Brown Brothers Harriman said recent market moves were driven by war-related news, with shipping safety in the Strait of Hormuz acting as a key gauge of risk sentiment. Brent crude oil rose back above $100 a barrel and the US dollar strengthened against all major currencies, pushing DXY to its highest level in nearly ten months. The bank said the dollar has tactical support from safe-haven demand linked to shipping risks and short-term US dollar funding needs. It added that demand for short-term USD funding often rises during stress because the dollar is widely used for trade invoicing, cross-border lending, global bond issuance, and FX reserves.

Dollar Tactical Support And Funding Stress

BBH said it remains cyclically neutral on the US dollar and expects DXY to return to a 96.00–100.00 trading range. It also said DXY has moved beyond the level implied by interest rate differentials between the US and other major economies. BBH maintained a longer-term bearish stance on the dollar, citing weaker confidence in US trade and security policy, worsening US fiscal credibility, and the politicisation of the Federal Reserve. The article stated it was produced using an AI tool and reviewed by an editor. Looking back at the events of 2025, we saw the dollar get a strong tactical bid from haven demand. Tensions surrounding shipping in the Strait of Hormuz pushed Brent crude over $100 and the DXY Dollar Index to a ten-month high. This was a classic flight to safety, where dollar funding needs spiked during a period of intense geopolitical stress. That tactical support for the dollar has now faded as we move through the first quarter of 2026. While the situation in the Strait of Hormuz remains tense, shipping insurance war risk premiums have fallen over 20% from their late 2025 peaks, signaling a decrease in the market’s “peak fear.” Consequently, the short-term, fear-driven demand for US dollars has subsided for now.

Dxy Range Trading And Volatility Setup

The cyclical view from last year has proven correct, as the DXY has since retreated into the predicted 96.00-100.00 range. As of today, the index is trading around 98.60, a level more consistent with the narrowing interest rate differentials between the U.S. and other major economies. Markets are now pricing in at least one Fed rate cut by the end of 2026, a sharp contrast to the hawkish stance seen last year. For derivative traders, this suggests that selling dollar volatility could be a prudent strategy in the coming weeks. With the DXY expected to remain range-bound, option-selling strategies like short strangles on major pairs such as EUR/USD or USD/JPY could be effective. These positions would profit from sideways price action and declining implied volatility. However, the long-held structural bearish view on the dollar is becoming more relevant. Worsening US fiscal credibility is a key factor, with the latest Congressional Budget Office report from February 2026 projecting the US debt-to-GDP ratio to hit 109% by year-end. This ongoing concern, combined with the politicization of economic policy ahead of the midterm elections, weighs on the dollar’s long-term appeal. Therefore, traders should also consider establishing longer-term bearish positions on the dollar. Buying long-dated put options on the DXY or dollar-tracking ETFs with expiries of six months or more offers a low-cost way to position for a potential breakdown below the 96.00 support level. This strategy allows one to capitalize on the structural weakness we see building, should it accelerate later in the year. Create your live VT Markets account and start trading now.

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Societe Generale economists expect the European Central Bank (ECB) to leave policy unchanged this week, while using a hawkish tone as it assesses the recent rise in oil prices. They see the current oil shock as smaller than past episodes, but with a risk it could persist if Iran restricts flows through the Strait of Hormuz. At current levels, oil prices are stated to be below historical highs, and even lower once inflation is considered. European economies are described as having reached peak oil use in the 1990s, with consumption now a third lower than it was.

Oil Shock Scale And Structural Cushion

The note says oil prices would need to double to reach the scale of earlier oil shocks. It also points to a declining share of fossil fuels in electricity generation as a factor that may reduce the economic impact. The ECB meeting on Thursday is expected to focus on whether the energy price jump is temporary or lasting, and how it may affect the economy. It is described as too early to conclude whether weaker growth would limit second-round inflation effects, or whether resilience would lead to a tighter stance. The European Central Bank will likely keep policy unchanged this week but maintain a hawkish tone while it assesses the recent oil price surge. With Brent crude having climbed to around $110 per barrel, the key question is whether this energy shock will prove temporary. This uncertainty from the central bank creates an environment where derivative traders should be focused on volatility. We see this directly in the market, with implied volatility on Euro Stoxx 50 options, as measured by the VSTOXX index, rising above 20. Traders should consider using options to position for a significant market move, as the ECB’s ultimate decision could swing sentiment sharply in either direction. This is a classic setup for strategies that profit from a breakout rather than a specific directional bet.

