Global financial markets started Friday in a cautious risk-off mood as tensions involving Iran and the Strait of Hormuz coincided with investor focus on the February Core Personal Consumption Expenditures (Core PCE) Price Index, the preferred inflation gauge of the Federal Reserve (Fed). Stronger recent U.S. economic data and persistent inflation worries supported the U.S. Dollar (USD), pressuring major currencies, commodities, and equities. At the same time, markets increasingly see high oil prices as a potential risk to global economic growth.
Trading across the Asia-Pacific (APAC) region remained subdued as investors assessed geopolitical risks and developments in energy markets.
Oil prices stayed elevated, though upside momentum eased after the U.S. issued a Russia-related general license allowing the sale of Russian crude oil and petroleum products already loaded onto vessels. U.S. Treasury Secretary (Treasury Sec.) Scott Bessent said the Trump administration temporarily allowed countries to purchase Russian cargoes stranded at sea to boost global supply and stabilise energy markets. The license acts as a 30-day sanctions waiver for cargoes already in transit, giving traders and refiners time to complete transactions without further supply disruption. The move aims to contain volatility caused by the Iran conflict and tensions around key shipping routes.
In regional energy developments, Japan and several APAC partners are expected to announce more than $30 billion in agreements with U.S. companies during a visit by Trump administration officials to Tokyo this weekend. Meanwhile, Australia plans to release about 20% of its fuel reserves to address supply shortages already affecting rural and regional areas.
Recent U.S. economic data delivered mixed but generally supportive signals for the USD. January Building Permits declined while Housing Starts rose to 1.487M compared with the 1.348M estimate. Initial Jobless Claims came at 213K against the 215K forecast. The January Goods and Services Trade Balance deficit narrowed to −54.5B versus the −66.6B estimate. These figures, combined with inflation concerns, reinforced expectations of a hawkish Federal Reserve stance and pushed the USD to its strongest level since late November 2025.
Donald Trump again called for interest rate cuts from the Fed, though markets see limited chances of immediate easing. Expectations for policy cuts have dropped sharply from around 60 basis points (bps) earlier this year to roughly 22 bps after geopolitical tensions intensified. This shift supported the U.S. Dollar Index (DXY), which climbed to the highest level of the year.
Elsewhere, the U.S., the European Union (EU), and Japan are advancing a critical minerals trade agreement that may include a price-floor mechanism. Analysts say earlier policy decisions underestimated Iran’s willingness to disrupt the Strait of Hormuz.
Israeli Prime Minister Benjamin Netanyahu stated Iran is no longer the same Iran, while reports suggest Israel could soon launch a ground campaign in Lebanon. Iranian officials said they do not plan to close the Strait of Hormuz but emphasized their right to secure the waterway, adding that many vessels can still pass through it. Britain’s Defense Secretary warned Iran may be laying mines in the area, while U.S. Energy Secretary (Energy Sec.) Chris Wright said Iran-related operations could take weeks rather than months. Treasury Sec. Scott Bessent added that there is currently no confirmation that Iran has mined the Strait of Hormuz, while Israeli officials believe Iran’s regime is unlikely to collapse soon despite ongoing war pressure.
Thursday’s North American trading session reflected heightened risk aversion after Iran reportedly struck tankers overnight in the Strait of Hormuz. The U.S. response remains unclear, and naval escorts are not expected until later in the month, raising the possibility of a prolonged conflict.
Rising energy prices weighed heavily on equities. U.S. stocks closed sharply lower after crude oil surged around 8% during the session, raising concerns about inflation, slower growth, and higher production costs. Higher energy costs increase transportation and manufacturing expenses and pressure industries sensitive to fuel prices, such as airlines and travel.
In the currency market, the U.S. Dollar Index (DXY) strengthened for the fourth consecutive day and reached the highest level since late November 2025, pushing EURUSD and GBPUSD lower for a fourth straight session. USDJPY briefly climbed to a 20-month high before retreating on speculation that Japanese authorities may intervene to support the Japanese Yen (JPY). Meanwhile, AUDUSD and NZDUSD remained under pressure, while USDCAD extended gains for a third consecutive day.
In other asset classes, crude oil paused its recent rally but still showed limited downside momentum. Equities continued to edge lower, while cryptocurrencies surprisingly moved slightly higher. Meanwhile, traditional safe-haven metals such as gold and silver posted modest losses and are heading toward a second consecutive weekly decline despite rising geopolitical tensions.
