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The Strait of Hormuz "locks the throat" on global inflation, and the Fed's interest rate cut expectations collapse
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Hello everyone, today XM Forex will bring you "[XM Forex]: The Strait of Hormuz "locks the throat" to global inflation, and the Fed's interest rate cut expectations collapse." Hope this helps you! The original content is as follows:
In early trading in the Asian market on Wednesday (March 4, Beijing time), spot gold was trading around US$5,123 per ounce. The price of gold fell more than 4% on Tuesday. Affected by the strength of the US dollar and the bleak prospects of interest rate cuts, the market expected the time for the Federal Reserve to cut interest rates has changed from the original date. The first month of July was postponed to September; U.S. crude oil traded around $74.80 per barrel. Oil prices rose by more than 5% on Tuesday. Tensions in the Middle East escalated. Israel and the United States military carried out violent attacks on multiple targets in Iran, triggering Iran to carry out retaliatory attacks in the Persian Gulf. The conflict has spread to Lebanon.
Stock Market
The U.S. stock market closed sharply lower on Tuesday as investors worried that the conflict in the Middle East could continue for a long time and push up inflation. The market was selling off across the board, with the CBOE Volatility Index closing at its highest level since November. The Dow fell 0.83% to 48,501.27 points; the S&P 500 fell 0.94% to 6,816.63 points; the Nasdaq fell 1.02% to 22,516.69 points.
The S&P 500 closed below its 100-day moving average for the first time since November 20, which is seen as a potential bearish signal. As oil prices continued to surge, investors worried about the impact of the four-day conflict on inflation.
Israeli and US troops struck targets in Iran, and Iran immediately launched retaliatory attacks in the Persian Gulf. The conflict has spread to Lebanon. Blackstone Group shares fell 3.8% as redemption requests from its flagship credit fund BCRED surged.
Gold Market
Gold prices fell on Tuesday, with spot gold falling more than 4% to US$5,137.00 per ounce.Yuan; U.S. gold futures closed down 3.5% at $5,123.70 an ounce, affected by a stronger U.S. dollar and bleak prospects for interest rate cuts, despite concerns that conflicts in the Middle East could become protracted and exacerbate inflation concerns.
Market strategists pointed out that the fall in gold prices was mainly caused by the market's pursuit of liquidity. Investors turned to holding cash. At the same time, the sharp strength of the U.S. dollar and the continuous rise in U.S. bond yields made gold priced in U.S. dollars less attractive to investors holding other currencies. However, analysts also believe that this pullback may be short-lived, and safe-haven funds driven by geopolitical risks should support gold prices higher in the future.
In terms of geopolitics, the conflict in Iran has entered its fourth day, and the Strait of Hormuz was announced to be closed, causing the price of benchmark crude oil to surge by more than 8%. Market analysts pointed out that damage to energy infrastructure and interruptions in tanker transportation have increased the risk of continued strength in crude oil, natural gas and refined oil prices, which has exacerbated inflation concerns and delayed market expectations for central bank interest rate cuts, resulting in a lack of support for gold.
In terms of other precious metals, spot silver plunged 6.6% to US$83.50 per ounce; platinum fell more than 8%, and palladium also fell more than 5%.
Oil market
Affected by the escalation of conflicts in the Middle East, oil prices surged by more than 5%, closing at the highest level since January 2025. Brent crude oil futures closed up $3.66 at $81.40 per barrel; U.S. crude oil futures closed up $3.33 at $74.56 per barrel. Brent crude oil prices have risen by 12% since the conflict broke out last Saturday.
Israeli and U.S. troops carried out violent strikes on multiple targets in Iran, triggering Iran to carry out retaliatory attacks in the Persian Gulf, and the conflict has spread to Lebanon. Iraq, the second largest oil producer in the Organization of the Petroleum Exporting Countries (OPEC), has cut production by nearly 1.5 million barrels per day due to disruptions in crude oil exports, and the extent of production cuts may expand to more than twice the current level in the next few days. Iran has launched attacks on energy infrastructure and tankers in the Strait of Hormuz, which carries a fifth of the world's oil and liquefied natural gas shipments. Oil tankers are avoiding the strait as global oil and gas shipping rates soar as insurers cancel coverage for the ships.
U.S. President Trump said that the U.S.-Israeli air strikes are expected to last four to five weeks, but may be extended. He claimed that military operations had destroyed many Iranian naval and air targets and predicted that Tehran would eventually lose its missile strike capabilities. Market analysts pointed out that Trump's remarks made the market expect that the situation may be resolved sooner than previously feared.