What Traders Watch Next

Looking back from our perspective in 2025, we all remember how the 2022 energy crisis forced the ECB into a rapid rate-hiking cycle that caught many off guard. That historical precedent is precisely why the central bank will be so cautious about underestimating second-round inflation effects this time. This memory is keeping markets on edge for any signs of a repeat policy response. However, the economic shock may be more muted today, as European oil consumption is substantially lower than it was during past crises. With renewables now accounting for over 45% of electricity generation in the bloc, the economy has a much larger cushion. At current levels, oil prices would likely need to double again to truly match the economic impact of previous shocks. Given this tension, traders should be watching derivatives tied to short-term interest rates, such as Euribor futures, for signs of a policy shift. Options on the EUR/USD pair will also be highly sensitive to any change in tone from the ECB relative to the US Federal Reserve. The main play is to position for the resolution of this uncertainty over the next several weeks. Create your live VT Markets account and start trading now.

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AUD/USD rose 0.5% to about 0.7015 in early European trading on Monday. It rebounded after a two-day sell-off as the Australian dollar gained on expectations of an interest rate rise by the Reserve Bank of Australia (RBA) on Tuesday. The RBA is expected to lift the Official Cash Rate by 25 basis points to 4.1%. In February, it raised the rate by 25 basis points to 3.85% and signalled further rises due to inflation risks.

Oil Prices And Inflation Expectations

Oil prices have risen in recent weeks after the closure of the Strait of Hormuz during Middle East conflicts involving the US, Israel, and Iran. Higher oil prices have also pushed up inflation expectations globally. The US dollar eased after a strong rally ahead of the Federal Reserve decision on Wednesday. The Fed is expected to keep rates unchanged at 3.50%–3.75%. AUD/USD is near 0.7015 and sits close to the 20-day exponential moving average at about 0.7053. The 14-day RSI is between 40.00 and 60.00 after dropping from the 60.00–80.00 range. Resistance is near 0.7100, with a cap at 0.7120–0.7150, and a break could target the mid-0.72s. Support levels are 0.6944, then 0.6900, with downside risk towards 0.6770–0.6800 if it falls further.

Market Context Then And Now

We remember the setup in March of last year, when expectations of a hawkish Reserve Bank of Australia had the AUD/USD pushing above 0.7000. The market was betting on rate hikes to combat inflation, which was being fueled by a spike in oil prices. Today, the picture is quite different, with the pair struggling to hold ground near 0.6650 as rate cut speculation grows. The RBA did follow through with hikes in 2025, but with Australia’s latest quarterly inflation figures cooling to 3.1%, we now see the market pricing in at least one rate cut by the end of this year. In contrast, the US Federal Reserve remains cautious with rates holding at 4.00-4.25%, as core services inflation proves stickier than anticipated. This widening interest rate differential in favor of the US dollar creates a significant headwind for any AUD/USD rallies. While the geopolitical oil shock of 2025 was a primary driver for the Aussie then, that pressure has since eased. We are now more focused on key industrial commodity prices, and recent data shows iron ore futures have slipped over 15% this quarter on weaker global demand forecasts. This weighs heavily on Australia’s terms of trade and puts a natural cap on the currency’s strength. Given this backdrop, we should consider positioning for further downside or limited upside in the AUD/USD over the coming weeks. Buying put options with strike prices around 0.6600 could offer a cost-effective way to profit from a break of current support levels. For those less bearish, selling out-of-the-money call options with a strike near 0.6800 allows for collecting premium while defining a clear resistance point we do not expect to be breached. Create your live VT Markets account and start trading now.

