Financial markets are cautious on Friday, with participants avoiding risk while waiting for clarity on the next round of US-Iran negotiations. There are no top-tier economic data releases, keeping attention on geopolitics and central bank comments.
US President Donald Trump said on Thursday that Israel and Lebanon agreed to a 10-day ceasefire. Israeli Prime Minister Benjamin Netanyahu later said Israel has not agreed to withdraw from southern Lebanon, and the Israeli military said troops will stay in a 10-km deep security zone and warned residents not to return.
NBC News reported that a senior Iranian official said a permanent ceasefire would depend on adherence to Iran’s conditions and those of “the resistance”. The UK and France will chair a meeting on freedom of navigation in the Strait of Hormuz, with representatives from around 40 countries, and there are reports the second round of US-Iran talks could take place this weekend.
The US Dollar Index is steady above 98.00 in the European morning, after a marginal rise on Thursday, while US stock index futures are mixed. EUR/USD is near 1.1780 after a 0.15% fall, with Eurostat due to release February trade balance data.
GBP/USD fell 0.25% on Thursday and is slightly above 1.3500. USD/JPY dipped below 158.30 to a weekly low on Thursday, then ended slightly higher and is above 159.00, while gold is around $4,800 after little change.
Looking back to this time in 2025, we recall the cautious mood driven by US-Iran negotiations and a fragile ceasefire in Lebanon. That period of geopolitical tension served as a reminder of how quickly risk sentiment can shift. Today, while those specific headlines have faded, the underlying instability in the region remains a key factor.
The implied volatility from last year’s events stands in contrast to today’s market, where the VIX has been hovering near 15, well below its recent peaks. This suggests the market might be underpricing the risk of a sudden shock. We should consider buying cheap, out-of-the-money call options on the VIX as a hedge against complacency.
In 2025, we were watching the Strait of Hormuz, a critical chokepoint for global energy. Those tensions have eased, and Brent crude has since stabilized in a range between $85 and $90 per barrel. However, any renewed flare-up could cause a rapid spike, so using call spreads on oil futures could be a cost-effective way to position for upside risk.
The US Dollar Index was strong above 98 back then, acting as a clear safe-haven asset. The dollar’s dominance has only increased since, with the DXY recently pushing above 106 on the back of persistent inflation data from the first quarter of 2026. This trend suggests that being long the dollar against currencies with dovish central banks remains a viable strategy.
Gold’s behavior last year, holding steady at an extreme $4,800, showed its value during peak uncertainty. While it has retreated from those fictional highs, gold recently made new record highs above $2,400 per ounce in April 2026, driven more by central bank buying and inflation hedging. This shows the drivers for gold have shifted from acute crisis to chronic macro risk.
The pressure we saw on the Japanese Yen in 2025, with USD/JPY above 159, is a story we are seeing again today as the pair tests the 155 level. The risk of direct intervention from the Bank of Japan is now extremely high, a factor that was only a distant threat a year ago. Traders should be cautious with long positions and could use puts on USD/JPY to protect against a sharp, sudden reversal.
