Are the US and Iran on the verge of a resumption of hostilities?

Despite numerous negotiations and warnings from the international monetary fund about the fragility of current economic trends, the current situation has given the impression that the countdown to the resumption of hostilities in the Middle East has quietly begun. In particular, anonymous officials revealed that the United States and Israel are highly likely to launch a military strike against Iran in the next 24 hours, which further exacerbated market fears of a worsening situation.

Some may see an unprovoked Iranian attack on an oil facility in the United Arab Emirates as the trigger for this escalation, but since the ceasefire agreement was reached on April 8, the two sides have been unable to reach a new consensus - in part because of US President Donald Trump's repeated refusal to negotiate a permanent peace deal on various Iranian proposals. This attitude shows that neither side is ready for a deal at present.

Although last-minute negotiations have the potential to ease current tensions,DLSMforeign exchangeBut there is a huge gap between Iran's demands on nuclear capabilities and issues related to the Strait of Hormuz and the goals set by the Trump administration. Unless that gap can be bridged, or one side of the United States and Iran chooses to compromise unconditionally, the four- to six-week war that Trump initially declared is likely to be extended indefinitely, causing immeasurable damage to the global economy.

Nonetheless, markets are eagerly anticipating Mr. Trump's usual early-morning comments, which will set the tone for what happens next. If he delivers a more reassuring signal after yesterday's tough statement that "Iran will be wiped off the face of the earth if it attacks US ships escorting the US in the Strait of Hormuz", the market's expectations could be reversed.

So far, the market reaction has been mild and restrained

The June WTI crude oil futures price hovered around $104/barrel during the session. It is worth noting that the price failed to break through the recent high of $110.93/barrel; while the December WTI crude oil futures price has climbed to $83.40/barrel, breaking through the high point in mid-March. This trend confirms that the market is increasingly worried that oil prices will continue to run at a high level this year. If the current relevant news continues to ferment and the US and Iran exchange further fire, crude oil prices will be supported by continued buying, and it is more likely to return to recent highs.

Interestingly, European stock indices have yet to crash, while US stock futures point to a slightly higher opening later in the day, a sign of relatively limited market anxiety. Strong corporate earnings reports have been supporting investor confidence and keeping the market relatively stable until key economic indicators such as Friday's non-farm payrolls data began to point to a much weaker economic outlook. Meanwhile, Bitcoin unexpectedly broke through the $80,000 mark - a level above which the closing price could be the basis for further gains if risk appetite continues to improve.

In addition, US Treasury yields were volatile: the yield on the 30-year US Treasury rose to 5%, the highest level since July 2025, and the yield on the 10-year US Treasury hit 4.40% again. In addition to rising inflationary pressures and widening term premiums, debt sustainability issues have once again become the focus of investors' attention as fiscal deficits continue to expand, while wars in the Middle East and military mobilization have further increased fiscal spending pressures, exacerbating market concerns about debt issues.

It is worth noting that there was little significant movement in the dollar exchange rate, with the euro hovering around 1.1660 against the dollar - a level much higher than market expectations given recent developments in the Strait of Hormuz. Are foreign exchange investors really not worried about the resumption of hostilities? This abnormal performance also triggered more speculation on the future foreign exchange trend in the market.

The Reserve Bank of Australia raises interest rates, releasing a pause signal

Earlier today, the Reserve Bank of Australia (RBA) announced another rate hike as scheduled, highlighting the threat posed by inflation and trying to limit the scope of the second-round effect of inflation. The bank's statement mentioned that "after this rate hike, there is room to wait and observe the follow-up developments" and "monetary policy is prepared to respond to various developments". These statements were interpreted by the market as a clear pause in interest rate hikes - provided that future oil prices remain near current levels. This also explains why the Australian dollar fell slightly against the US dollar today, but remained near three-year highs.

Finally, today's market will usher in a number of key US economic data, the most closely watched of which is the ISM purchasing managers' index (PMI) survey for the service industry, which is expected to show soaring inflationary pressures and a weak labor market. At the same time, a number of central bank officials will give speeches, including European Central Bank (ECB) President Lagarde and a number of Federal Reserve officials. These data and speeches will become key factors affecting the market trend of the day and attract the attention of global investors.