As this piece was written, Donald Trump stressed that his camp possesses vast resources and would take whatever action necessary. Unlike his typical off-the-cuff appearances, Trump has stayed measured and cautious for the past four days, refraining from spontaneous remarks before the cameras. With the news cycle heating up, what signals are financial markets sending about the road ahead?
U.S. Markets Face Volatility
S&P 500 futures slid lower as investors reacted to escalating geopolitical risks, while European and Asian markets suffered their sharpest two-day drops since April. The ongoing conflict involving Iran has now stretched into its fourth day, sparking worries over prolonged disruptions to oil supply and renewed inflationary pressures—ripples that have broadly unsettled global exchanges.
Soaring Energy Prices Fan Inflation Fears
Brent crude soared over 8%, climbing above $85 per barrel—a high not seen since mid-2024. European natural gas prices spiked by 41%, fueled by the closure of Qatar’s largest LNG export facility and amplifying anxiety over energy security. Roughly 20% of the world’s oil passes through the Strait of Hormuz, and Tehran is now blocking this crucial channel while warning it will target overland pipelines as well.
Yields on 10-year U.S. Treasury notes rose by six basis points to reach 4.10%, reflecting diminished expectations of further Federal Reserve rate cuts. With employment contraction stalling and inflation remaining stubbornly persistent—now exacerbated by surging energy costs—the prospect of the Fed delaying its anticipated rate reductions for this year appears increasingly likely.
Complicating matters further, U.S. officials are reportedly weighing new restrictions on AI chip exports to Chinese consumers. News of this potential move dragged Nvidia shares down 3% during pre-market trading. While the crypto market has thus far shrugged off the escalations, the fall of this major AI player could sour Bitcoin’s performance during the current trading session.
Key Events for Crypto and Energy Ahead
Today, the U.S. is set to announce new measures to address oil supply issues. At 5:55 p.m., Fed official Williams will deliver opening remarks at the Governmental Affairs Conference for American credit unions. Later, at 7:15 p.m., Trump will meet bilaterally with German Chancellor Merz, a critical encounter for clarifying the fate of the postponed U.S.-EU trade deal. If Merz affirms that the agreement will progress smoothly, and that the Supreme Court decision won’t be weaponized against Trump, markets could find some relief.
At 7:45 p.m., the Fed’s Kashkari is scheduled to converse with Mike McKee at the Bloomberg Invest conference. Near 10:00 p.m., Trump will convene with the Treasury and Energy Secretaries, likely to settle on final steps related to oil policy. Notably, nearly all of Trump’s events lately have been held behind closed doors, with limited media access.
Around this time tomorrow, the U.S. ADP Employment Change report will be released. Closely watched as a leading indicator for Friday’s official Nonfarm Payrolls number, the report holds weight for interest rate outlooks. A continued employment slowdown would clear the way for the rate cuts market participants are hoping for.
