Markets met a surge in volatility early on Monday, with investors assessing the latest developments surrounding the Middle East crisis, allowing geopolitical headlines and the risk perception to continue to drive the action.
Over the weekend, Iranian President Masoud Pezeshkian apologised to neighbouring countries for attacks launched following US-Israel strikes, saying that Tehran will not strike “unless they attack first.”
The United Arab Emirates, Kuwait and Iraq have decided to reduce crude oil production, citing Iranian threats against the safe passage of ships through the Strait of Hormuz. Because tankers are unwilling to cross the strait, oil producers in the region are running out of storage space and opting to curb the output.
In early trading, West Texas Intermediate hit its highest level since June 2022, above $110 a barrel, while Brent climbed above $114.
During Asian trading hours, news of the International Energy Agency (IEA) considering a coordinated release of emergency oil reserves among G7 member countries to stabilise markets helped oil prices correct lower.
By noon, Brent was trading near $100, rising about 9% on the day, WTI was up 7% near $96.
US President Donald Trump posted on Truth Social that the short-term increase in oil prices was a “very small price to pay” for destroying Iran’s nuclear threat.
Meanwhile, Iran has named Mojtaba Khamenei, Ali Khamenei’s son, to succeed as the new supreme leader. Fox News reported that President Trump was “not happy” with Iran’s appointment.
The Israeli military said early on Monday that it had started a new wave of attacks in central Iran and also targeted Hezbollah infrastructure in Beirut.
Iran also reportedly continued its attacks, with outlets noting drone interceptions heading to the US diplomatic facility near Baghdad airport and Saudi Arabia’s northern Jawf region, in addition to reports about rising thick smoke from the Bapco oil refinery in Bahrain.
IMF: Resilience tested again
In related news, Kristalina Georgieva said the IMF is seeing resilience tested again by the new conflict in the Middle East.
The US dollar benefits from the risk-averse market atmosphere, with the DXY Dollar Index was up 0.5% at 99.30 after gaining more than 1% in the previous week, while US stock index futures were last seen losing between 1.7% and 1.5%.
Gold struggles to capitalise on safe-haven flows, with XAUUSD trading in the red near $5,100, losing about 1% on the day.
EURUSD opened with a bearish gap and touched its weakest level since late November near 1.1500. The euro-dollar pair recovered in the early European session, but remains deep in negative territory at around 1.1550.
Germany’s Destatis reported on Monday that Industrial Production contracted by 0.5% on a monthly basis in January.
Data from China showed earlier in the day that annual inflation, as measured by the change in the consumer price index (CPI), jumped to 1.3% in February from 0.2% in January.
USDJPY climbed toward 159.00 early on Monday before retreating to 158.50. Japan Prime Minister Sanae Takaichi said that it’s hard to say how the conflict in the Middle East could affect Japan’s economy.
GBPUSD remains on the back foot and lost more than 0.5% on the day below 1.3350 in early European trading.
(Source: OANDA)
