A fragile ceasefire between the US and Iran is being tested as Iran's Revolutionary Guard seized two vessels and fired on three ships in the Strait of Hormuz, despite US President Donald Trump's announcement on Tuesday of an indefinite extension to the ceasefire, which was made hours before it was set to expire [1][2][3][4][5]. Trump reiterated that the US Navy blockade of Iranian ports will continue, while Iran has demanded the removal of the blockade as a precondition for further negotiations [1][2][3][4][5]. Iranian parliament speaker Mohammad Bagher Ghalibaf stated that reopening the Strait of Hormuz is 'impossible' as long as the US and Israel maintain what he called 'flagrant' ceasefire violations [3][4][5].
These ongoing tensions have driven oil prices sharply higher for the third consecutive day, with Brent crude rising over 3% to close at $101.91 per barrel and US West Texas Intermediate (WTI) futures up more than 3% to settle at $92.96 per barrel on Wednesday [2][5]. WTI briefly spiked to $95.85 before retreating, but remains above $92.00, up nearly 0.30% for the day [2]. The rise in oil prices is attributed to both the geopolitical risk premium from the Hormuz standoff and a surprise draw in US crude stockpiles [2][5].
Despite the hostilities, global equity markets have responded positively. The S&P 500 and Nasdaq Composite reached new record highs overnight, while Japan's Nikkei 225 and South Korea's Kospi also hit new highs in early Thursday trading [5]. The Canadian Dollar (CAD) has been supported by higher oil prices, but gains are capped by the safe-haven demand for the US Dollar (USD) amid ongoing geopolitical risks [1]. The USD/CAD pair retreated slightly from a three-day high but lacked strong follow-through, as markets await US economic data and continue to monitor oil price dynamics [1].
In currency markets, the Euro (EUR) and New Zealand Dollar (NZD) both strengthened against the USD, buoyed by revived risk appetite following the ceasefire extension [3][4]. The EUR/USD held gains above 1.1700, trading near 1.1710, while the NZD/USD firmed around 0.5910 for the fourth consecutive day [3][4]. However, both pairs remain sensitive to further developments in the Middle East and upcoming economic data, such as the S&P Global PMI [4].
Forward-looking statements include expectations for continued volatility driven by geopolitical developments and central bank policy. The Bank of Canada is seen as a possible candidate for a rate hike in April, while the European Central Bank is expected to hold rates steady in April but may consider 25 basis point hikes in June and September, according to Barclays analysts [1][4]. Kevin Warsh, President Trump's nominee for Federal Reserve chair, indicated a preference for new inflation measures that exclude extreme price shocks, suggesting potential changes in Fed policy direction [5].
CONCLUSION
Despite escalating tensions in the Strait of Hormuz and surging oil prices, global equity markets have rallied, reflecting investor optimism about the ceasefire's potential to contain broader conflict. However, persistent hostilities and unresolved geopolitical risks continue to inject volatility into commodities and currency markets. Market participants are advised to closely monitor further developments in the Middle East and central bank policy signals for future direction.