The core event across all sources is a sharp surge in crude oil prices, with WTI crude rising over 6% on Thursday and breaking above $80 per barrel for the first time since June 2024, driven by escalating tensions in the Middle East and the effective closure of the Strait of Hormuz following a joint US-Israeli operation on February 28. Iran's Islamic Revolutionary Guard Corps (IRGC) declared the strait closed on March 2, warning that any vessel attempting to transit would be targeted. This has resulted in tanker traffic dropping to near zero, at least five vessels damaged, over 150 ships stranded, and major shipping companies Maersk and Hapag-Lloyd suspending all transits. Iranian drone strikes on QatarEnergy's Ras Laffan and Mesaieed facilities have also taken roughly one-fifth of global LNG export capacity offline, and Iraq has begun shutting off production as exports through the strait become increasingly constrained [2].
OPEC+ responded by agreeing on March 1 to add 206,000 barrels per day in April, above the pre-crisis expectation of 137,000 barrels per day. However, analysts at Rystad Energy noted this increase is largely symbolic while the strait remains inaccessible, as much of the group's spare capacity is in Saudi Arabia and the UAE, both of which rely on Gulf export routes. Goldman Sachs warned that a temporary spike to $100 per barrel could slow global growth by 0.4 percentage points [2].
The surge in oil prices has supported the US Dollar, which firmed ahead of the Nonfarm Payrolls (NFP) report. The US Dollar Index (DXY) rose to the 99.20 region, with the USD showing the strongest gains against the Australian Dollar (+1.31%) and notable gains against other majors such as the Euro (+0.50%), Pound (+0.36%), and Yen (+0.43%) [1]. The EUR/USD slipped to near 1.1580, and GBP/USD dropped to 1.3337, down 0.25% on the day, as risk aversion and strong US labor data pressured both pairs [1][4].
US labor market data showed resilience: Initial Jobless Claims for the week ended February 28 were unchanged at 213K, below the expected 215K, and the Challenger Job Cuts report showed 48.307K job cuts in February, down 55% from January's 108.435K [1][3][4]. The ADP Employment Change report indicated the private sector added 63K jobs in February, beating the forecast of 50K [3]. The ISM Services PMI climbed to 56.1, above expectations of 53.5 [3]. Despite the drop in layoffs, hiring plans have weakened, falling 56% since the start of the year [3].
Market expectations for aggressive monetary easing from the Federal Reserve have been scaled back, with the CME FedWatch tool showing a 50.4% chance the Fed will keep rates unchanged at its July meeting and the first rate cut now expected in September [3]. Richmond Fed President Thomas Barkin commented that recent inflation data raises doubts about whether the Fed has finished its inflation fight [4].
Geopolitical tensions and strong US data have led to risk aversion, with Wall Street opening lower and the US Dollar rallying for the third day of the week [4]. The Australian Dollar weakened sharply, with AUD/USD trading around 0.7010, down 0.95% on the day, as the US Dollar drew support from strong US data and safe-haven flows. Australia's trade surplus narrowed to A$2,631M in January, well below expectations, and exports declined by 0.9% MoM [3].
Looking ahead, traders are focused on Friday's US NFP report, with estimates for 59K-60K jobs created and the unemployment rate expected to remain steady at 4.3% [2][4]. The market remains cautious amid ongoing geopolitical risks and uncertainty over the Fed's next moves.
CONCLUSION
Crude oil's surge above $80 per barrel, driven by Middle East tensions and the closure of the Strait of Hormuz, has fueled a rally in the US Dollar and heightened risk aversion across markets. Strong US labor data has further supported the Greenback, while expectations for Fed rate cuts have been pushed back. Market participants remain focused on upcoming US employment data and ongoing geopolitical developments for further direction.