US-Iran talks: US dollar erases war premium, oil prices plummet, global stock markets and gold rise together.

On Wednesday, the global financial markets experienced significant volatility due to news of a major breakthrough in the Middle East situation. Reports indicated that the United States and Iran were nearing an agreement to end the conflict, triggering a surge in risk appetite that led to a decline in the US dollar, a sharp drop in oil prices, and a substantial rise in global stock markets. US dollar loses "war premium" On Wednesday, the US dollar continued its recent downward trend, completely erasing all gains made since the outbreak of the Middle East conflict. The Bloomberg Dollar Spot Index fell by as much as 0.8%, hitting its lowest level since February 26. Previously, the dollar had strengthened due to safe-haven demand and rising energy prices, but as the situation reversed, funds quickly fled. Daniela Hathorn, Senior Market Analyst at Capital.com, commented that this latest news signaled a significant shift in the situation, which the market viewed as a clear bullish signal. Investors may further shift towards optimism and gradually digest the pessimistic expectations that had been factored in due to extreme risk aversion. According to reports, the White House believes it is close to reaching an agreement with Iran on a memorandum of understanding to end the current war and set a framework for more detailed negotiations on nuclear issues. As a result of this news, the US dollar weakened against almost all major currencies, options market indicators showed that investors' confidence in the US dollar's potential rise in the next week had evaporated, and the index measuring demand for bullish versus bearish trades on the dollar had fallen to the most unfavorable level since late February. Meanwhile, commodity currencies like the Canadian dollar and the Norwegian krone, which had benefited from high oil prices, were also facing downward pressure. Oil prices plunge nearly 10% in a single day The reaction in the commodity markets was more pronounced. International oil prices plunged on Wednesday, with US crude oil futures prices plummeting nearly 12% to around $90 per barrel; global benchmark Brent crude oil futures prices dropped by about 11%, falling below the $100 mark. Wholesale gasoline prices fell by 5%, and heating oil futures, an important reference for aviation fuel, dropped by over 6.5%. The immediate impact of the oil price decline was a relief for consumers. Just before the reports came out, the average retail gasoline price in the US had just surpassed $4.50 per gallon, the highest level since July 2022, and just shy of the historical peak by less than 50 cents. Since the US and Israel launched military actions against Iran, gasoline prices have surged by over 50%. The crucial Strait of Hormuz was nearly closed, with the number of daily transit vessels dropping to single digits, severely impeding over 20% of the global oil supply. Even after Wednesday's drop, crude oil prices have still risen by over 60% since the beginning of the year. Bond yields decline, gold rebounds The cooling of risk aversion has pushed bond yields lower. The yield on the US 10-year Treasury bond fell by nearly 9 basis points to 4.34%, while the yield on the 30-year bond reached a one-week low. The lower yields mean reduced borrowing costs for consumers, and the US 30-year fixed mortgage rate, which had climbed to a high of 6.54% due to war concerns, is expected to decline in the next one or two days. Meanwhile, traditional safe-haven asset gold surged instead of falling, with spot gold prices climbing by over 3% to surpass $4710 per ounce. Analysts attribute the strength in gold prices mainly to the weakening US dollar and the easing of inflation and rate hike expectations due to the oil price decline. However, market participants warn that if tensions between the US and Iran escalate again, gold prices may face speculative profit-taking. In terms of stocks, S&P 500 index futures quickly rose by over 1%, Nasdaq 100 index futures surged by 1.67%, Russell 2000 index futures rose by 2%, and Dow futures soared by over 590 points. European markets also quickly rallied, with the pan-European Stoxx 600 index surging by 2.52%. Focus shifts to non-farm payrolls data Despite the dominance of the Middle East situation in the short term, investors are also starting to focus on the US non-farm payroll data to be released later this week. This data will test the resilience of the US economy and assess whether it is strong enough to support the Federal Reserve's decision to maintain its current tightening monetary policy or whether weakness in the labor market will reignite expectations for rate cuts. Currently, US President Trump has announced a suspension of escort operations, stating that there has been "significant progress" in negotiations. Iran has also stated that it will "only accept a fair and comprehensive agreement." The sharp fluctuations in the market indicate that traders are quickly pricing in the possibility of peace.