Fawad Razaqzada

Gold prices remain trapped in an increasingly uncomfortable middle ground as investors attempt to balance mounting geopolitical tensions against a steadily firmer US rates backdrop, all thanks to elevated oil prices. Pressure is increasing and the metal is on the verge of a break below the 200-day moving average, which hasn’t happened since September 2023.

The S&P 500 climbed to fresh record, recovering from earlier weakness, after reports emerged that Washington and Tehran had reached a provisional agreement to extend their ceasefire for a further 60 days, easing immediate concerns over a broader escalation in the Gulf.

The broader direction for US indices remains upward for now. Yet after weeks of near one-way gains, the S&P 500 Index (^SPX) chart is beginning to show signs of fatigue. Combined with a lack of any breakthrough in the Middle East situation, that does raise the risks of a correction, observes Fawad Razaqzada, technical analyst at TradingCandles.

The near-term EUR/USD forecast remains tilted to the downside, for as long as the Strait of Hormuz remains effectively shut.

Oil prices, already higher on the day, spiked again in the afternoon trading, as gold, stocks, crypto and FX markets all turned volatile on renewed escalation of Middle East tensions.

Reports suggest that Iran has stopped talks with US in protest over Israel's bombing of Lebanon.

Just like the start of last week, investors were slightly alarmed by the latest pick up in tensions in the Middle East, causing oil prices to rebound around 3% on the day, even if global equity markets were once again ignoring the noise. But the FX markets reacted with the dollar rising across the board, while currencies of oil importers were, predictably, under pressure again. Last week Trump had suggested negotiations with Tehran were “proceeding nicely” and that their naval blockade would be removed immediately. But that hasn't happened and traders are once again left betrayed by Trump's jawboning, while Israel has carried out strikes in southern Lebanon to raise serious question marks over the “ceasefire” agreement. The near-term EUR/USD forecast remains tilted to the downside, for as long as the Strait of Hormuz remains effectively shut.

We maintain a bullish DAX forecast, barring a major escalation in the US-Iran tensions.

European equities pushed higher this morning, joining the global rally. Investors are balancing ongoing geopolitical uncertainty in the Middle East against the relentless strength of the global technology sector. While European benchmarks have lagged behind Wall Street's technology-led advance for much of the year, it appears like other areas of the market are catching up a little as risk appetite returns. We maintain a bullish DAX forecast, barring a major escalation in the US-Iran tensions.

German DAX stocks, oil prices, Middle East tensions, and geopolitical risk are back in focus as renewed uncertainty surrounding Iran and the Strait of Hormuz drives fresh volatility across markets.