Trump's Ceasefire Extension Delivers Further Breathing Room for Markets

There was good news and bad news for risk assets this week. The good news arrived (after US markets closed on Tuesday) when President Trump announced an extension of the ceasefire with Iran. The move buys more time and removes the immediate threat of escalation as the original deadline loomed. The bad news, however, is that a second round of substantive peace talks has yet to materialise, with senior US officials such as JD Vance not yet heading to Pakistan for negotiations. Trump’s decision essentially extends the uneasy status quo rather than resolving the conflict. While the pause has reduced immediate tail risks, the absence of a genuine breakthrough means traders remain inclined to tiptoe rather than trade with real conviction.

Oil prices rose as the ceasefire deadline approached, reflecting fears that fighting could resume and further disrupt supplies. They then eased following news of the extension. Crude remains highly sensitive in this headline-driven environment. Both the US and Iran continue their own versions of a blockade, with the US maintaining its naval presence around Iranian ports and Iran restricting tanker movements in response. Neither scenario is good news for the global energy supply chain. Prolonged constraints at this critical chokepoint risk higher logistics costs, tighter inventories, and renewed inflation pressures further down the line, even if spot prices appear relatively contained for now.

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Currencies also reflected the mixed macro picture. The US Dollar received a fresh boost from stronger-than-expected US retail sales and pending home sales data released on Tuesday, both of which pointed to resilient consumer and housing activity despite elevated energy costs. Adding to the dollar-friendly tone, Fed Chair nominee Kevin Warsh used his confirmation hearing to stress that he would fiercely guard the central bank’s independence if confirmed. His comments reinforced expectations of a steady policy hand in Washington, supporting the greenback and keeping real yields well supported.

Gold, meanwhile, lost its grip on the $4,800 level. The stronger Dollar and firmer US macro data increased the opportunity cost of holding the non-yielding metal, prompting some profit-taking after recent gains. Geopolitical uncertainties still provide underlying support, but for now the yellow metal appears caught in a holding pattern, waiting for either clearer de-escalation signals or a renewed spike in risk aversion. For gold, levels to watch include support around $4660, with resistance waiting at $4800 and $4890.

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