In terms of oil products, U.S. diesel futures soared by about 10%, hitting a new high since October 2023; U.S. gasoline futures rose by nearly 4%, hitting the highest level since July 2024; the crack spread, which measures refining profits, also soared to its highest point since 2023. In addition, the premium of Brent crude oil over U.S. crude oil has expanded to nearly $8 per barrel, a new high since November 2022, which will support U.S. crude oil exports.
Forex market
The U.S. dollar strengthened sharply, rising to multi-month highs against the euro, pound and yen, amid renewed inflationary risks stemming from tensions in the Middle East, while markets trimmed expectations for interest rate cuts from major central banks. The dollar index rose 0.5% to 98.995, after hitting a more than three-month high.
As oil prices jumped due to conflict in the Middle East, traders reassessed the possibility and timing of interest rate cuts by major central banks. Rising energy costs could push up consumer prices, especially for economies heavily reliant on oil imports, making policymakers more cautious about easing financial policy.
According to the pricing of the federal funds rate futures market, the market's expected time for the Fed to cut interest rates has been postponed from the original July to September, and the expected rate cut this year has also narrowed to 46 basis points.
In this context, the United States is increasingly viewed as a relatively safe haven due to its high energy self-sufficiency rate and generally solid economic data. Europe and Japan are more vulnerable to rising energy costs than the United States, putting pressure on their currencies. The euro fell 0.6% to $1.1616, hitting its lowest level since late November last year; the dollar rose 0.2% against the yen to 157.61 yen, having previously climbed to its highest point since January 23; the pound fell 0.3% to $1.3361, hitting its lowest level since December last year.
Japan’s Finance Minister said that as conflicts in the Middle East trigger market fluctuations, Japanese authorities are closely monitoring financial markets with a strong sense of urgency and hinted at possible foreign exchange intervention measures. Some strategists warn that the dollar's gains could be short-lived and could quickly www.xmtraders.come to a halt if there are signs of a peaceful resolution.
International News
U.S. banks are on high alert for cyber attacks
As the conflict with Iran escalates, U.S. banks are on high alert for cyber attacks. U.S. financial institutions are stepping up cybersecurity monitoring amid concerns that Iran-linked hackers could launch low-level attacks, particularly distributed denial-of-service (DDoS) attacks that could paralyze websites and systems. U.S. intelligence agencies have warned that such an attack is possible.
Macron: The French aircraft carrier "Charles de Gaulle" will be deployed in the Mediterranean
On the evening of March 3, local time, French President Macron delivered a televised speech to the nation, informing the French people of the latest situation in Iran and the Middle East and France's position. In his speech, Macron confirmed that the French aircraft carrier Charles de Gaulle will be deployed in the Mediterranean to deal with tensions in the Middle East and ensure the security of France and its allies. In addition, France's domestic military protection operation "Operation Sentinel" has been strengthened, and the government has strengthened the security deployment of important facilities and key areas to respond to possible security threats and ensure the safety of the country and the people.
Iran’s next supreme leader may not be elected until next week
Informed sources said that the final vote to elect the successor of Supreme Leader Ayatollah Ali Khamenei may be postponed until next week and be held after Khamenei’s funeral.The meeting of experts responsible for electing the next supreme leader has adopted the highest level of security measures when meeting.
The Israeli army said it killed the senior www.xmtraders.commander of the Iranian Revolutionary Guards in charge of Lebanese affairs
The Israel Defense Forces announced on the 3rd that Daoud Alizad, the acting www.xmtraders.commander of the Lebanese Legion of the Iranian Islamic Revolutionary Guards’ “Quds Force”, was killed in an Israeli air strike on Tehran, Iran earlier that day. The Israeli army said that Alizadeh took over www.xmtraders.command of the Lebanese Legion of Iran's Islamic Revolutionary Guards Corps' "Quds Force" from Mohammad Reza Zahedi. Zahedi was killed in an Israeli attack on Damascus in April 2024. Alizadeh thus became "the highest-ranking Iranian www.xmtraders.commander responsible for Lebanon." (CCTV News)
Trump claimed that Iran’s military capabilities have been severely damaged and denied that it was “dragged into a war” by Israel
On March 3, local time, US President Trump met with German Chancellor Mertz at the White House. Trump said that the United States had previously negotiated with Iran, but based on the progress of the negotiations, Iran was "prepared to launch the first attack", including strikes against Israel and other countries, so the United States decided to take "pre-emptive" military action. He denied being "dragged into the war" by Israel, saying "if anything, it was probably me who pushed Israel's hand." Trump said that currently "almost all of Iran's military capabilities have been destroyed," including its air force, air defense systems, radar and detection facilities, and that its missile inventory is declining rapidly. The US military is continuing to attack Iran's missile reserve facilities and launch platforms. "As we destroy all launch platforms and missiles in stock, this capability will gradually disappear."
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