Safe-haven demand returned early Thursday after US President Donald Trump’s comments on the Middle East conflict did not point to a quick end to the war against Iran. US stock index futures fell 1.2% to 1.8% in the European morning, while the US Dollar rose about 0.5% above 100.00.
Trump said Iran is “no longer a threat” and that the US will hit Iran “extremely hard” over the next two to three weeks. He also said the US does not need the Hormuz Strait and that it will reopen after the conflict.
Market Reaction And Key Moves
Crude oil rose after a two-day fall, with WTI near $101, up about 7% on the day. Gold fell more than 3% and traded below $4,600.
US data showed private-sector employment rose by 62K versus a 40K forecast. The ISM Manufacturing PMI rose to 52.7 from 52.4, and the Prices Paid Index increased to 78.3 from 70.5.
Thursday’s US releases include February Goods Trade Balance and weekly Initial Jobless Claims. Focus shifts on Friday to Nonfarm Payrolls, the Unemployment Rate, and March wage inflation.
FX Rates And Positioning Ideas
EUR/USD fell about 0.5% below 1.1550 and GBP/USD dropped about 0.6% below 1.3250. USD/JPY rose towards 159.50 after closing almost unchanged on Wednesday.
A year ago today, we saw a classic risk-off market driven by fears of a US-Iran conflict, which pushed WTI crude oil prices over $100 per barrel. Today, the situation is much different, with WTI trading closer to $84 as OPEC+ has maintained steady production, and recent US inventory reports from March 2026 showed a surplus. This suggests that any new geopolitical flare-ups in the Strait of Hormuz may not cause the same aggressive price spike, making long-dated, out-of-the-money call options a relatively cheap hedge against surprises.
The US Dollar Index (DXY) was also a primary safe-haven beneficiary, climbing above 100 in early April 2025. While the dollar remains strong now, currently trading around 104.5, its strength is driven less by fear and more by interest rate differentials, with the Federal Reserve holding firm while other central banks consider easing. With the March Nonfarm Payrolls report due tomorrow, implied volatility is elevated, suggesting strategies like straddles or strangles on currency futures could be used to trade the post-announcement move, regardless of direction.
We saw an unusual reaction in gold last year when it fell sharply despite the turmoil, as the surging dollar proved to be a more powerful headwind. Today, with gold trading around $2,450, it faces a similar challenge from a strong dollar and positive real yields, as the latest US inflation data for February 2026 came in at a stubborn 2.9%. This environment suggests caution for outright long positions; traders could consider using put spreads to bet on a potential pullback or to hedge existing holdings.
Last year’s price action showed a broad-based dollar rally, with EUR/USD falling below 1.1550 and GBP/USD dropping under 1.3250. The current environment shows a similar, albeit less volatile, trend with EUR/USD at 1.08 and GBP/USD near 1.26 as of this morning. Given the divergence in central bank policy, we see continued pressure on these pairs, making strategies that benefit from range-bound or slightly lower prices, like selling call spreads, attractive over the next few weeks.
Conversely, USD/JPY rallied toward 159.50 a year ago, a move we are seeing echo today as the pair hovers near 151.70. The fundamental driver remains the wide gap between US and Japanese interest rates. However, with the pair at multi-decade highs, the risk of intervention from Japanese authorities is significant, a factor that was less pronounced in early 2025.
