Are the US and Iran on the verge of resuming hostilities?
2026-05-05 18:53:20
Despite numerous negotiations among all parties and repeated warnings from the International Monetary Fund (IMF) regarding the fragility of current economic trends, the current situation gives the impression that the countdown to a renewed hostilities in the Middle East has quietly begun. In particular, anonymous sources have indicated a high probability of a US-Israel military strike against Iran within the next 24 hours, further exacerbating market concerns about a deteriorating situation.
Some might see Iran's unprovoked attack on a UAE oil facility as the trigger for this escalation, but since the ceasefire agreement was reached on April 8, the two sides have failed to reach a new consensus—partly because US President Trump has repeatedly refused to negotiate a permanent peace agreement on several proposals submitted by Iran, a stance that clearly indicates neither side is currently ready to reach an agreement.
While last-minute negotiations may ease current tensions, Iran's demands regarding nuclear capabilities and the Strait of Hormuz remain deeply divergent from the goals set by the Trump administration. Unless this divide is bridged, or either the US or Iran chooses unconditional compromise, Trump's initial four-to-six-week war could potentially drag on indefinitely, causing incalculable damage to the global economy.
Nevertheless, the market remains eagerly awaiting Trump's usual early morning pronouncements, as these statements set the tone for future developments. Yesterday, Trump stated firmly that "if Iran attacks American ships escorting ships in the Strait of Hormuz, Iran will be wiped off the face of the earth." If he subsequently releases more reassuring signals, market expectations for the situation could potentially reverse.
So far, the market reaction has been mild and restrained.
June WTI crude oil futures prices hovered around $104 per barrel during the session, notably failing to break through the recent high of $110.93 per barrel. Meanwhile, December WTI crude oil futures prices climbed to $83.40 per barrel, surpassing the mid-March high. This trend confirms growing market concerns that oil prices will remain high throughout the year. If current news continues to develop and tensions escalate between the US and Iran, crude oil prices will likely receive sustained buying support, making a return to recent highs highly probable.
Interestingly, European stock indices have not yet experienced a crash, while US stock futures indicate a slight gap up at the open later today, suggesting relatively limited market anxiety. Strong corporate earnings have supported investor confidence and kept the market relatively stable until key economic indicators such as Friday's non-farm payroll data began pointing to a significantly weakening economic outlook. Meanwhile, Bitcoin unexpectedly broke through the $80,000 mark—if market risk appetite continues to improve and the closing price holds above this level, it could provide a foundation for further gains.
In addition, US Treasury yields fluctuated: the 30-year US Treasury yield climbed to 5%, the highest level since July 2025; the 10-year US Treasury yield touched 4.40% again. Besides rising inflationary pressures and widening term premiums, the issue of debt sustainability has once again become a focus for investors as fiscal deficits continue to expand. Meanwhile, the Middle East wars and military mobilization have further increased fiscal spending pressures, exacerbating market concerns about debt issues.
It's noteworthy that the US dollar exchange rate showed almost no significant fluctuation, while the euro-dollar exchange rate hovered around 1.1660—a level far higher than market expectations given recent developments in the Strait of Hormuz. Are forex investors truly not worried about a renewed conflict? This unusual performance has sparked further speculation in the market regarding future forex trends.
Reserve Bank of Australia raises interest rates, signaling a pause
Earlier today, the Reserve Bank of Australia (RBA) announced another interest rate hike as expected, emphasizing the threat of inflation and attempting to limit the impact of a second round of inflationary effects. The bank's statement mentioned that "following this rate hike, there is room to wait and observe subsequent developments" and that "monetary policy is prepared to respond to all possible scenarios." These statements were interpreted by the market as a clear signal of a pause in rate hikes—provided that oil prices remain near current levels. This also explains why the Australian dollar fell slightly against the US dollar today, but remained near a three-year high.
