A wave of risk aversion swept through global markets on Thursday as Iran rejected U.S. President Donald Trump's 15-point ceasefire proposal, fueling fears of a prolonged conflict in the Middle East and sending safe-haven demand for the U.S. Dollar higher [1][2][3][4]. Tehran's counter-demands, including guarantees against future hostilities, compensation for war damages, and formal control over the Strait of Hormuz, were described as 'unrealistic' by U.S. officials, further reducing hopes for a near-term agreement [1][2][3][4]. President Trump responded with warnings on social media, stating, 'They better get serious soon, before it is too late, because once that happens, there is no turning back, and it won't be pretty!' [1][2][3][4].
The market reaction was swift and pronounced. The U.S. Dollar Index (DXY) held near recent highs, trading around 99.80–99.90, reflecting the currency's resilience amid heightened geopolitical uncertainty [1][2]. USD/CHF edged higher to 0.7930, up 0.15% on the day, while NZD/USD extended losses below 0.5800, marking its third consecutive day of declines as risk sentiment soured [1][3]. The Indian Rupee faced additional pressure from foreign fund outflows and surging oil prices, with Foreign Institutional Investors (FIIs) selling Rs. 1,07,009.53 crore worth of Indian equities in March [2].
Oil prices surged sharply, with U.S. crude approaching $95 per barrel (up more than 4.2% on the day and over 40% since the war began), and Brent crude rising 4.5% to over $107 per barrel [4]. Heating oil spiked 6% early Thursday [4]. The escalation in oil prices particularly impacted currencies of oil-importing economies, such as India, and contributed to global inflationary pressures [2][4].
Equity markets responded negatively: S&P 500 futures pointed to losses of nearly 1%, Nasdaq 100 futures were down more than 1.1%, Dow futures dropped about 400 points, and Russell 2000 futures tracked a 1.5% decline [4]. Asian markets also fell, with China's Shanghai and Hong Kong's Hang Seng indexes down 1% and Korea's Kospi sliding 3.2% [4]. U.S. Treasury yields rose, with the 10-year yield nearing 4.4% and 20- and 30-year yields approaching 5%, pushing mortgage rates above 6.4% [4].
Central banks remained active: The Swiss National Bank reiterated its readiness to intervene to curb excessive Swiss Franc appreciation, while the Federal Reserve was expected to keep rates steady in the 3.50%-3.75% range until at least September, according to a Reuters poll [1]. In New Zealand, attention turned to upcoming consumer confidence data, with little domestic economic news to offset the global risk-off tone [3].
Analysts from Deutsche Bank and JPMorgan noted that the lack of progress in U.S.-Iran talks and the surge in oil prices had put the 'de-escalation playbook' on hold, creating uncertainty and volatility across asset classes [4].
CONCLUSION
The rejection of the U.S. ceasefire proposal by Iran and the resulting escalation in Middle East tensions have triggered a broad flight to safety, boosting the U.S. Dollar and sending oil prices sharply higher. Global equities and risk-sensitive currencies have come under pressure, while central banks signal vigilance amid heightened volatility. Market sentiment remains negative as investors await further developments in the geopolitical landscape.