US President Trump delivered a national address from the White House at 9:00 AM Beijing time on Thursday (April 2nd), providing an update on the war with Iran. He stated that the war is nearing its end, the US is achieving its main objectives, and will launch a "very powerful" strike against Iran within the next two to three weeks. Trump reiterated that the war will end within two to three weeks. During his speech, US crude oil prices surged by nearly $6, currently trading around $104 per barrel, a daily increase of about 4%, reversing a more than 2% drop in the morning session.

Trump's statement on withdrawal may boost market confidence in the short term, especially in the energy sector, but actual implementation remains to be seen. If the conflict ends quickly, oil prices are expected to fall; conversely, the continued existence of issues such as the Strait of Hormuz may maintain uncertainty. Iran's strong response indicates that there are still differences in the positions of the two sides, and investors need to pay attention to the ripple effects of the progress of negotiations and military developments on crude oil, stock markets, and global supply chains.

Although Trump stated that the war with Iran will end soon, and the Iranian president also stated that he is ready to end the war, the need for relevant guarantees limits the rise in oil prices. This signal was interpreted by the market as a potential rapid decline in geopolitical risk premiums, opening a "trap door" in the market. This is because once hostilities cease, the blocked Strait of Hormuz is expected to reopen, allowing a large influx of supply back into the market.

US non-farm payrolls increased by 178,000 in March, far exceeding consensus expectations. The US dollar index rose by about 12 points, reaching a high of 100.12; the dollar broke through the 0.8000 level against the Swiss franc, reaching a high of 0.8022; the euro and pound fell against the dollar in the short term; and US Treasury yields rose in tandem.

Spot gold rebounded sharply at the beginning of last week. This strong rebound, seemingly encouraging, could not mask a harsh reality: gold prices plummeted by 11.8% in March, poised to record its worst monthly performance since October 2008. In just one month, gold went from being a safe-haven favorite at the beginning of geopolitical conflicts to quickly becoming a victim of high interest rates and inflation expectations, while market sentiment is swinging wildly with the Trump administration's "de-escalation signals" regarding military action against Iran.

Last Week's Market Performance Recap:

With markets closed for the Easter holiday, U.S. stock index futures fell about 0.2% on Friday as investors digested a stronger-than-expected jobs report and developments in the Middle East. S&P 500 futures briefly rose after the initial data release, which showed the U.S. economy added 178,000 jobs in March, exceeding economists' consensus expectations. However, futures quickly reversed course and fell 0.3% to 6,599. Dow Jones futures fell 107 points, or 0.2%, to 46,625, after a brief rally earlier. Nasdaq 100 futures fell 98 points, or 0.4%, to 24,119. For the week, all major stock indexes recorded gains, with the S&P 500 rising 3.4%, the Dow Jones Industrial Average rising nearly 3%, and the Nasdaq surging 4.4%.

The global gold market demonstrated strong intrinsic momentum during the shortened trading week. Gold prices not only recovered the losses from late March, but also sent a strong short-term trend reversal signal to the market with a four-day winning streak on the daily chart. Spot gold rose 4.00% during the week, marking its largest weekly gain since the end of 2025; New York gold futures performed even more aggressively, rising 4.74% for the week, closing at $4,677 per ounce at the end of the week.

Silver prices followed gold's rise last week, climbing more than 4.5% to around $73 per ounce, influenced by a stronger dollar and higher oil prices. President Trump's vow to escalate attacks on Iran fueled inflation concerns and shifted market expectations from pre-war hopes for rate cuts to the possibility of the Federal Reserve maintaining its current policy in 2026. The safe-haven rise in the dollar put pressure on precious metals; silver prices have fallen more than 20% since the conflict began on February 28.

US non-farm payrolls increased by 178,000 in March, far exceeding consensus expectations. The US dollar index rose by about 12 points, reaching a high of 100.12. Technically, the dollar index and other currencies quickly moved away from the upper edge of their recent consolidation range after the data release, indicating a short-term strengthening of bullish momentum. The short-term yield curve shifted upward, reflecting the market's repricing of economic resilience. For related currencies, this data provided short-term support for the dollar index, exerted downward pressure on major non-US currencies, and provided upward impetus for US Treasury yields.

