Financial markets experienced heightened volatility following U.S. President Donald Trump's 48-hour ultimatum to Iran demanding the reopening of the Strait of Hormuz, threatening to 'obliterate' Iran's power plants if the demand was not met [1][3][4][7]. Iran responded by threatening indefinite closure of the strait and targeting energy, IT, and desalination infrastructure in the region, including U.S. and Israeli assets [1][2][6][7]. The Strait of Hormuz, which typically handles about 20% of global oil supplies, has been largely blocked to commercial shipping since U.S.-Israel strikes on Iran began on February 28, fueling fears of a deepening supply shock and inflationary pressures [7]. Iranian state media stated that only vessels not linked to 'Iran's enemies' would be allowed passage [7].
The Indian Rupee (INR) plunged to a lifetime low against the U.S. Dollar (USD), with USD/INR reaching 94.40, as risk aversion intensified and foreign institutional investors (FIIs) offloaded Rs. 86,780.89 crore worth of Indian equities in March [1]. The Nifty 50 index dropped nearly 2% to an 11-month low near 22,650 [1]. Asian stock markets broadly declined, reflecting a shift to safe-haven assets [1][2][3]. The U.S. Dollar Index (DXY) rose 0.15-0.17% to near 99.65-99.67, supported by expectations that the Federal Reserve will maintain rates amid rising inflation concerns from higher energy prices [1][3][4][6]. Futures traders have priced in an 85% chance of no Fed rate cuts in April [4].
Oil prices were highly volatile, with Brent crude up 0.23% to $112.42 per barrel and U.S. WTI up 0.28% to $98.51 per barrel [7]. The Brent-WTI spread widened to over $14, the largest in years [7]. Goldman Sachs raised its oil price forecasts, expecting Brent to average $110 in March and April, up from $98, and WTI to average $98 in March and $105 in April, citing the risk of Hormuz flows remaining at just 5% of normal through April 10 [7]. If flows stay at 5% for 10 weeks, daily Brent prices could exceed their 2008 record of $147 per barrel [7]. Saudi Aramco cut crude supply to Asian buyers for a second month in April, further tightening feedstock availability [1][6].
Major currency pairs reflected the risk-off sentiment: EUR/USD fell 0.2% to near 1.1545 as the Euro struggled amid safe-haven flows to the USD and negative energy supply shocks [3]. EUR/GBP steadied near 0.8670, with both the ECB and BoE warning of inflation risks and holding rates steady at their recent meetings [2][5]. The ECB flagged 'upside risks to inflation and downside risks to growth,' while the BoE signaled a possible rate hike as early as April [2][5]. USD/CHF strengthened to near 0.7890, with the CHF benefiting from its safe-haven status [4]. GBP/JPY remained range-bound below mid-212.00s, as the JPY's safe-haven appeal and potential Japanese intervention offset GBP strength [5].
Silver (XAG/USD) extended its losses for a fifth session, trading around $65.60 per troy ounce, as higher rates and a strong USD weighed on the non-interest-bearing metal [6]. Central banks including the Fed, ECB, BoE, and BoJ left rates unchanged last week but signaled readiness to tighten policy further if inflation persists [6].
Forward-looking statements from analysts and policymakers highlighted the uncertainty and risk of further escalation. Goldman Sachs warned that prolonged disruption in Hormuz could push oil prices above historic highs [7]. ECB and BoE officials stressed the importance of restoring safe shipping to ease energy price pressures and flagged the risk of inflation shocks [2][3][5].
CONCLUSION
President Trump's ultimatum to Iran over the Strait of Hormuz has triggered a global risk-off move, sending oil prices higher, currencies into volatility, and equities lower. Safe-haven assets and the U.S. Dollar strengthened as investors braced for further escalation and supply shocks. Analysts and central banks warned of persistent inflation risks and signaled readiness to tighten policy, underscoring the high market impact and ongoing uncertainty.