Markets have shown resilience in recent days with some recovery attempts, but remain sensitive to Middle East developments, including reports of Iranian actions in the Strait of Hormuz, U.S. military responses, and fluctuating oil prices (which have pulled back from earlier spikes but remain elevated due to supply disruption fears). There is a clear correlation between the oil price and the stock market. Markets are reacting positively to comments from Donald Trump suggesting the US-Israel-Iran conflict could end “very soon.”
This has led to a significant drop in oil prices. However there is no guarantee oil prices will continue to pullback, that is the main risk for markets. The focus today is on US CPI to be released at 1.30pm (UK time). Expectations are for steady or moderated inflation, but any hotter-than-expected print could raise concerns about delayed Fed rate cuts (or even pauses), pressuring stocks further. Lower inflation could support risk assets. But the trend is down, rallies are counter trend.