By Lukman Otunuga, Head of Market Research, FXTM
Oil benchmarks are heading for their best monthly gain since 1990.
Rising concerns over supply shocks as the Strait of Hormuz remained effectively closed elevated oil benchmarks to triple digits. Given the ongoing conflict, oil prices remain fundamentally bullish with $100 a key psychological level for both Brent and Crude.
This is good news for Nigeria who is a net oil exporter. Higher oil prices should translate to currency gains, though global risk-off from the Iran conflict may offset some upside.
Globally, the week initially kicked off on a tense note after Iran accused the US of preparing for a possible land assault even as Trump sought talks to end the conflict.
This marked another dangerous turning point in the Iran war which entered its fifth week.
However, some optimism returned to markets on Tuesday after the Wall Street Journal reported that Trump told aides he was willing to end the war against Iran.
Nevertheless, repeated mixed messages from Trump and ongoing closure of the Strait of Hormuz could lead to more volatility as investors scramble to price the uncertainty.
Gold has shed almost 14% this month despite the risk-off sentiment.
Despite recent comments by Fed officials that eased rate hike bets, the precious metal has been punished by a broadly stronger dollar and diminishing bets around lower US rates.
Beyond geopolitics, it’s all about the March NFP report on Friday which will serve as a key gauge over the health of the US labour markets.
The outcome could shape expectations around the Fed at a time when surging energy prices are already complicating the outlook. Markets expect the US economy to have created 65,000 jobs in March compared to the -92,000 figure in the previous month.
Looking at the charts, $4600 remains a key point of interest for gold with a break above opening the doors toward $4700/$4800 and weakness below this level inviting bears to target $4450 and $4300.
Last Friday, USDJPY crossed above 160 for the first time since July 2024.
Back in 2024, this level was defended twice by the Japanese government. If history repeats itself and an intervention becomes reality, this could trigger an aggressive selloff on the USDJPY pair. The Iran conflict may fuel risk aversion, stimulating appetite for safe-haven assets like the Yen. Oil price volatility may also impact the Yen given that Japan imports 90% of its crude from the Middle East.
