Yesterday's trading session saw market volatility ramp up further, following a weekend statement from Trump that Iran had 48 hours to re-open the Strait of Hormuz or face military strikes on key energy infrastructure. Oil, the dollar and bond yields all initially surged on the news, whilst equites plummeted. At one stage markets were fully pricing-in 4 UK rate hikes by year-end.
Mid-morning, a statement from Trump that the US and Iran had been having "good talks" and that the US military would not strike Iran's infrastructure for 5 days whilst talks continue saw an immediate reversal of the early moves.
In reaction to the temporary cessation, oil prices immediately fell by 15%, and bond yields and the dollar tumbled back down.
Overnight, unconfirmed reports of strikes on Iranian gas infrastructure have boosted oil prices, as markets nervously await the start of the new trading day
*Daily move - against G10 rates as of 17:00 GMT, 23.03.26
** Indicative rates - interbank rates as of 17:00 GMT, 23.03.26
Geo-political events are clearly continuing to dominate markets but should we see a swift end to the hostilities, the "damage" to the global economy thus far could be healed very quickly, enabling bond yields to fall back, and relieving the current pressure on central banks to aggressively hike interest rates in order to tame inflation. Of course the opposite is also true, were the current situation to drag on the impact on global trade and inflation would be severe.
For now we are in limbo land as markets are looking no further than the latest Trump headline.
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