When geopolitical risks escalate, markets do not react only to the news itself. They also react to concerns over energy, inflation, and liquidity.

The U.S. dollar rose during Asian trading on Monday as negotiations between the United States and Iran appeared to be deadlocked. Tensions continued to center on the Strait of Hormuz, one of the world’s most important energy shipping routes, pushing oil prices sharply higher and making financial markets more cautious.

According to the provided data, Brent crude rose 4.3% to $105.47 per barrel, while WTI crude gained 4.7% to $99.92 per barrel. The near-closure of the Strait of Hormuz has raised concerns over global energy supply, especially as the route normally carries around one-fifth of the world’s oil and gas.

Against this backdrop of rising risk, the U.S. dollar benefited from its role as a highly liquid asset during periods of uncertainty. The dollar gained 0.33% against the Japanese yen to 157.16 yen, while the euro fell 0.24% to $1.1757. This suggests that capital is currently favoring safety and liquidity over risk assets.

Global equity markets showed mixed performance. S&P 500 futures slipped 0.1%, while Nasdaq futures eased 0.05%. In Asia, Japan’s Nikkei fell 0.36%, while South Korea’s chip-heavy KOSPI index climbed 4%, supported by AI-related stocks. China’s CSI300 index rose 1.4%, while Hong Kong’s Hang Seng Index slipped 0.3%.

Data from China also showed rising inflationary pressure, with producer prices reaching a 45-month high and consumer inflation accelerating due to higher global energy costs. This could make central banks more cautious in their monetary policy decisions.

Notably, despite heightened geopolitical tensions and rising inflation risks, gold fell 0.5% to $4,690 per ounce. This suggests that, in the short term, gold has not received strong support from its traditional safe-haven role, while the U.S. dollar and oil prices remain the main focus of the market.

Overall, the deadlock in U.S.-Iran negotiations is putting significant pressure on energy, currency, and equity markets. If tensions around the Strait of Hormuz continue, oil prices may keep adding pressure to inflation, growth, and global monetary policy expectations.

Ebila AI continues to monitor major financial market developments, combining macro perspectives and data-driven analysis to help investors follow the market in a more systematic way.

Source: Reuters

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