The Morning Update

The USD extends gains, oil prices rally, equity markets are down, and US yields rise as the Mideast conflict rages. The US Dollar rallied sharply after US strikes on Iran, reclaiming its traditional safe-haven role as geopolitical tensions in the Middle East escalated. The Dollar Index recorded its strongest daily gain in seven months, supported by flight-to-safety flows and strong demand for US Treasuries. While the move reassures investors of the greenback’s defensive appeal in externally driven crises, some analysts argue its longer-term haven status still depends on the nature of future shocks and oil price dynamics. Global equities weakened sharply as the war in Iran intensified, raising fears of prolonged energy disruptions and higher inflation. US futures dropped nearly 2%, while European and Asian benchmarks headed for their worst two-day decline since April as oil prices surged above $82 a barrel. Investors grew more cautious, with strategists warning that markets may not yet fully reflect the risks of a sustained conflict. Oil prices surged sharply amid escalating geopolitical tensions and fears of supply disruptions around the Strait of Hormuz. In contrast, gold slipped from recent highs and Bitcoin weakened as investors reassessed risk exposure amid volatile markets. Focus remains on Iran/US updates and comments from a flurry of ECB & Fed speakers, which will help drive intraday market direction.

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In the news. Dow futures drop 800 points as traders fear US-Iran conflict could drag on. Stocks and bonds tumble as widening Middle East war rattles markets. Trump struggles to explain why he launched another Middle Eastern war. Eurozone inflation rises to 1.9% in February. Paramount's $110 bn Warner Bros deal poised win FCC backing. Warsh's push to shrink the Fed's balance sheet would evolve slowly. Trump says the US/UK relationship is 'not like it used to be'. France offers to deploy nuclear deterrent across Europe for the first time. Iran executes Khamenei's plan to spread regional war. Nervous nations are calling Canada's energy minister after Iran strikes.

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In currency markets. G20 currencies continue to weaken against the US Dollar as escalating geopolitical tensions and surging oil prices drive a broad risk-off move across global markets. Within that backdrop, the South African Rand and Polish Zloty have tumbled sharply, pressured by safe-haven flows into the greenback and heightened concerns over inflation, energy costs and slowing growth. CNY is easing 0.25%, and Asian currencies are falling 0.6% on average against the USD. Trading currencies continue under selling pressure, with ZAR & PLN tumbling 2%, NZD, NOK, SEK & CZK weakening 1.4%, MNX, CHF & AUD retreating 1.2%, DKK falling 0.9% and JPY down 0.4% against the USD.

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In commodity markets. Oil prices rallied 7.6%. Natural Gas prices 6%. Gold & Copper prices weakened 2.2%. Silver prices tumbled 10.5%. Coffee prices slipped 0.6%. Soybean prices advanced 1.5%, and Wheat prices gained 1%.

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CAD eased past 1.3700 against the US Dollar as safe-haven flows into the greenback outweighed the support from a near 8% surge in oil prices. Despite the pullback, the loonie continues to outperform many of its G20 peers, underpinned by Canada’s energy exposure. Stronger manufacturing data has helped limit losses, though rising bond yields signal growing inflation concerns tied to higher energy costs.

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EURCAD remains under pressure as broad Euro weakness and safe-haven flows into the US Dollar weigh on the single currency, while the Canadian Dollar draws support from surging oil prices. With geopolitical tensions elevated, relative CAD resilience continues to tilt risks lower for the cross.

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EUR remains under pressure, weakening nearly 1% in early trading and breaking below 1.1600 amid risk aversion. Escalating Middle East tensions have driven strong safe-haven flows into the US Dollar, overshadowing hotter-than-expected Eurozone inflation data. With investors reassessing the outlook for Federal Reserve policy amid rising geopolitical risks, the greenback continues to outperform.

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GBPEUR trades lower in early European dealings as Sterling softens amid UK political uncertainty and rising expectations of Bank of England rate cuts. A significant Labour by-election defeat has added pressure on the Pound, while ECB policymaker Martin Kocher signalled the central bank stands ready to adjust rates quickly if needed, keeping the Euro supported ahead of Eurozone inflation data.

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GBP tumbles against the US Dollar, falling below 1.3300 and hitting fresh three-month lows amid intensifying risk aversion. Escalating conflict in the Middle East has boosted safe-haven demand for the greenback, while higher oil prices add pressure on Sterling. With markets focused on upcoming US jobs data for Fed policy clues, the Dollar remains firmly supported.