Asset Summary – Monday, 2 March
US DOLLAR is gaining value as geopolitical tensions rise in the Middle East, prompting investors to seek the safety of the dollar. Military actions involving the US, Israel, and Iran, coupled with the closure of the Strait of Hormuz, are increasing demand for the dollar as a safe-haven asset. Simultaneously, higher-than-expected US producer price data suggests that inflationary pressures persist, potentially complicating the Federal Reserve’s plans for interest rate cuts. Although the market anticipates rate cuts later in the year, the current uncertainty and inflationary signals are supporting the dollar’s strength.
BRITISH POUND is under pressure, recently hitting lows not seen since December 2025, primarily due to a strengthening US dollar driven by safe-haven demand amid escalating geopolitical tensions involving the US, Israel, and Iran. Domestic political uncertainty, stemming from an unexpected Labour defeat, adds to the pound’s woes, raising concerns about potential increases in fiscal spending. Recent UK jobs data, showing rising unemployment and slowing wage growth, further weakens the pound, reinforcing expectations of a potential interest rate cut by the Bank of England. The pound’s trajectory will likely be influenced by upcoming UK inflation data and the market’s assessment of the Federal Reserve’s monetary policy path based on FOMC Minutes and PCE data releases.
EURO is under significant pressure, driven by a confluence of factors. Escalating conflict in the Middle East has triggered a flight to safety, benefiting the US dollar at the euro’s expense. Surging energy prices, particularly natural gas in Europe, further weigh on the currency. While recent data showed some improvement in European manufacturing, particularly in Germany, this positive news is overshadowed by geopolitical instability and concerns about inflation. The expectation of limited ECB rate cuts in the near term adds to the challenging environment for the euro. Overall, the heightened risk aversion and energy price pressures suggest continued downside risk for the euro in the short term.
JAPANESE YEN is currently under pressure, with its value depreciating against the US dollar. Geopolitical tensions in the Middle East, particularly involving Iran, are contributing to the Yen’s weakness as investors seek safe-haven assets other than the Yen. Furthermore, uncertainty surrounding the Bank of Japan’s monetary policy, influenced by government appointments and comments suggesting a reluctance towards further rate hikes, is also weighing on the Yen. Despite government intervention warnings and close monitoring of the Yen’s decline, the currency faces headwinds from both global risk sentiment and domestic monetary policy concerns. Technical analysis suggests a potential for further USD/JPY upside if certain resistance levels are breached, while key support levels could trigger a deeper retracement.
CANADIAN DOLLAR is demonstrating resilience and experiencing upward pressure due to a confluence of factors. Canada’s perceived stability in trade relations, particularly in contrast to US policy uncertainties and trade disputes, is bolstering the currency’s appeal. The exemption of Canadian goods from new US tariffs provides a significant advantage. Furthermore, the recovery in oil prices provides additional support, offsetting concerns about domestic economic contraction. Safe-haven demand due to geopolitical tensions may also influence the currency’s value, though the US dollar’s own safe-haven status could create counteracting pressure.
AUSTRALIAN DOLLAR is under pressure due to escalating geopolitical tensions in the Middle East, specifically coordinated strikes and retaliatory attacks involving the US and Iran, which are driving investors towards safe-haven assets like the US dollar. This risk-off sentiment has weakened the Aussie, as it is often perceived as a proxy for global growth. Domestically, a downward revision in the manufacturing PMI and a decline in the Melbourne Institute’s Monthly Inflation Gauge further contribute to the currency’s weakness. The market anticipates upcoming US economic data, including the ISM Manufacturing PMI, and a speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, which could provide further direction for the currency pair.
DOW JONES faces downward pressure as escalating conflict in the Middle East triggers a flight from riskier assets. Heightened energy prices fueled by geopolitical instability risk reigniting inflation, potentially leading to tighter monetary policy and further dampening investor sentiment. Losses are expected across most sectors, including technology and banking, which will drag down the index. However, North American energy producers might provide a limited offset to these declines.
FTSE 100 experienced a decline driven by escalating geopolitical tensions, specifically events involving the US, Israel, and Iran, which fueled a broader market sell-off and increased demand for safer investments. The financial sector suffered significant losses, with major banks like HSBC, Barclays, and Lloyds seeing notable drops, while airline stocks also weakened due to flight disruptions. Conversely, energy companies like Shell and BP benefitted from rising oil and gas prices, and defense stocks, such as BAE Systems, saw gains, indicating a mixed performance across different sectors within the index as investors reacted to the unfolding global events.
DAX experienced a significant downturn, falling to its lowest level in over three weeks, primarily driven by anxieties surrounding the escalating conflict in the Middle East. The coordinated strikes and subsequent Iranian retaliation have triggered concerns about energy supply disruptions and broader global economic stability, leading investors to sell off shares across various sectors. Travel and leisure companies, alongside banking and insurance institutions, bore the brunt of the decline. However, defense-related stocks bucked the trend, experiencing gains amid anticipated increases in US defense expenditures.
NIKKEI faces significant downward pressure due to escalating geopolitical tensions in the Middle East, specifically military strikes and retaliatory actions involving the US, Israel, and Iran, leading to concerns about a broader conflict and the closure of the Strait of Hormuz. This risk-off sentiment, compounded by losses on Wall Street and anxieties surrounding the impact of AI on traditional software, has spurred a decline in major Nikkei components like Mitsubishi UFJ, Advantest, SoftBank Group, and Nintendo. While the Nikkei previously benefited from investor interest in Asian AI infrastructure and experienced strong gains last month, the current instability overshadows these positive factors, suggesting continued volatility and potential losses.
GOLD is experiencing a significant surge in value, driven by escalating conflict in the Middle East and the subsequent flight to safe-haven assets. The closure of the Strait of Hormuz and rising oil prices are fueling inflation fears, further bolstering gold’s appeal as a hedge. Investors are moving away from currencies and stocks, reinforcing gold’s role as a store of value amid global instability. Despite a slight pullback in prices as some investors take profits, the overall outlook for gold remains positive, with geopolitical developments continuing to be the primary driver of its value.
OIL is exhibiting a bullish trend, propelled by heightened geopolitical instability in the Middle East. The escalating conflict involving the US, Israel, and Iran, coupled with attacks on critical infrastructure like Saudi Aramco’s Ras Tanura refinery, has raised concerns about supply disruptions. Shipping companies rerouting vessels underscore the severity of the situation, adding to the upward pressure on prices. While OPEC+ agreed to a modest production increase, it was less substantial than anticipated, further fueling market anxieties and suggesting that the price rally may persist.