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WTI crude traded near $97.85 in early European trading on Monday, rising amid reports that the US administration is weighing military strikes on Iran’s main oil export facilities on Kharg Island. Markets are also awaiting the American Petroleum Institute’s weekly inventory report, due on Tuesday. The move followed US action against Iran’s Kharg Island oil hub and calls for allied naval support to keep the Strait of Hormuz open. The route has been effectively closed since US–Israel operations began on 28 February.

Escalation And Market Focus

Donald Trump said the US is discussing patrols with other countries and that Israel is working with the US on security in the area. He also warned that attacks could extend to energy infrastructure if Iran disrupts transit through Hormuz. The International Energy Agency announced a record release of 400 million barrels from strategic reserves to ease supply concerns. The IEA said the coordinated release can add short-term supply and limit sharp rises in oil prices. With WTI oil nearing $98 a barrel, we are facing a classic conflict between geopolitical supply shocks and coordinated market intervention. The military strikes on Iranian facilities are a significant escalation, creating a high-risk environment for oil supply. This uncertainty means volatility is the only guarantee in the coming weeks. Implied volatility in crude oil options will likely surge to levels we have not seen since the outbreak of the Ukraine war in 2022. Back then, the CBOE Crude Oil Volatility Index (OVX) spiked dramatically as prices shot past $120 per barrel. We should prepare for similar market behavior, meaning options strategies that profit from large price swings, regardless of direction, could be advantageous. For those anticipating further escalation, buying call options is a direct way to bet on higher prices. We only have to look back to the initial months of the 2022 conflict to see how a major military event can overwhelm initial economic countermeasures. A prolonged closure of the Strait of Hormuz, through which about 21% of global oil passes, would make the IEA’s reserve release seem small in comparison.

Key Catalysts And Positioning

Conversely, the IEA’s planned release of 400 million barrels is a historically massive figure, much larger than the 240 million barrels released by members throughout 2022. That previous release did help cool prices from their peaks, showing that such measures can be effective over time. Traders who believe this supply injection will successfully cap prices may see this as an opportunity to buy put options, positioning for a price drop if the conflict de-escalates. In the immediate term, this week’s American Petroleum Institute (API) report will be a critical data point. Any unexpected build in crude inventories could provide a temporary ceiling on prices and give bears confidence. A significant draw, however, would amplify supply fears and could easily push WTI crude over the $100 psychological barrier. Create your live VT Markets account and start trading now.

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The Japanese yen has weakened only modestly against the US dollar despite higher energy prices, while it has edged up against the euro. USD/JPY is nearing 160, but the yen is down just over 2% versus the dollar since the start of the month. Oil and gas imports account for almost 3% of Japan’s GDP, based on last year when energy prices were low. In 2022, these imports were around 4% of GDP, and a prolonged conflict could add further pressure to the yen.

Market Focus On The Bank Of Japan

Markets are also watching the Bank of Japan meeting on Thursday, its second policy meeting of the year. Rates are widely expected to stay unchanged, while markets price about a 70% chance of a hike in April. A clear statement from the BoJ could support expectations for an April move and strengthen the yen. If policymakers remain cautious, markets may reduce those expectations next week, which could weaken the yen. USD/JPY may test 160 this week, with attention on the chance of government action if that happens. The article also notes near-term swings in the exchange rate. The Japanese yen has been under pressure, but not as much as one might think given the recent surge in energy costs. With WTI crude oil prices climbing back above $95 a barrel, a 15% increase since the start of the year, the yen’s relative stability is noteworthy. We are now watching USD/JPY rapidly approach the 170 level, a major psychological barrier.

