20% of the global oil supply passes through the Strait of Hormuz
Last week, the market was anticipating the Federal Open Market Committee's (FOMC's) decision on interest rates, with expectations for no changes, and indeed, the rates remained stable. However, the Fed did not offer any new insights to the markets.
In contrast, Brazil's Central Bank raised its interest rate, while Norway's Central Bank surprised market participants with a reduction in its benchmark rate. Both the Swiss National Bank and Sweden's Central Bank also announced rate cuts.
On the other hand, Pakistan's Central Bank, the State Bank of Pakistan (SBP), the Bank of Japan (BoJ), the Bank of England (BoE), and the Chilean Central Bank kept their rates steady.
In his press conference, Fed Chairman Powell indicated that the outlook for monetary policy is quite uncertain.
Although the Federal Reserve maintained its interest rate, market indicators are suggesting a potential up to 50 basis-point cut in September and in December. Discussions are already circulating about the possibility of a US rate cut as early as next month in July.
Fed member Waller has said the Federal Reserve should not delay rate cuts for too long.
Additionally, recent US data indicates that the 10% tariff levied on foreign goods has had minimal effect on consumer behaviour.
Though spending has slowed, but it is clear that the ongoing trade war is negatively impacting business confidence and overall economic activity.
The potential consequences of the Iran-Israel situation should also be taken into account. Oil prices have already risen, and any further escalation in tensions in the Middle East could lead to even higher prices. Analysts are particularly attentive to the increase in oil prices, as Europe relies heavily on foreign gas, with Iran being the third-largest supplier. Gas prices have also climbed alongside oil prices and should not be overlooked.
Since the onset of the Iran-Israel conflict, oil prices have increased by nearly 10% per barrel. This past weekend, the market remained cautious and anxious amid deteriorating geopolitical conditions, avoiding risk-taking.
This hesitancy was fueled by Donald Trump's statement that the US would take approximately two weeks to decide on potential involvement. However, this also implies that by the time this analysis is published, the US could take action against Iran. Only time will reveal the actual outcome.
One thing is certain: if the US intervenes, oil prices could approach $ 100 as roughly 20% of the global oil supply passes through the Strait of Hormuz. Additionally, gold is likely to benefit significantly if the situation worsens. In the meantime, the Bank of Japan (BoJ) released policy minutes last week that highlighted 'extremely high uncertainties' due to global concerns. The bank has lowered its growth and inflation forecasts, worrying that a potential increase in US tariffs could hinder economic recovery.
However, its board members have indicated their readiness to raise interest rates if conditions stabilize.
As expected, the Bank of England (BOE) decided to keep its policy rate unchanged. Still, one vote leaned towards a dovish stance, with three members supporting a rate cut, while six opted to maintain the current rate. This decision reflects the growing global uncertainties and the rising prices of food and oil.
Furthermore, the G7 focused heavily on geopolitical issues and their potential repercussions.
Regarding tariffs, they committed to working on a new trade agreement with the US over the next 30 days.
Turning to gold, this week it remains in a neutral zone. Much depends on the developments between Iran and Israel. If the situation persists without US intervention, gold prices may decline, but if others become embroiled in the conflict, gold could surge. There's no definitive outlook, making any predictions about gold's next trend speculative. Unless situation eases, bias for gold will remain on the rise.
Next week, several important data releases are scheduled, starting with the S&P flash PMI on Monday. On Tuesday, the Consumer Confidence Index will be published alongside Fed Chair Powell's testimony before the House Financial Services Committee. Then on Wednesday, New Home Sales data will be released and Powell will testify before the Senate Banking Committee.
On Thursday, the US data to be released will include weekly jobless claims, durable goods orders, and pending home sales, as well as the final Q1 GDP for the US. Finally, on Friday, the PCE Core Inflation for May will be the last data point of the week.