Upbeat U.S. data released on Thursday, combined with rising risk aversion, helped the U.S. Dollar Index (DXY) move toward a weekly gain. The stronger USD, together with growing economic concerns in the Eurozone and the UK, pressured EURUSD and GBPUSD. As a result, EURUSD fell to its lowest level since November 2025, while both major currency pairs declined for the fourth consecutive session on Friday.
Meanwhile, USDJPY climbed to a 20-month high before easing slightly after Japanese policymakers signaled possible market intervention to defend the Japanese Yen (JPY). The pair also faced pressure from the hawkish stance of the Federal Reserve (Fed) and the JPY’s traditional safe-haven appeal.
Earlier in the day, Japan’s Trade Minister (Trade Min.) Akazawa said authorities will continue discussions regarding Japan’s allocation and timing for an International Energy Agency (IEA) coordinated release of oil reserves. At the same time, the Japanese government and private sector are working to secure alternative crude supplies, with companies exploring imports from the U.S., Central Asia, and South America.
The stronger U.S. Dollar (USD) and prevailing risk aversion are pressuring AUDUSD and NZDUSD, while USDCAD moves higher as the firm USD and cautious market sentiment prevail ahead of Canada’s monthly employment data due later today. Adding support to USDCAD is the recent pullback in crude oil prices, a key export commodity for Canada.
Meanwhile, a Reuters poll indicates that the Reserve Bank of Australia (RBA) may raise the cash rate to 4.10% on March 17 and further to 4.35% by the end of 2026. In New Zealand, the Manufacturing Purchasing Managers’ Index (Manufacturing PMI) held steady at 55 in February, marking the strongest expansion phase since 2021. On the other hand, Canada’s January Trade Balance showed a deficit of −3.65B compared with the −0.9B estimate.
Despite worsening market sentiment and aggressive gold purchases from China, gold prices are heading for a second consecutive weekly loss. The decline is mainly linked to the stronger U.S. Dollar Index (DXY), which is moving toward a second straight weekly gain. In addition, markets are consolidating the strong rally seen in gold and silver during 2025, while technical correction also contributes to the recent pullback in bullion prices.
West Texas Intermediate (WTI) Crude Oil snaps its three-day winning streak and posts mild losses early Friday as traders expect some relief in the global energy supply situation after the U.S. eased sanctions on Russian oil for 30 days. However, buyers remain optimistic due to the ongoing Iran conflict and continued risks to global oil shipments passing through the Strait of Hormuz.
Meanwhile, Bitcoin (BTC) and Ethereum (ETH) extend gains for the fifth consecutive day, supported by optimism surrounding the Clarity Bill and a technical breakout. In doing so, cryptocurrencies largely ignore the stronger U.S. Dollar (USD) and prevailing risk aversion in broader markets.
Elsewhere, Asia-Pacific (APAC) equities continue to trade lower with modest losses, while U.S. equities ended Thursday’s session in the red. The Dow Jones Industrial Average (DJIA) closed at 46,677.85, down −739.4 or −1.56%. The Standard and Poor’s 500 Index (S&P 500) finished at 6,672.62, down −103.18 or −1.52%. The NASDAQ Composite Index ended at 22,311.98, down −404.16 or −1.78%. The Russell 2000 Index declined to 2,488.99, losing −53.91 or −2.12%, reflecting heavier selling in small-cap stocks.
Traders face a busy Friday with key data releases including UK and U.S. GDP, Canada’s employment figures, the U.S. Core Personal Consumption Expenditures (Core PCE) Price Index, Durable Goods Orders, and the University of Michigan (UoM) Consumer Sentiment Index. Market volatility is also likely to be influenced by updates on the Iran conflict, global efforts to address energy supply risks, and statements from major central bank officials.
Thursday’s mostly positive U.S. data, combined with persistent inflation concerns, is keeping the U.S. Dollar (USD) strong, putting pressure on major currencies, Antipodean pairs, and equities. Cryptocurrencies could continue benefiting from industry optimism, while crude oil may remain firm amid ongoing supply challenges. At the same time, firmer readings from the Core PCE Price Index, GDP, and other key indicators could further support the USD’s upside momentum. Gold, meanwhile, may recover some of its recent losses if incoming U.S. data temporarily eases dollar strength.
May the trading luck be with you!