Intervention Risks And Volatility Outlook

This market tension is fueled by conflicting domestic data. The latest figures from the Statistics Bureau of Japan show that core inflation for February remained sticky at 2.2%, keeping pressure on the Bank of Japan to continue its policy normalization. However, this is set against a backdrop of a sluggish economy, which contracted by 0.2% in the final quarter of 2025, making the central bank cautious about hiking rates too quickly. Therefore, all eyes are on the Bank of Japan’s meeting later this week. While we agree with the consensus that rates will remain unchanged, the market is pricing in roughly a 40% chance of a further rate hike in the second quarter. Any dovish language from the BoJ could be seen as a green light for traders to push the dollar higher against the yen. This setup makes it very possible that the market will test the 170 level on USD/JPY in the coming weeks. Derivative traders should recall the Ministry of Finance’s direct intervention in the currency market during the autumn of 2024 when the rate broke above 160. A similar response is possible, which could cause a sharp and sudden reversal. In the medium term, we still expect a stronger yen as the BoJ is likely to raise rates further this year while the US Federal Reserve looks to ease. For the time being, however, heightened volatility is the main theme. Options strategies that benefit from large price swings could prove effective in this uncertain environment. Create your live VT Markets account and start trading now.

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India’s wholesale price index (WPI) inflation rose to 2.13% in February. This was above expectations of 2%. The wholesale inflation data for February coming in at 2.13% is a clear signal that price pressures are building faster than anticipated. This is the fourth consecutive month of rising WPI, a sharp reversal from the trend we saw for most of 2025. This uptick will almost certainly force the Reserve Bank of India to adopt a more hawkish tone in its upcoming policy meeting.

Implications For Rate Policy

We need to remember the context of the last year, where the RBI held rates steady throughout 2025, waiting for a decisive fall in inflation that never quite materialized. After seeing strong GDP growth numbers of over 7% in the final quarter of 2025, this persistent inflation makes the case for any near-term rate cuts very weak. The market will now have to adjust its expectations away from accommodation. For interest rate traders, this means positioning for higher yields in the coming weeks. We should consider shorting bond futures or buying overnight indexed swaps, as the market will begin to price out the possibility of a rate cut later this year. This upward pressure on rates is likely to accelerate as we approach the next policy announcement. On the equity side, this inflation data serves as a potential headwind for the Nifty 50. The strong market rally we experienced in late 2025 was partly built on the hope of future rate cuts, which now seems unlikely. We should look at buying put options on the Nifty as a hedge or a speculative play on a potential market correction.

Currency Market Considerations

This changing rate outlook could also impact the currency market. A more hawkish RBI stance relative to other central banks could attract capital inflows, putting upward pressure on the Indian Rupee. Therefore, traders could look at selling USD/INR futures, anticipating a move back towards the stronger levels we witnessed in the latter half of 2025. Create your live VT Markets account and start trading now.

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Brent crude prices firmed after US strikes on Iranian military assets near export facilities on Kharg Island, alongside renewed attacks on regional oil assets. The situation increased concern about shipping routes through the Strait of Hormuz and the Red Sea. Kharg Island is the Persian Gulf port where up to 90% of Iranian oil exports are typically loaded onto tankers. Further action involving foreign troops on the ground was discussed as a possible escalation, and Iranian officials said they would respond to attacks on their oil infrastructure.

Risks To Shipping And Supply

Possible disruption in the Red Sea could limit the use of Saudi Arabia’s East–West pipeline, which can redirect 5–7mn bbl/day. That diversion capacity is set against a potential 18–20mn bbl/day supply interruption linked to the Strait of Hormuz. The strikes also raised questions about flows linked to China, with Kharg Island described as the origin point for a large share of China’s oil imports. The report also noted the US is a mostly self-sufficient net energy exporter and is positioned near key maritime chokepoints for Chinese energy imports. The article stated the effects could spread beyond energy into petrochemicals, agriculture, and pharmaceuticals. It also said the piece was produced with an AI tool and reviewed by an editor. Given the US strikes on Iranian military assets near Kharg Island late last year, a significant risk premium is now embedded in oil prices. We have seen Brent crude futures consolidate above $105 per barrel, a sharp increase from the sub-$80 levels seen before the initial attacks in 2025. This elevated price floor reflects the market’s ongoing assessment of a major supply shock.