WEEKLY OUTLOOK — June 23-27
GOLD @ USD 3368— Gold is expected to remain unstable because of unpredictable circumstances. Only a breakout above USD 3395-00 could lead to a test of USD 3450. However, there is a risk that if it breaks below USD 3322, the fall could extend to USD 3272.
EURO @ 1.1525— Support 1.1420 should hold for 1.1610 or 1.1650 before the fall. Otherwise 1.1350.
GBP @ 1.3481— Pound Sterling has support at 1.3370 and is not expected to give way. The currency pair needs to rise above 1.3595 in order to reach 1.3640. Or else 1.3320.
JPY @ 145.81— The USD has the potential to make some progress, but it must surpass the 146.75-85 range for additional gains. If it fails to do so, a drop below 144.60 could lead to a test of the 143.50 or 142.20 level.
Copyright Business Recorder, 2025
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
‘Extremely dangerous' if Iran closes Strait of Hormuz: EU
BRUSSELS: The EU's top diplomat warned Monday it would be 'extremely dangerous' should Iran shut down the crucial Strait of Hormuz trading route over US strikes on its nuclear sites. 'Concerns of retaliation and this war escalating are huge,' Kaja Kallas told reporters as EU foreign ministers met in Brussels for talks, with the Iran-Israel conflict high on the agenda. 'Especially the closing of the Strait of Hormuz by Iran is something that would be extremely dangerous and not good for anybody,' she warned. Analysts have said Iran may opt to retaliate to Washington's early Sunday attack by shutting the Strait, a waterway through which one-fifth of global oil output passes. US Secretary of State Marco Rubio has urged China to help deter Iran from shutting down the trading route. The European Union has been urging de-escalation since the United States joined Israel's war with Iran by striking the country's nuclear sites. Three tankers divert away from Strait of Hormuz amid rising tensions: shipping data 'Ministers are very much focused on the diplomatic solution,' Kallas said Monday, having called on all sides at the weekend to 'step back' and return to negotiations. The EU foreign policy chief, who joined top diplomats from France, Germany and Britain for talks with Iranian Foreign Minister Abbas Araghchi in Geneva Friday, said the European outreach would continue. 'There has to be a diplomatic solution,' Kallas said. 'When Iran is willing to talk to us. I think we have to use this opportunity.' France, Germany and Britain called jointly on Tehran on Sunday 'not to take any further action that could destabilise the region'. Speaking in Brussels, France's Foreign Minister Jean-Noel Barrot insisted Europe could bring to bear its long experience negotiating with Iran to prevent it from developing nuclear weapons. 'There is no lasting military solution to this problem,' Barrot said. 'Only negotiations can enable us to place long-term limits on Iran's nuclear programme.' 'Europe can bring its experience, its competence, its fine knowledge of these questions to open a space for negotiations,' he said. 'We reject any attempt to bring about regime change by force,' Barrot added, warning it would be 'illusory and dangerous' to think such a shift can be achieved with 'bombs'.
