Global markets experience two-way volatility due to the fluid Middle East situation and US actions. Gold and oil show sharp reactions while the BoJ maintains rates.
Israel-Iran tension spiked, WTI rebounded, BoJ slowed down bond tapering
Global markets have experienced two-way volatility since yesterday due to the fluid situation that is unfolding in the Middle East, as there are no clear signs of de-escalation in the conflict between Israel and Iran.
During yesterday’s early US session, several media outlets reported that Iran wanted to resume negotiations with the US over its nuclear programme, igniting hopes that geopolitical tensions may abate.
Sentiment improved in the US stock market, with all the major US stock indices closed in the green; S&P 500 (0.9%), Nasdaq 100 (+1.4%), Dow Jones Industrial Average (+0.7%), and Russell 2000 (+1.1%), almost erasing all of last Friday’s losses. WTI crude oil reversed down with an intraday loss of -2%, and Gold (XAU/USD) shed by -1.4%.
In case you missed it: Our chart of the week - Technical analysis of US Nasdaq 100 highlights a potential minor bearish top and increased volatility.
In an abrupt turn of events in today’s early Asian session, US President Trump has called for the evacuation of Tehran and decided to leave the G7 leaders’ summit in Canada early to head back to Washington, sparking fears that the US may get involved in the Israel-Iran conflict.
In addition, media reported that three oil tanker ships were on fire in the Gulf of Oman, near the Strait of Hormuz, raising fears that Iran may have started to disrupt oil supply in the Middle East.
WTI crude oil rebounded by 1.1% to trade at US$72.20/barrel after it hit an intraday low of US$69.20 yesterday. Gold (XAU/USD) recovered slightly by 0.2% to US$3,393 from today’s Asian session current intraday low of US$3,374. S&P 500 and Nasdaq 100 E-mini futures reversed down by -0.4%.
The FX market has shown no clear signs of US dollar strength revival despite geopolitical tensions in the Middle East, as the US Dollar Index continued to trade in a tight range of 98.60 and 97.60 since last Thursday, 12 June, and remained below its 20-day moving average that is acting a near-term resistance at around 99.00.
The Bank of Japan (BoJ) has left its benchmark policy rate at 0.5% for a third consecutive meeting after a 25 basis point hike in January. Also, it unveiled a plan to ease the pace of its monthly bond tapering programme in the next fiscal year to 200 billion yen per quarter from the current pace of 400 billion yen.
These latest moves by the BoJ have been widely expected by the market to ease the recent heightened volatility seen in the longer-term Japanese government bonds (JGB) market after the 30-year JGB yield spiked to a record high of 3.2% in May.
The USD/JPY has continued to trade in a sideways range configuration since its 27 May 2025 swing low area of 142.35, as it whipsawed around its 20-day and 50-day moving averages.
