Ceasefire and Oil Volatility Drive Markets (20 – 24 April)

Global markets navigated a volatile week as shifting signals from the United States–Iran conflict kept sentiment fragile. Early optimism around a potential resolution, including claims of a 10-day ceasefire between Israel and Lebanon and the reopening of the Strait of Hormuz, briefly eased inflation concerns and reduced safe-haven demand. However, conflicting developments, including renewed uncertainty over the blockade and energy supply risks, kept oil prices elevated and prevented a full recovery in risk appetite.

The macro backdrop reflects this uncertainty. Falling oil prices at the start of the week temporarily reduced expectations for tighter monetary policy, but renewed supply concerns quickly brought inflation risks back into focus. Bond markets adjusted accordingly, with yields holding at elevated levels while central bank expectations shifted. The Federal Reserve is now widely expected to keep rates unchanged this year, while markets in Europe continue to price in potential tightening despite slowing growth signals.

Market Drivers & Catalysts

• Ceasefire and Diplomatic Signals: Reports of a 10-day ceasefire and claims that Iran may abandon nuclear ambitions initially supported risk sentiment, though confirmation remains limited. 
• Strait of Hormuz Uncertainty: Temporary reopening pushed oil prices down more than 10%, but renewed blockade risks later reversed the outlook. 
• Oil Price Volatility: Brent surged above $96 per barrel, including a single-session gain of more than 6%, reflecting persistent supply concerns. 
• Central Bank Repricing: Markets shifted to pricing no Federal Reserve rate cuts this year, while expectations for ECB tightening remain intact. 
• Energy-Driven Inflation Risks: An 8.5% surge in energy-related producer prices highlighted ongoing inflation pressure tied to geopolitical tensions. 

Fixed Income

• US 10-Year Treasury Note Yield: Held above 4.3% after rising for two consecutive sessions, as elevated oil prices kept inflation risks in focus. Markets have moved from expecting two rate cuts to pricing no cuts this year.
• UK 10-Year Bond Yield: Also remained above 4.3%, reflecting persistent inflation concerns driven by energy prices, even as growth expectations softened.
• Japan 10-Year Government Bond Yield: Stayed near 2.41% for a third straight session. Markets await clearer guidance from the Bank of Japan, which is expected to revise inflation forecasts higher due to energy costs.
• Germany 10-Year Bund Yield: Held near 3%, close to 15-year highs. Markets now price in two 25 basis point rate hikes this year, down from three previously expected.

Commodities

Gold remained stable around $4,800 per ounce, marking a fourth consecutive weekly gain. The metal is up about 1% this week and nearly 17% above its March low, supported by easing inflation expectations and continued geopolitical uncertainty.

Silver hovered near $79 per ounce, also extending its rally for a fourth week. The metal is up around 4% this week and nearly 30% above its March low, supported by lower rate expectations and easing inflation pressures.

Currencies

• U.S. Dollar Index (DXY): Held above 98 but remained on track for a third consecutive weekly decline. Reduced safe-haven demand and easing inflation concerns pressured the dollar.
• Euro: Climbed above $1.18, gaining 2.7% on the week and marking its strongest performance in a year. This is the third consecutive weekly rise, supported by dollar weakness and easing energy-driven inflation pressures.
• British Pound: Drifted to around $1.356 as expectations for Bank of England tightening eased. Despite this, sterling remains near an eight-week high and is up about 2.6% this month.
• Japanese Yen: Weakened past 159 per dollar, reversing earlier gains. Policy uncertainty from the Bank of Japan and lack of clear forward guidance weighed on the currency.

Economic Data Highlights

• US Existing Home Sales (March): Fell 3.6% to 3.98 million units, below expectations of 4.06 million and marking a nine-month low. Inventory rose to 1.36 million homes, or 4.1 months of supply. Median prices increased 1.4% year-on-year to $408,800. 
• US Producer Price Index (MoM): Increased 0.5% in March, below expectations of 1.1%. Goods prices rose 1.6%, driven by an 8.5% jump in energy costs, while food prices declined 0.3%. Annual PPI rose 4%, with core inflation at 3.6%. 
• China GDP (Q1 2026): Expanded 5.0% year-on-year, exceeding forecasts of 4.8% and rising from 4.5% in the previous quarter. This marks the strongest growth in three quarters. 
• China Trade Balance (March): Surplus narrowed to $51.13 billion, well below expectations of $112 billion. Exports grew 2.5%, while imports surged 27.8% to a record $269.9 billion. The US surplus stood at $16.8 billion, with Q1 surplus at $264.75 billion. 

Macro Calendar Highlights

• Ongoing United States–Iran negotiations and potential ceasefire extension 
• Developments regarding the Strait of Hormuz blockade 
• Central bank communication from the Federal Reserve, ECB, and Bank of Japan 
• Updates on global energy supply and OPEC+ positioning