This week, which ended on February 20, there was widespread volatility across asset classes due to US-Iran tensions and a historic Supreme Court decision over President Trump’s worldwide tariffs.
As investors balanced moderate growth against ongoing inflation and growing geopolitical worries, the US dollar index surged to a one-month high of 98.1. Minutes of the January FOMC meeting reinforced the Fed’s cautious approach by indicating no pressing need to loosen monetary policy. The policy picture was further muddied by conflicting US economic statistics.
While core PCE inflation remained high at 3%, considerably over the Fed’s 2% objective, the US GDP increased by just 1.4% in the fourth quarter, in part due to disruption from the government shutdown. Friday’s decline in the dollar, which ended a four-day rise after the Supreme Court invalidated the tariff bill, saw it finish below 97.8. US stocks, which had been erratic throughout the week due to fluctuations in tech sectors, applauded the ruling and ended the day somewhat higher.
The markets for bullion were likewise erratic. Trump’s promise to use an executive order to impose a new 10% global tariff increased trade uncertainty and decreased demand for safe havens. Silver surged more than 5% to return above $84 an ounce, while gold futures on COMEX registered a third consecutive weekly rise, finishing above $5,130 per ounce. Following Trump’s remarks and indications of a greater US military presence in the region, mounting fears of a potential US-Iran conflict earlier in the week helped to support precious metals. A strong US currency, however, prevented large gains.
WTI crude rose 5% to $67.05 a barrel, a six-month high, on news that Trump had given Iran a 10- to 15-day window to reach a nuclear deal. Fears of interruption to the Strait of Hormuz, a crucial chokepoint that handles around one-third of the world’s seaborne oil commerce, have increased due to growing US military deployments.
A second round of peace negotiations between Russia and Ukraine ended without any breakthroughs, raising hopes that Western restrictions on Russian exports will continue. The EIA announcement of an unexpected 9 million barrel drop in crude stockpiles, which reversed much of the growth from the previous week, provided additional assistance. Given the reduced diplomatic timescale and increased geopolitical tensions, a persistent risk premium is probably going to continue to boost oil prices.
After breaking above a Symmetrical Triangle pattern last Thursday, MCX Crude Oil futures saw a sharp increase on the daily chart. The price is now maintaining a bullish outlook by holding above the 20 EMA and the Supertrend (7,3). With the first resistance level around Rs 6,240 per barrel, the upward momentum is anticipated to continue in the coming week. Prices could rise toward Rs 6,550 if there is a breakout over this level. The immediate support levels on the downside are Rs 5,850 and Rs 5,640.
After a robust Friday rally erased early losses, base metals likewise ended the day higher. The complex closed marginally higher for the week as most contracts increased by more than 1% in the last session. Zinc outperformed with gains of about 1%, while copper increased by 0.64% to $12,964 per ton. The delayed recovery followed a difficult week that included a strengthening U.S. currency, a rise in global stockpiles, and muted Chinese demand due to Lunar New Year holidays.
Observing Markets will be closely monitoring any progress or escalation in diplomatic negotiations or military action between the United States and Iran in the near future. Investors will continue to pay attention to the wider ramifications of the Supreme Court’s tariff decision and Trump’s impending State of the Union speech. Furthermore, it is anticipated that the reopening of Chinese markets on February 24 will offer crucial information about demand patterns following the Lunar New Year, particularly for industrial commodities like base metals.
As investors look for more precise information on when the Federal Reserve will lower interest rates next, they will be closely monitoring the US weekly jobless claims and Producer Price Index (PPI) data as well as remarks by a number of FOMC officials.
