Risk off sentiment middle east tensions drove the U.S. dollar higher on Thursday as investors reacted to rising Middle East risks, higher oil prices, and firmer Treasury yields.
Markets ended sharply lower during the session. At the same time, oil prices jumped and bond yields rose across the curve. As a result, investors cut risk exposure and moved into a more defensive stance.
President Trump said he was close to making a decision on a military strike against Iran. He also said he was seriously considering a massive attack that would go beyond prior U.S. military operations, although he had not made a final decision. Those remarks added to market stress and helped extend the rally in oil.
Risk Off Sentiment Middle East Tensions Drive Trade
Geopolitics stayed the main market driver through the day. Because oil prices rose, inflation concerns returned and pushed Treasury yields higher. Meanwhile, the stronger dollar reflected the broader move away from risk.
The source article said the market closed in classic risk-off mode. Technology shares faced heavy selling pressure, while investors focused on the combined impact of geopolitical strain and rising energy prices. Therefore, the session ended with pressure on equities and support for the U.S. currency.
Fed and ECB Outlooks Stay in Focus
The source article also said next week’s FOMC meeting is becoming one of the most unpredictable in years, according to Nick Timiraos of the Wall Street Journal. Higher oil prices support the case for another rate hike. However, softer inflation data still argue for leaving rates unchanged.
Markets now price about a 40% chance of a September hike, the article said. It also said Chairman Kevin Warsh’s stance is seen as the key wildcard.
In Europe, the ECB left policy unchanged. ECB President Christine Lagarde said euro-area activity had improved modestly, but she warned that energy-linked inflation risks remained high. Additionally, the Governing Council said no second-round inflation effects had appeared and repeated that its September decision will depend on incoming data.
By the end of the day, risk off sentiment middle east tensions remained the central theme, with investors heading toward the weekend amid high uncertainty over both geopolitics and monetary policy.
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Source: InvestingLive
