After the long weekend of Good Friday and Easter Monday, global markets reopened on Tuesday with mixed signals but strong underlying drivers. Solid U.S. employment data and a better-than-feared ISM Services PMI, along with persistent inflation concerns and hawkish Federal Reserve (Fed) commentary, supported the U.S. Dollar (USD). At the same time, rising geopolitical tensions kept traders cautious as Donald Trump warned Iran, while Tehran rejected peace efforts.
Overnight, explosions were reported in Bahrain, sirens sounded in eastern Saudi Arabia, and Iranian sources flagged fresh attacks on infrastructure, including an airport in Kashan. Israel also approved an updated list of Iranian energy and infrastructure targets if diplomacy fails. A key escalation was the reported strike on Saudi Arabia’s Jubail industrial hub, a major petrochemical and energy center contributing about 7% to GDP. Saudi authorities said seven ballistic missiles were intercepted, but debris reportedly fell near energy sites, and videos showed visible strikes, suggesting more serious damage. This marks a rare and notable hit on core Saudi infrastructure compared to other Gulf regions.
Spillover risks increased further, with US-linked targets reportedly hit in Kuwait and Iraq, including a drone strike on a US base in Baghdad. Israel activated air raid sirens across southern areas after warnings of more Iranian missile launches.
Policy uncertainty also rose after a Pentagon briefing involving Pete Hegseth and Dan Caine was canceled. Axios reported that US officials are less willing to extend deadlines again, though Iran’s “tough” stance is still seen as a negotiation tactic, keeping backchannel talks active. The US still has the flexibility to delay military action if a credible deal path appears.
On Monday, thin liquidity due to closures in Europe and Canada amplified market reactions. Trump escalated warnings, saying that if the Strait of Hormuz is not reopened and progress is not made on US terms by 8 PM ET Tuesday, the US could target and destroy bridges and energy infrastructure within hours, causing damage that may take decades to rebuild.
Iran responded by warning that US-linked data centers in the UAE, including those tied to Amazon, Microsoft, Oracle, and Equinix, could be targeted. Iranian military leadership dismissed Trump’s threats as ineffective and confirmed continued operations against US and Israeli interests.
At the same time, Benjamin Netanyahu reportedly advised Trump against a ceasefire during a Sunday call, arguing it could weaken current military momentum against Iran. This highlights growing tension between military strategy and diplomatic efforts, adding uncertainty to an already volatile situation where all sides are escalating rhetoric and defining targets.
On the macro side, US data showed ISM Services PMI at 54.0 for March versus 54.9 expected and 56.1 prior. Earlier trends show strong momentum, with December PMI at 54.4 (highest since October 2024) and February jumping to 56.1 (highest since July 2022), marking 20 straight months of expansion and 69 months of overall economic growth. Fed officials Austan Goolsbee and Beth Hammack warned inflation risks are rising again, describing conditions as “orange” level in a four-color risk system (between “everything is fine” green and “crisis” red), meaning elevated and potentially worsening price pressures.
That said, the US Dollar Index (DXY) edges higher, gold softens slightly, major currencies lack direction, cryptocurrencies and Asia-Pacific equities decline, and WTI crude rises for a third straight day, up nearly 3% and approaching multi-year highs. Additionally, the gold price also posted a three-day losing streak despite lacking much of the momentum.
The U.S. Dollar (USD) shows modest strength, putting pressure on EURUSD and GBPUSD, while pushing USDJPY higher for the fifth straight day, though momentum remains limited. With markets in Europe and the UK closed earlier, there were no major catalysts beyond risk-driven news, leaving Japan as the main source of updates early Tuesday.
That said, Japan’s February household spending declined for the third consecutive month, dropping -1.7% y/y compared to -0.7% expected and -1% prior, while increasing +1.5% m/m versus 2.6% expected and -2.5% prior. Japan’s Finance Minister Satsuki Katayama refrained from commenting on bond yield levels but emphasized rising global volatility caused by sharp movements in oil prices.
Similar to other major currency pairs, AUDUSD, NZDUSD, and USDCAD reflect a stronger U.S. Dollar (USD) against the Antipodeans (AUD, NZD, and CAD), mainly due to risk-off sentiment, largely ignoring mixed domestic data.
In Australia, conditions remain mixed. Data from the Australian Bureau of Statistics showed household spending rising 0.3% m/m in February, matching January and slightly beating expectations, while annual growth held steady at 4.6%, indicating resilient consumption despite ongoing cost pressures. However, the S&P Global Australia Services PMI dropped sharply to 46.3 from 52.8, falling below the 50 mark (expansion vs contraction) for the first time in over two years and marking the steepest decline since late 2023.
In New Zealand, commodity prices surged, with the ANZ World Commodity Price Index rising 4.1% m/m in March. This pushed it to the second-highest monthly level on record, just below the peak seen during the Russia–Ukraine war in March 2022.
In Canada, the S&P Global Services PMI improved slightly to 47.2 from 46.5 but stayed below the 50 threshold, signaling continued contraction in the services sector.
WTI Crude Oil jumped more than 3%, moving above $116, reaching its highest level since 9 March and marking a one-month high. Oil prices kept rising as hopes of an Iran ceasefire weakened and geopolitical risks increased. As Trump’s Tuesday deadline came closer and Iran stayed firm against ceasefire proposals, market sentiment turned cautious.
Gold and cryptocurrencies showed small losses early Tuesday due to a cautious market mood. Bitcoin (BTC) and Ethereum (ETH) both recorded mild losses for the second straight day, while gold also dropped for the third consecutive day. Further, the Asia-Pacific equities also moved lower, ignoring the modest gains seen on Wall Street.
On Monday, US equity markets closed higher with cautious optimism about a possible resolution, even though risks stayed high. The Dow Jones Industrial Average (DJIA, Dow Jones Industrial Average) rose by 165.21 points (+0.36%) to 46,669.88, the S&P 500 (S&P 500 Index) gained 29.14 points (+0.44%) to 6,611.83, and the NASDAQ Composite (NASDAQ Composite Index) increased by 117.16 points (+0.54%) to 21,996.34. However, market volatility remains high due to ongoing geopolitical uncertainty and policy risks.
Key events this week include the OPEC+ (Organization of the Petroleum Exporting Countries Plus) meeting, Trump’s Iran deadline, Federal Open Market Committee (FOMC, Federal Open Market Committee) minutes, Reserve Bank of New Zealand (RBNZ, Reserve Bank of New Zealand) policy decision, Reserve Bank of India (RBI, Reserve Bank of India) meeting, US PCE (Personal Consumption Expenditures) inflation, Bank of Korea (BOK, Bank of Korea) decision, China CPI (Consumer Price Index), Canadian employment data, and US CPI (Consumer Price Index). Tuesday’s data includes final PMI (Purchasing Managers’ Index) readings from Germany, the EU (European Union), Canada, and the UK, along with US Durable Goods Orders and ADP Employment Change.
Strong US data and risk-off sentiment support the USD (US Dollar). Ongoing geopolitical tensions, firm economic data, and Trump’s rejection of a ceasefire (with no TACO – Trump Always Chickens Out – shift) may pressure major currencies, Antipodeans like AUD (Australian Dollar) and NZD (New Zealand Dollar), and cryptocurrencies. Commodities such as crude oil and gold may attract buyers, equities remain uncertain and headline-driven, and bonds could see safe-haven demand.
May the trading luck be with you!
