Escalating tensions between the United States and Iran, particularly surrounding incidents and blockades in the Strait of Hormuz, have created a risk-averse environment in global markets, impacting currencies, commodities, and metals on Thursday [1][2][3]. The Australian Dollar (AUD/USD) traded around 0.7140, down 0.27% on the day, as geopolitical concerns outweighed positive domestic data, including S&P Global’s PMI showing manufacturing returning to expansion and a rebound in services [1]. Société Générale noted the AUD's vulnerability due to its reliance on imported petroleum products, suggesting heightened volatility if supply disruptions persist [1].
The US Dollar Index (DXY) strengthened, trading at 98.78 and extending gains for the third consecutive day, supported by higher Treasury yields and reduced expectations of Federal Reserve rate cuts [1][2]. Initial Jobless Claims in the US rose to 214K, above the 212K forecast and up from 208K previously, but this had limited impact on the USD as investors focused on geopolitical developments and oil price dynamics [1][2]. The USD was strongest against the New Zealand Dollar, with a 0.46% gain, and up 0.20% against the Canadian Dollar, while the AUD fell 0.20% against the USD [1].
Gold (XAU/USD) rebounded modestly, trading around $4,740 after an intraday low of $4,684, but remained pressured by a firmer US Dollar and elevated oil prices [2]. Shipping disruptions in Hormuz, including the IRGC's seizure of two vessels and a Pentagon assessment that clearing mines could take up to six months, sustained inflation fears and increased the likelihood of a 'higher-for-longer' interest rate environment [2]. Despite a two-week ceasefire extension announced by US President Donald Trump, Iranian officials have not formally accepted, and Tehran criticized the ongoing US naval blockade as a barrier to negotiations [2][3].
Base metals showed mixed signals, with Copper and Aluminium edging higher after the ceasefire extension reduced near-term geopolitical risk, but the Strait of Hormuz closure continued to pose supply risks [3]. Aluminium found support from Middle Eastern supply disruptions, which account for about 9% of global output, while Copper supply faces risks from sulphuric acid shortages and China's planned export suspension from May [3]. ING strategists described the metals complex as cautious, with demand pressure from high energy costs and ongoing supply disruptions [3].
Looking ahead, traders are closely monitoring further developments in the US-Iran situation and upcoming US PMI data, which could influence monetary policy expectations and market direction for currencies, commodities, and metals [1][2].
CONCLUSION
Persistent US-Iran tensions and the Strait of Hormuz closure are driving volatility across currencies, commodities, and metals, with the US Dollar strengthening and risk-sensitive assets like the AUD and Gold under pressure. Supply disruptions are supporting Aluminium and raising risks for Copper, while inflation fears and higher-for-longer interest rate expectations weigh on Gold. Market participants remain focused on geopolitical headlines and upcoming macroeconomic releases for further direction.