Date: 9th July 2026.
Markets Weekly: Oil, Fed Outlook and Middle East Tensions Keep Traders on Edge.
Global financial markets continue to navigate a challenging environment where geopolitics, inflation, and central bank policy remain the dominant themes. Renewed military activity in the Middle East, fluctuating oil prices, and shifting expectations for US interest rates have created increased volatility across currencies, commodities, bonds, and equities.
Although investors remain cautious, market reactions suggest participants still believe the current geopolitical tensions can be contained. However, with inflation risks returning to the spotlight, traders are closely monitoring every headline for signs of a broader shift in market sentiment.
Middle East Conflict Remains the Key Market Catalyst
The latest developments between the United States and Iran continue to dominate financial markets.
After renewed military exchanges earlier this week, including US strikes on Iranian military targets and retaliatory attacks by Iran, President Donald Trump initially declared that the ceasefire agreement was ‘over.’ However, sentiment shifted once again after Trump later stated that Iran was seeking to resume negotiations.
This back-and-forth rhetoric has become a familiar pattern throughout the conflict. While the White House appears eager to reduce tensions, investors remain sceptical that a lasting diplomatic solution is close.
Negotiations surrounding Iran’s nuclear programme have made little meaningful progress despite previous commitments, suggesting further periods of uncertainty remain likely over the coming weeks.
Strait of Hormuz Still in Focus
Although military activity has increased, financial markets have largely avoided panic.
The Strait of Hormuz remains one of the world’s most strategically important shipping routes, transporting approximately one-fifth of global oil supplies.
Following recent attacks on commercial vessels, shipping activity slowed considerably before gradually resuming along alternative routes. While Brent crude briefly climbed above $80 per barrel earlier this week, prices have since eased back below $78 as investors continue to believe that a full-scale disruption to global energy supplies remains unlikely.
For now, markets appear to view the latest escalation as another phase in the ongoing negotiations rather than the beginning of a prolonged energy crisis.
Oil Prices Keep Inflation Concerns Alive
Energy markets remain at the centre of investor attention.
Although oil prices have retreated slightly, the recent rally has reignited concerns that inflation could remain elevated for longer than previously expected.
Higher energy prices feed directly into transportation and production costs, potentially slowing the recent decline in global inflation.
As a result, traders have begun reassessing expectations for central bank policy, particularly in the United States.
Federal Reserve Adopts a More Cautious Tone
The release of the Federal Reserve’s latest meeting minutes provided another reminder that policymakers remain divided over the future path of interest rates.
During the June policy meeting, several members argued that another interest rate increase could still become necessary if inflation remains persistent. Others maintained that rates may gradually move lower later this year.
Following the minutes, markets increased expectations that the Federal Reserve could deliver another rate hike before year-end.
According to futures markets, the probability of another increase has risen significantly over the past week as higher oil prices threaten to keep inflation above target.
For traders, the message remains clear: inflation continues to drive monetary policy.
Currency Markets: Dollar Volatility Continues
The US Dollar experienced another volatile week as geopolitical headlines and interest rate expectations continued to influence investor positioning.
Safe-haven demand initially supported the Dollar following renewed military action in the Middle East. However, the currency later weakened after President Trump suggested that diplomatic discussions with Iran could resume.
Markets interpreted the comments as another attempt to de-escalate tensions, although investors remain unconvinced that a lasting agreement is imminent.
Major currency pairs reflected the changing sentiment:
EURUSD climbed back towards 1.1440, approaching recent highs.
GBPUSD rose above 1.3420, reaching its strongest level in nearly three weeks after breaking above key technical resistance.
AUDUSD recovered alongside improving risk appetite.
USDJPY edged lower as Treasury yields eased.
The US Dollar continues to trade between competing forces: safe-haven demand during periods of geopolitical uncertainty and weakness resulting from softer Treasury yields and shifting expectations for Federal Reserve policy.
Swiss Franc Attracts Defensive Buying
The Swiss Franc remained one of the strongest performers among major currencies this week.
USDCHF continued to move lower as investors sought traditional safe-haven assets amid rising geopolitical uncertainty.
At the same time, the Swiss National Bank reiterated its willingness to intervene in currency markets if excessive strength in the franc threatens domestic price stability.
Growing demand for both the Swiss Franc and gold reflects investors’ continued search for defensive assets while geopolitical risks remain elevated.
Equity Markets Show Signs of Stability
Despite heightened geopolitical tensions, global equity markets have remained remarkably resilient.
European stock futures point towards a stronger opening, while US index futures also recovered after earlier losses.
Asian markets delivered mixed performance, with gains in mainland China and Japan offsetting weakness in Hong Kong.
The resilience of equity markets suggests investors continue to expect the current conflict to remain contained rather than escalate into a broader regional crisis.
Gold Continues to Benefit from Uncertainty
Gold maintained its upward momentum as investors balanced geopolitical risks against rising interest rate expectations.
Normally, higher Treasury yields reduce the appeal of non-yielding assets such as gold. However, persistent geopolitical uncertainty has continued to support demand for precious metals.
Silver also advanced alongside gold, reflecting broader defensive positioning across commodity markets.
Corporate Developments
Artificial intelligence remains one of the strongest long-term investment themes despite current macroeconomic uncertainty.
Among the week’s major corporate developments:
SK Hynix’s upcoming US listing has reportedly attracted exceptionally strong investor demand.
Reports suggest China may ease restrictions on purchases of Nvidia’s advanced AI chips, potentially supporting semiconductor stocks.
Meta Platforms announced plans to invest approximately $10 billion in its first Canadian data centre as the company continues expanding its AI infrastructure.
Economic Calendar
European Session
The European Central Bank will release its latest meeting accounts. While the report provides useful insight into policymakers’ discussions, it rarely generates significant market volatility because the information is already considered outdated.
US Session
Attention turns to the latest US labour market data.
Economists expect:
Initial Jobless Claims: 217,000
Continuing Claims: 1.814 million
Unless the figures differ significantly from expectations, the release is unlikely to become a major market catalyst.
Investors will also monitor speeches from several central bank officials, including representatives from the Federal Reserve, the Swiss National Bank, and the Bank of England.
What Traders Should Watch Next
Financial markets remain highly sensitive to both economic data and geopolitical headlines.
The key themes likely to drive markets over the coming days include:
Further developments between the United States and Iran.
Security of shipping through the Strait of Hormuz.
Oil prices and their impact on global inflation.
Federal Reserve interest rate expectations.
US Dollar performance across the major currency pairs.
Next week’s US inflation data, which could significantly influence expectations for future Fed policy.
For now, investors continue to favour the view that geopolitical tensions will remain contained. However, any disruption to global energy supplies or another sharp rise in oil prices could quickly reverse sentiment across global financial markets.
As inflation remains the defining issue for central banks, traders should expect elevated volatility to continue throughout the coming weeks.
Always trade with strict risk management. Your capital is the single most important aspect of your trading business.
Please note that times displayed based on local time zone and are from time of writing this report.
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Andria Pichidi
HFMarkets
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