Global markets turned risk-averse after weekend talks between Iran and the US made no progress. The only item on the US calendar is March Existing Home Sales.
President Donald Trump said talks were “very friendly” and that Iran agreed to “just above every point” the US needed, but Iran did not commit to giving up nuclear ambitions. Trump said a two-week ceasefire is holding, while the US military will enforce a blockade on all naval traffic in and out of Iranian ports in the Strait of Hormuz from 10:00 EST Monday.
Markets React To Renewed Geopolitical Risk
The Wall Street Journal reported Trump and advisers are weighing renewed military strikes alongside the blockade. Oil opened with a bullish gap, with WTI near $96, up about 6% on the day.
US stock index futures fell 0.6% to 0.7%, while the USD Index rose over 0.3% to near 99.00. US CPI inflation rose to 3.3% year-on-year in March from 2.4% in February; monthly CPI was 0.9% after 0.3%.
Gold fell to a six-day low below $4,650, then recovered above $4,700. EUR/USD neared 1.1700, down about 0.3%, and GBP/USD was just above 1.3400, down 0.35%.
USD/JPY traded above 159.50 after two days of gains. BoJ Governor Kazuo Ueda said the recovery is modest and inflation is moving towards target.
Key Cross Asset Levels
Looking back at the events of exactly one year ago, we saw how quickly markets reacted to the failed US-Iran talks. The immediate 6% spike in WTI crude oil to $96 a barrel was a clear warning of how sensitive energy prices are to conflict in the Strait of Hormuz. We should be positioned for similar volatility now, especially with crude oil inventories showing a recent drawdown of 2.1 million barrels last week, tightening the supply picture even before any new disruptions.
The risk-off sentiment that hit stock futures in April 2025 is a textbook reaction we must prepare for again. Volatility, as measured by the VIX, is currently holding near a relatively calm 15, which could represent a cheap entry for buying call options as a hedge. Any escalation in geopolitical tensions would likely see this index surge, as it did this time last year when it jumped over 25% in two days.
Last year’s events also reinforced the US Dollar’s role as the ultimate safe haven, with the DXY climbing past 99.00. With US inflation data from March showing a stubborn 3.4% annual rate, the dollar continues to have fundamental support for a strong policy stance. This suggests that holding long dollar positions against other major currencies remains a sound strategy in the face of global uncertainty.
We should also remember the pressure on the Japanese Yen, which weakened past 159.50 against the dollar despite the risk-off mood. While the strong dollar was the main driver then, a severe crisis could still trigger a rush into the Yen as a traditional haven, unwinding carry trades violently. Traders should therefore be cautious and consider options to protect against a sudden reversal in USD/JPY.
Gold’s behavior last year was tricky, showing a sharp dip before rebounding above $4,700. This initial shakeout likely cleared the way for a more sustained move higher, driven by both the conflict and the high inflation figures. Given that gold is currently trading above $2,550 an ounce, any similar dips on news should be viewed as opportunities to build long positions.
