Global Markets: Investor Caution Amid Calm Before Volatility: Global markets are witnessing a state of cautious anticipation,
With notable fluctuations in equities, oil, and precious metals amid the military escalation between Israel and Iran,
accompanied by political developments, including conflicting statements
from U.S. President Donald Trump and indirect Iranian diplomatic efforts to de-escalate and resume nuclear talks.

Contents
Equity Markets Recover

Trump and Iran

Regional Conflict

Oil and Gold

Escalating Tensions

The Federal Reserve

Equity Markets Recover Despite Geopolitical Risks

U.S. equity indices rebounded significantly after sharp declines,
With the S&P 500 rising around 1% and climbing above the 6,000-point mark,
benefiting from reduced fears of conflict expansion.
Asian markets were relatively stable,
With gains in Japanese and South Korean stocks and declines in Hong Kong and Chinese shares.

Meanwhile, the U.S. dollar remained steady against most G10 currencies.
At the same time, long-term Treasury bonds continued to underperform,
despite a successful auction of 20-year bonds worth $13 billion with an expected yield,
an improvement over last month’s disappointing auction that had triggered a widespread sell-off.

Trump and Iran: Mixed Messages and Diplomatic Hopes

President Donald Trump sparked controversy by calling for the evacuation
of Tehran during his participation in the G7 summit in Alberta,
while simultaneously stating that Iran is seeking negotiations.
The White House announced Trump would cut his trip short to return to Washington.

According to a Wall Street Journal report citing unnamed Middle Eastern and European officials,
Tehran has hinted at readiness to resume nuclear talks with the U.S.
Provided that Washington does not participate in Israeli strikes.
Reuters reported similar messages transmitted via Saudi Arabia, Qatar, and Oman.

Regional Conflict Threatens Economic Momentum

Despite the relative return of optimism, the military escalation has cast a shadow over financial markets,
hindering the positive momentum of the S&P 500 and causing investor caution.

Tom Essaye of The Sevens Report noted:

“Markets remain focused on geopolitical developments,
but unless the conflict spreads, the impact on equities will remain limited.”

Chris Larkin of E*TRADE, a Morgan Stanley subsidiary,
Added: “Tariffs aren’t the only potential source of volatility.
The market expects the Middle East to remain contained, but any surprise could significantly shift sentiment.”

Oil and Gold: Rising Amid Uncertainty

WTI crude fell below $70 per barrel on Monday evening before rebounding to around $73 by Tuesday.
Gold rose due to safe-haven demand following Trump’s remarks.

Morgan Stanley economists, led by Chetan Ahya, attributed rising prices to supply concerns.
However, they noted that the impact on Asian economies may be limited due to decreased dependence on oil.

They warned: “If oil surpasses $85 per barrel and the dollar continues to strengthen, it could delay interest rate cuts.”

Escalating Tensions and No Signs of De-escalation

No clear signs of de-escalation have emerged.
Iran reportedly launched several drone and missile attacks in the last 24 hours,
while Israel retaliated by targeting senior Iranian military leaders,
striking the state TV complex during a live broadcast, and hitting the South Pars gas field.

Yet, key oil export infrastructure remains intact, and the Strait of Hormuz,
through which nearly one-fifth of global daily oil supply passes, has not been closed.

According to Mehr News Agency, Tehran is preparing a significant strike against Israel.
Meanwhile, Israeli Minister of Strategic Affairs Ron Dermer told Bloomberg:
“We will proceed with our mission to eliminate the nuclear and missile threats.”
adding that Iran’s willingness to negotiate does not change Israel’s position.

Federal Reserve in the Spotlight

Investors continue to monitor central bank decisions amid complex geopolitical and economic pressures.
In Japan, Trump’s meeting with Prime Minister Shigeru Ishiba failed to yield a trade agreement,
raising fears of a potential economic recession.
Conversely, UK Prime Minister Keir Starmer secured a trade deal with Trump,
cutting U.S. tariffs on key British exports and increasing quotas on U.S. agricultural products.

In the U.S., all eyes are on the Federal Reserve’s Wednesday meeting.
Markets expect no change in interest rates, with attention focused on remarks from Fed Chair Jerome Powell.

David Doyle of Macquarie said: “Powell might call recent inflation data encouraging,
but he will likely caution against overinterpreting it due to ongoing uncertainties from tariffs, fiscal policy, and rising oil prices.”

He concluded: “Ultimately, monetary policy risks for 2025 may skew toward a more hawkish stance.”

Global Markets: Investor Caution Amid Calm Before Volatility

Global Markets: Investor Caution Amid Calm Before Volatility

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