move—could act as a key pivot between consolidation and a continuation of the rebound. Above that, the $100 level should serve as a strong psychological resistance. In short, oil price volatility is likely to persist, with prices remaining elevated versus pre-conflict levels, but with limited scope for a sustained upside as higher prices weigh on demand.
Recent developments support this view, with European refineries reportedly cutting demand in response to higher prices.
In contrast, US consumption appears more resilient. Latest data showed a strong rebound in US retail sales. While part of the increase reflects higher energy prices and is not inflation-adjusted, gains were broad-based across categories including furniture, electronics and general merchandise. This aligns with recent bank commentary suggesting that US consumer spending remains relatively robust—for now.
As a result, US 2-year yields moved higher yesterday, reaching around 3.80%, as the data reduced the urgency for near-term rate cuts amid expectations of rising inflation. Comments from Kevin Warsh, Fed chair candidate, also drew attention. He emphasized his independence from political influence saying he will not be a ‘puppet sock’ to the White House and suggested that rate cuts may be preferable to balance sheet expansion, while also expressing a willingness to work with the US Treasury to reduce the balance sheet. However, the timing of such efforts remains challenging given ongoing uncertainty in global demand for US Treasuries!
The US Dollar, which initially strengthened during the early stages of the Iran conflict, has since lost momentum and returned toward pre-conflict levels. The EURUSD rebounded ahead of a key technical resistance, keeping the pair in the Trump-inauguration-to-date positive trend, while the USDJPY hovers just below the 160 level, with intervention risks limiting further upside.
Elsewhere, data showed that producer inflation in South Korea reached a three-year high amid rising energy costs, while the Kospi edged lower from recent highs.
In equities, the technology sector continues to regain attention as a relatively defensive growth play, supported by resilient AI demand despite Middle East tensions and energy crisis. This narrative remains in focus ahead of earnings season. Korean memory chipmakers, in particular, are benefiting from strong pricing power due to supply shortages, which should help protect margins despite rising costs.
In the US, Tesla is set to report earnings after the bell. Consensus expectations point to roughly 13–17% revenue growth compared to a year earlier, thanks to an easier comparison base following a weaker period last year due to Elon Musk’s political mess. However, the key debate around Tesla is no longer about short-term delivery numbers or car sales altogether, but whether Tesla can continue to position itself as an AI-driven growth story rather than an automaker falling out of grace. Challenges remain significant: deliveries have already missed expectations, pricing pressure, fading EV subsidies and an aging lineup are weighing on margins, and heavy capex—expected to exceed $20bn this year—raises concerns about cash flow and execution. Competition from China is also intensifying, with BYD announcing rapid charging advancements that highlight the pace of innovation in the sector. Their cars will reportedly charge from 10 to 98% in 6 minutes, and charging to 35% will take up to 1 minute only!
Against this backdrop, the bar has shifted. Markets are likely to focus less on quarterly figures and more on Elon Musk’s narrative around robotaxis, AI and future growth engines to justify valuation levels. Its PE ratio stands at 320 today.
