Global financial markets responded positively on Wednesday to growing hopes of a de-escalation in the US-Iran conflict, following comments from US President Donald Trump indicating that military operations may conclude within two to three weeks and that the US would consider Iran's ceasefire request once the Strait of Hormuz is 'open, free, and clear' [1][2][3][4]. These developments triggered a broad rotation out of safe-haven assets, leading to a decline in the US Dollar Index (DXY), which fell more than 0.5% to trade around 99.30–99.40, near a one-week low after reaching a ten-month high of 100.64 on Tuesday [1][2][4].
Equity markets surged on the improved risk sentiment. The Dow Jones Industrial Average rallied approximately 400 points (0.9%), the S&P 500 gained about 1%, and the Nasdaq Composite outperformed with a 1.6% rise, led by mega-cap technology stocks such as Microsoft (MSFT), Nvidia (NVDA), Alphabet (GOOG), Meta (META), and Amazon (AMZN) [3]. European equity markets also closed with strong gains [4]. In contrast, Nike (NKE) shares dropped around 14% after issuing a downbeat outlook, despite beating revenue and EPS estimates for the fiscal third quarter; the company warned that Q4 sales are expected to fall 2%–4% and projected a 20% revenue decline in Greater China [3].
Currency markets reflected the shift in sentiment. USD/JPY retreated from the 160.00 level to trade around 158.50, with the pair showing mild bearishness after failing to sustain gains above the psychological 160.00 mark—a level previously associated with Japanese intervention [1]. The Australian Dollar (AUD/USD) advanced 0.56% to around 0.6940, benefiting from the risk-on environment and the weaker US Dollar [4].
Commodities also reacted, with West Texas Intermediate (WTI) crude oil futures falling about 1% to just above $100 per barrel and Brent crude slipping to just above $102, as ceasefire rhetoric reduced the geopolitical risk premium in energy markets [3].
On the macroeconomic front, US data remained broadly solid but failed to support the US Dollar amid the geopolitical developments. The ISM Manufacturing PMI rose to 52.7 in March, retail sales increased 0.6% MoM in February, and the ADP Employment Change showed a 62K gain in March [2][4]. The ISM Prices Paid subindex jumped to 78.3 from 70.5, signaling rising input costs that could complicate the Federal Reserve's rate path [2]. Fed officials offered mixed commentary: Richmond Fed President Thomas Barkin noted that rate hikes could be necessary if inflation expectations rise, while St. Louis Fed President Alberto Musalem said monetary policy is 'well positioned' but highlighted inflation risks from the Middle East conflict [4].
Technical analysis indicated that the DXY remains under downside pressure, with resistance at 99.45–99.60 and support around 99.30 [2]. For USD/JPY, the 21-day SMA at 158.80 acts as immediate resistance, with the 50-day SMA near 156.96 as the next support [1].
Traders are awaiting President Trump's scheduled national address for further clarity, and near-term volatility is expected to persist without a definitive resolution to the conflict [1][2][3][4].
CONCLUSION
Markets rallied strongly on Wednesday as hopes for a US-Iran ceasefire drove risk assets higher and weakened the US Dollar. While supportive US economic data was overshadowed by geopolitical developments, investors remain cautious ahead of President Trump's upcoming address. The situation remains fluid, with volatility likely to persist until a clear resolution emerges.