Written by Are we really close to a Middle East ceasefire?
The back-and-forth between US President Trump and the Iranian regime continues, as the initial 15-point plan presented by Trump was met by a 5-point plan proposal from the other side. There is a considerable gap between the two plans, but the fact that both nations are willing to talk – even if they disagree at this stage and without showing an appetite for face-to-face meetings – could prove instrumental in the conclusion of the current regional conflict.
While there are rumours about a ceasefire being announced on Saturday, even without Iran’s consent, we haven’t heard much from Israel, which continues to extensively bomb Iran. Israeli officials might potentially ignore Trump’s attempt for a ceasefire since their own key objective is regime change in Iran and not just to destroy Iran’s nuclear capabilities. Hence, any ceasefire agreement without Israel’s explicit approval might prove short-term.
Meanwhile, at the time of writing, oil is edging higher, trading comfortably above the $90 level, as market participants want confirmation that a ceasefire is coming to start pricing out the increased risk premium. Interestingly, according to the Israeli press, Iranians have allowed a small number of ships safe passage through the Strait of Hormuz – a gesture of goodwill as negotiations with the US continue. This move won’t ease the current supply bottleneck, especially for Asian countries, but it shows that the current blockade could quickly disappear once there is a truce in place.
Markets in cautious mode
Global stock markets remain in cautious mode, with Asia indices setting the tone for another difficult session, unless the newsflow regarding the Middle East improves dramatically. US stock index futures point to a small negative open later today, with the S&P 500 index remaining below its 200-day simple moving average (SMA). Notably, most S&P 500 sectors are underwater this month, with the exception of energy stocks. This divergence has occurred for the first time since September 2023, when higher oil prices and rising bond yields proved a boon for energy stocks.
With rate cuts evaporating and most central banks now expected to hike rates in 2026 – an outlook somewhat overstretched, particularly for the likes of the Bank of England – gold continues to disappoint. The rally in the past two sessions has almost reversed, with the next key support at $4,381. Positive developments in the Middle East, resulting in a lower perceived risk of a sizeable inflation overshoot and a weakening of the US dollar, could act as a basis for another upleg in gold.
Fedspeak and US auctions in the spotlight
Today’s dollar performance also depends on Fedspeak and another US Treasury auction. While Board member Miran continues to push for rate cuts, mostly dismissing inflation concerns and instead highlighting labour market weakness – a message he is expected to reiterate today – Fedspeak has recently turned hawkish.
Fed Vice Chairman Jefferson, Board members Cook and Barr, and Dallas Fed President Logan are expected to stress the need for patience, with rate cut plans shelved for as long as heightened oil prices persist. Interestingly, some of today’s speakers could also emphasize next week’s key US data calendar.
Finally, with the 10-year US Treasury yield hovering at 4.37% at the time of writing – 40bps above its February 27 low – the focus today is on the 7-year Treasury note auction. Following two abysmal 2- and 5-year auctions, $44bn of a new 7-year note will be offered today, with another weak auction confirming the market’s distaste for US debt, pushing bond yields even higher and adding to the current weak risk appetite.
By XM.com