Trading And Hedging Implications

The current environment is defined by extreme volatility, with the Cboe Crude Oil Volatility Index (OVX) spiking to levels reminiscent of early 2022. Traders should therefore focus on options strategies that benefit from sharp price movements. Buying long-dated call options or vertical call spreads offers a way to capture upside from any further escalation while defining downside risk. The primary concern remains the potential closure of the Strait of Hormuz, a chokepoint for nearly 20% of global oil supply. We know from historical data, such as the 1980s Tanker War, that even minor disruptions in the strait can cause disproportionate price spikes. The inability of the Saudi East-West pipeline to fully compensate for a closure means any direct conflict there would be catastrophic for supply. We are also watching China’s reaction, as the Kharg Island strikes directly threaten a major source of their energy imports. Shipping insurance rates for tankers heading to Asia from the Persian Gulf have reportedly tripled in the past month. This pressure is forcing Chinese buyers to seek more expensive barrels from the Atlantic basin, tightening the entire global market. Opportunities exist in spread trading as well, particularly the Brent-WTI spread, which has widened significantly due to Brent’s direct exposure to Middle East maritime risk. We expect this premium to persist as long as tensions remain high. Traders should also monitor crack spreads, as a sustained crude rally will squeeze margins for refined products like gasoline and diesel, creating separate trading opportunities. Create your live VT Markets account and start trading now.

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Gold prices in the Philippines fell on Monday, based on FXStreet data. Gold was priced at PHP 9,659.41 per gram, down from PHP 9,670.11 on Friday. Gold also dropped to PHP 112,665.50 per tola from PHP 112,790.30 on Friday. Other listed prices were PHP 96,594.10 for 10 grams and PHP 300,441.50 per troy ounce.

How FXStreet Calculates Local Gold Prices

FXStreet converts international gold prices into Philippine pesos using the USD/PHP rate and local units. The figures are updated daily using market rates at the time of publication, and local prices may differ slightly. Central banks are the largest holders of gold, and added 1,136 tonnes worth about $70 billion in 2022, according to the World Gold Council. This was the highest annual total since records began, with rising reserves reported in emerging economies including China, India, and Turkey. Gold often moves in the opposite direction to the US Dollar and US Treasuries, and can also differ from stock market trends. Prices can react to geopolitical events, recession fears, interest rates, and changes in the US Dollar, as gold is priced in dollars (XAU/USD). We see this minor dip in local gold prices as a reflection of daily international market fluctuations. For traders, this short-term noise is less important than the broader trends shaping the precious metal’s value. Gold’s price remains sensitive to shifts in the US Dollar, which has been trading in a narrow range for the past month.

Key Market Forces Affecting Gold

The global economic picture supports gold’s role as a hedge. The latest US inflation data for February 2026 came in at a stubborn 3.2%, slightly above forecasts, making the Federal Reserve’s path on interest rates uncertain. We remember the high inflation of the early 2020s, and this persistence makes non-yielding assets like gold more attractive for capital preservation. Central bank buying continues to provide a strong price floor, a trend we have watched since the record-breaking purchases in 2022. World Gold Council data showed this behavior continued through 2024 and 2025, with net purchases remaining historically high. This steady demand should give traders confidence that a major price collapse is unlikely. Geopolitical tensions are also a key factor, with recent diplomatic friction in Eastern Europe adding to market uncertainty. We’ve seen risk assets like the S&P 500 pull back by about 2.5% over the last two weeks from its highs. If this risk-off sentiment grows, capital will likely flow into safe-haven assets like gold. Given this backdrop, elevated price volatility seems probable in the coming weeks. Traders could consider strategies that benefit from price swings, such as long straddles, while the strong underlying support from central banks might make longer-dated call options appealing. The inverse correlation with equities also presents opportunities for pair trades, such as buying gold futures while selling stock index futures. Create your live VT Markets account and start trading now.

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Gold (XAU/USD) traded near $5,000 in Asia on Monday. It came under selling pressure as attention shifted to central bank policy decisions due this week. Markets are watching the US–Israel conflict with Iran, which can raise demand for safe-haven assets. The Trump administration said it expects the conflict to end within weeks or “sooner”, while Israel’s military plans for its campaign to last at least three more weeks.