Finally, the market will see several key US economic data releases today, with the most anticipated being the ISM Services Purchasing Managers' Index (PMI) survey – which is expected to show soaring inflationary pressures and a weak job market. Meanwhile, several central bank officials will deliver speeches, including European Central Bank (ECB) President Christine Lagarde and several Federal Reserve officials. These data and speeches will be key factors influencing market movements and are closely watched by global investors.
Some might see Iran's unprovoked attack on a UAE oil facility as the trigger for this escalation, but since the ceasefire agreement was reached on April 8, the two sides have failed to reach a new consensus—partly because US President Trump has repeatedly refused to negotiate a permanent peace agreement on several proposals submitted by Iran, a stance that clearly indicates neither side is currently ready to reach an agreement.
While last-minute negotiations may ease current tensions, Iran's demands regarding nuclear capabilities and the Strait of Hormuz remain deeply divergent from the goals set by the Trump administration. Unless this divide is bridged, or either the US or Iran chooses unconditional compromise, Trump's initial four-to-six-week war could potentially drag on indefinitely, causing incalculable damage to the global economy.
Nevertheless, the market remains eagerly awaiting Trump's usual early morning pronouncements, as these statements set the tone for future developments. Yesterday, Trump stated firmly that "if Iran attacks American ships escorting ships in the Strait of Hormuz, Iran will be wiped off the face of the earth." If he subsequently releases more reassuring signals, market expectations for the situation could potentially reverse.
So far, the market reaction has been mild and restrained.
June WTI crude oil futures prices hovered around $104 per barrel during the session, notably failing to break through the recent high of $110.93 per barrel. Meanwhile, December WTI crude oil futures prices climbed to $83.40 per barrel, surpassing the mid-March high. This trend confirms growing market concerns that oil prices will remain high throughout the year. If current news continues to develop and tensions escalate between the US and Iran, crude oil prices will likely receive sustained buying support, making a return to recent highs highly probable.
Interestingly, European stock indices have not yet experienced a crash, while US stock futures indicate a slight gap up at the open later today, suggesting relatively limited market anxiety. Strong corporate earnings have supported investor confidence and kept the market relatively stable until key economic indicators such as Friday's non-farm payroll data began pointing to a significantly weakening economic outlook. Meanwhile, Bitcoin unexpectedly broke through the $80,000 mark—if market risk appetite continues to improve and the closing price holds above this level, it could provide a foundation for further gains.
In addition, US Treasury yields fluctuated: the 30-year US Treasury yield climbed to 5%, the highest level since July 2025; the 10-year US Treasury yield touched 4.40% again. Besides rising inflationary pressures and widening term premiums, the issue of debt sustainability has once again become a focus for investors as fiscal deficits continue to expand. Meanwhile, the Middle East wars and military mobilization have further increased fiscal spending pressures, exacerbating market concerns about debt issues.
It's noteworthy that the US dollar exchange rate showed almost no significant fluctuation, while the euro-dollar exchange rate hovered around 1.1660—a level far higher than market expectations given recent developments in the Strait of Hormuz. Are forex investors truly not worried about a renewed conflict? This unusual performance has sparked further speculation in the market regarding future forex trends.
Reserve Bank of Australia raises interest rates, signaling a pause
Earlier today, the Reserve Bank of Australia (RBA) announced another interest rate hike as expected, emphasizing the threat of inflation and attempting to limit the impact of a second round of inflationary effects. The bank's statement mentioned that "following this rate hike, there is room to wait and observe subsequent developments" and that "monetary policy is prepared to respond to all possible scenarios." These statements were interpreted by the market as a clear signal of a pause in rate hikes—provided that oil prices remain near current levels. This also explains why the Australian dollar fell slightly against the US dollar today, but remained near a three-year high.
Finally, the market will see several key US economic data releases today, with the most anticipated being the ISM Services Purchasing Managers' Index (PMI) survey – which is expected to show soaring inflationary pressures and a weak job market. Meanwhile, several central bank officials will deliver speeches, including European Central Bank (ECB) President Christine Lagarde and several Federal Reserve officials. These data and speeches will be key factors influencing market movements and are closely watched by global investors.
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