Market News

Market attention has shifted back to the Middle East as both the US and Iran ruled out extending the June memorandum aimed at ending the conflict.

The past week saw sharp cross-asset moves as key US economic data temporarily overshadowed geopolitical developments in the Middle East. The data flow materially shifted expectations for Fed policy, while persistent US-Iran tensions continued to support oil prices.

US producer price inflation continued to cool, following the latest CPI data, reinforcing expectations that the Fed has less need to tighten policy further. The softer inflation and labour-market data weighed on the US dollar, pushing the DXY below 100.00.

Markets were driven primarily by the latest US CPI report, which showed a broad moderation in price pressures across goods and services. The softer inflation profile reduced the pressure on the Fed to consider an earlier rate hike, although geopolitical risks continued to complicate the outlook.

Markets saw sharp moves after July Non-Farm Payrolls came in well below expectations. According to the US Bureau of Labor Statistics (BLS), non-farm payrolls fell by 23,000 jobs in July, while June payrolls were revised down to just 20,000 jobs.

Oil prices reversed sharply higher during the previous session after details of a draft proposal between Oman and Iran were released. Under the proposal, Iran would prohibit US and Israeli vessels from transiting the Strait of Hormuz. Ships from countries that Tehran accuses of causing damage to Iran would also be barred from using the strategic waterway until full compensation has been paid.

Markets turned more subdued following Monday's sharp volatility. WTI crude recovered modestly to the $80 level after Iran rejected reports that Washington and Tehran had planned to hold talks yesterday.

Markets opened the week with significant volatility, led by a sharp decline in oil prices. Over the weekend, US President Donald Trump announced that Iran and several Middle Eastern countries had requested additional time to finalize an agreement.