Geopolitical Risks And Safe Haven Demand

Over the weekend, US forces targeted military sites on Iran’s Kharg Island, an oil export hub. Iran said it would retaliate against any US-linked oil facilities in the region. Rising tensions have pushed oil prices higher, adding to inflation worries. This has increased expectations that the Federal Reserve may delay interest rate cuts, which can weigh on non-yielding assets such as Gold. Central bank decisions are due this week from the Fed, RBA, BoJ, ECB and BoE. Rates are expected to stay unchanged, except for the RBA, which is expected to raise rates again. Gold is currently caught in a tug-of-war, making directional bets risky. The conflict should be driving prices up, but fears that high oil prices will delay Fed rate cuts are pushing it down. We see this as an opportunity to trade volatility, possibly through straddles on gold futures or ETFs, which profit from a large price move in either direction.

Policy Divergence And Cross Asset Trades

The attack on Iran’s Kharg Island is a clear bullish signal for oil prices. Historically, supply disruptions in the Middle East have led to sharp price spikes, and we expect this time to be no different. WTI crude futures have already jumped over 8% to $115 a barrel, so we believe buying near-term call options is the most direct way to trade the expected continuation of this trend over the next few weeks. The spike in oil will likely keep inflation sticky, supporting the market’s view that the Federal Reserve will not cut rates soon. With the last CPI reading for February 2026 coming in hotter than expected at 3.5%, the US dollar should remain strong. We would consider long positions in the US Dollar Index (DXY) through futures contracts. This mix of geopolitical tension and central bank uncertainty is a classic recipe for broad market fear. We remember the spike in the VIX during the Taiwan Strait tensions in late 2025, and a similar environment is brewing now. Buying call options on the VIX could serve as an effective hedge against a potential downturn in major equity indices like the S&P 500. While most central banks are on hold, the Reserve Bank of Australia is expected to hike rates, creating a clear policy divergence. This comes after Australian inflation remained stubbornly above 4% in the final quarter of 2025. This makes long Australian dollar positions attractive, particularly against currencies with dovish central banks like the Japanese Yen (AUD/JPY). Create your live VT Markets account and start trading now.

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Friday’s premarket rebound carried on after the PCE reading, but the VIX tried to retest European morning highs and markets then fell for about two hours. This move ended an oversold bounce that would have matched a daily defence level tied to the share of stocks trading above their 20-day moving averages. Markets did not pause after the oil strategic reserve announcement or earlier comments about the war ending soon. Risk was reduced ahead of the weekend, while the USDX moved above 100 resistance.

Weekly And Cross Asset Signals

The week included a new development on the S&P 500 weekly chart, as well as further signals from credit markets. Gold failed to hold gains even as oil and the VIX continued to rise. The Nasdaq held up better at first, including early hourly strength in SMH and IGV, but it later reversed as well. A possible near-term stabiliser was raised in relation to Iranian comments about shipping through the Strait staying open, while the dollar’s move was presented as reflecting market positioning. The failed rally after last week’s Core PCE data came in hot at 3.1% shows that sellers are firmly in control and buying the dip is a losing strategy right now. We are seeing significant de-risking, so buying puts on the SPX or NDX offers a direct way to position for more downside. Any short-term bounces should be viewed with extreme suspicion until this underlying weakness changes. With the VIX closing the week above 22, a level of fear we haven’t seen for several months, hedging is no longer optional but a necessity for any long positions. The US Dollar Index breaking out to close at 100.85, its highest level since the fourth quarter of 2025, is a major headwind for stocks. We believe VIX call options are a prudent hedge against a more significant volatility event in the near future.

Credit Spreads And Hedging

We are also watching credit markets closely, as high-yield credit spreads have widened by 35 basis points this month to over 450 bps, signaling real concern from bond traders. This type of price action feels very similar to the sharp sell-off we experienced in the third quarter of 2025, which also began with stubborn inflation fears. The bond market is telling us to reduce risk in equities. Gold’s inability to rally during this flight to safety is a warning sign, so we would avoid calls on the metal or miners like GDX for now. Instead, geopolitical tensions are showing up directly in energy markets, with Brent crude futures now trading above $95 a barrel on concerns over the Strait of Hormuz. This environment could benefit traders who are holding long positions in energy derivatives. Create your live VT Markets account and start trading now.

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