Business Recorder
3 hours ago
- Business Recorder
PSX plunges amid US-Iran tensions, KSE-100 sheds over 3,900 points
Selling pressure was observed at the Pakistan Stock Exchange (PSX) amid escalating geopolitical tensions following the US attack on Iran, raising concerns among investors as the benchmark KSE-100 Index shed over 3,900 points during the intra-day trading on Monday. At 3:25pm, the benchmark index was hovering at 116,113.50 level, a decrease of 3,909.73 points or 3.26%. 'Stocks in Pakistan open with a fall of 1700 points or 1.4% amid ongoing Iran-related tension,' Mohammed Sohail, CEO of Topline Securities, said in a note. Across-the-board selling pressure was observed, especially in key sectors including automobile assemblers, oil and gas exploration companies, OMCs, power generation and commercial banks. Index-heavy stocks, including OGDC, PPL, POL, HUBCO, and PSO, traded in the red. During the previous week, the PSX endured turbulence as a combination of rising geopolitical tensions in the Middle East, volatile international commodity prices, and mixed domestic economic indicators rattled investor sentiment. The benchmark KSE-100 Index remained in sharp retreat from its recent highs. On a week-on-week basis, the benchmark settled at 120,023.23 points, reflecting a 1.7% decline compared to the previous week's close at 122,143.57 points. Internationally, shares slipped in Asia on Monday and oil prices briefly hit five-month highs as investors anxiously waited to see if Iran would retaliate against US attacks on its nuclear sites, with resulting risks to global activity and inflation. Early moves were contained, with the dollar getting only a minor safe-haven bid and no sign of panic selling across markets. Oil prices were up around 2.8%, but off their initial peaks. Optimists are hoping Iran may back down now that its nuclear ambitions have been curtailed, or that regime change might bring a less hostile government to power there. Stocks slide, oil and gold jump after Israel strikes Iran One key factor will be access through the Strait of Hormuz, which is only about 33 km (21 miles) wide at its narrowest point and through which around a quarter of global oil trade and 20% of liquefied natural gas supply passes. For now, Brent was up a relatively restrained 2.7% at $79.12 a barrel, while U.S. crude rose 2.8% to $75.98. Elsewhere in commodity markets, gold edged down 0.1% to $3,363 an ounce. Share markets were proving resilient so far, with S&P 500 futures off a moderate 0.5% and Nasdaq futures down 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5, and Japan's Nikkei eased 0.9%. Europe and Japan are heavily reliant on imported oil and LNG, whereas the United States is a net exporter. This is an intra-day update
Business Recorder
3 hours ago
- Business Recorder
PSX plunges amid US-Iran tensions, KSE-100 sheds over 3,500 points
Selling pressure was observed at the Pakistan Stock Exchange (PSX) amid escalating geopolitical tensions following the US attack on Iran, raising concerns among investors as the benchmark KSE-100 Index shed over 3,500 points during the intra-day trading on Monday. At 3:05pm, the benchmark index was hovering at 116,476.94 level, a decrease of 3,546.29 points or 2.95%. 'Stocks in Pakistan open with a fall of 1700 points or 1.4% amid ongoing Iran-related tension,' Mohammed Sohail, CEO of Topline Securities, said in a note. Across-the-board selling pressure was observed, especially in key sectors including automobile assemblers, oil and gas exploration companies, OMCs, power generation and commercial banks. Index-heavy stocks, including OGDC, PPL, POL, HUBCO, and PSO, traded in the red. During the previous week, the PSX endured turbulence as a combination of rising geopolitical tensions in the Middle East, volatile international commodity prices, and mixed domestic economic indicators rattled investor sentiment. The benchmark KSE-100 Index remained in sharp retreat from its recent highs. On a week-on-week basis, the benchmark settled at 120,023.23 points, reflecting a 1.7% decline compared to the previous week's close at 122,143.57 points. Internationally, shares slipped in Asia on Monday and oil prices briefly hit five-month highs as investors anxiously waited to see if Iran would retaliate against US attacks on its nuclear sites, with resulting risks to global activity and inflation. Early moves were contained, with the dollar getting only a minor safe-haven bid and no sign of panic selling across markets. Oil prices were up around 2.8%, but off their initial peaks. Optimists are hoping Iran may back down now that its nuclear ambitions have been curtailed, or that regime change might bring a less hostile government to power there. Stocks slide, oil and gold jump after Israel strikes Iran One key factor will be access through the Strait of Hormuz, which is only about 33 km (21 miles) wide at its narrowest point and through which around a quarter of global oil trade and 20% of liquefied natural gas supply passes. For now, Brent was up a relatively restrained 2.7% at $79.12 a barrel, while U.S. crude rose 2.8% to $75.98. Elsewhere in commodity markets, gold edged down 0.1% to $3,363 an ounce. Share markets were proving resilient so far, with S&P 500 futures off a moderate 0.5% and Nasdaq futures down 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.5, and Japan's Nikkei eased 0.9%. Europe and Japan are heavily reliant on imported oil and LNG, whereas the United States is a net exporter. This is an intra-day update