Before the end of last week, the euro/dollar traded in a narrow range, as the stronger-than-expected US non-farm payroll report supported the dollar, while the euro remained relatively stable amid liquidity scarcity due to the Good Friday holiday. At the time of writing, the pair was trading around 1.1534, showing weakness for the second consecutive day, after rising to a one-week high of 1.1627 on Wednesday. The dollar/yen pair showed a mild downward bias before the end of last week, as continued intervention concerns supported the yen, and the dollar remained strong against major currencies despite the unexpectedly strong US non-farm payroll data. Price action was flat and volatile due to liquidity shortages caused by the Good Friday holiday. At the time of writing, USD/JPY was trading around 159.57, having retreated after a brief surge to 159.82 in response to US labor force data.

GBP/USD fell for the second consecutive day, declining 0.12%, following a strong US nonfarm payrolls report, potentially prompting the Federal Reserve to refocus on addressing five years of above-target inflationary pressures. At the time of writing, the pair was trading at 1.3205. Meanwhile, the US dollar index, which tracks the dollar against six major currencies, rose slightly by 0.12%, returning above the 100.00 level, amid growing speculation that the Federal Reserve would maintain stable interest rates amid ongoing Middle East conflict. The Australian dollar hovered around 0.7030 against the US dollar. The AUD/USD pair was moderately pressured by stronger-than-expected US nonfarm payrolls data supporting the US dollar, and its earlier gains were somewhat erased due to liquidity shortages caused by the Good Friday holiday. At the time of writing, the Australian dollar/US dollar pair was trading around 0.6896, having previously touched a daily high of 0.6916.

During the Good Friday holiday, trading volumes in major global financial markets are expected to decrease significantly, with liquidity conditions tightening. Geopolitical factors have driven oil prices significantly higher, as concerns about renewed inflationary pressures continue to intensify. Oil prices have been significantly boosted by geopolitical factors, and market anxieties about runaway inflation have become a key support for the strengthening US dollar index. WTI spot crude oil has climbed back above the psychological level of $100; as of the week ending March 31, oil speculators reduced their net long positions in WTI by 23,898 contracts to 103,707 contracts.

Over the weekend, Bitcoin consolidated around $66,600, facing renewed selling pressure. The extended holiday weekend temporarily kept potential buyers away, allowing bears to gain more control over price movements. Bitcoin fell below $67,000, dragging Ethereum (ETH) and Ripple (XRP) down to $2,050 and $1.30 respectively. Derivatives data showed that traders' bearish bias increased amid rising risk aversion in the overall market.

The yield on the 10-year U.S. Treasury note rose to 4.35% in shortened trading over the weekend, further away from the two-week low reached earlier in the previous week, following a stronger-than-expected jobs report. The U.S. economy added 178,000 jobs in March, almost three times the market forecast of 60,000, while the unemployment rate fell slightly to 4.3%, and wage growth slowed. These figures reinforced market expectations that the Federal Reserve will keep the federal funds rate unchanged this year. Trading volume is expected to remain subdued due to the Good Friday holiday, with U.S. stock markets closed and bond markets operating on a shortened schedule.

Market Outlook This Week: This week (April 6-10), the US will release several key data points related to economic growth and inflation. Coupled with expectations of a US-Iran agreement, the OPEC+ meeting, and policy moves by central banks in various countries, geopolitical events and major economic indicators intertwine, potentially triggering significant market volatility. From crude oil inventories and global inflation data to the Fed meeting minutes, every piece of key information will influence asset pricing. Investors need to closely monitor key moments and prepare for potential market uncertainties.

Global capital markets will be closed at the beginning of the week, but three key points remain to watch: the White House's statement that it hopes to reach an agreement with Iran by April 6; Saudi Aramco's announcement of official selling prices last Sunday; and the OPEC meeting with oil-producing countries.

According to the latest report from the World Gold Council, central banks purchased a total of 19 tons of gold in February, with the National Bank of Poland being the undisputed main buyer. Although future demand growth may slow due to economic protection needs, the continued entry of new participants and the strategic determination of some countries to increase their gold reserves in the long term still provide solid support for the gold market. The importance of gold in central bank reserves is becoming increasingly prominent as geopolitical risks rise. Regarding risks this week:

Geopolitical and policy variables require close attention.

Besides core economic data, investors should pay close attention to four potential risks:

First, progress on the US-Iran agreement and changes in the Middle East geopolitical situation may boost risk aversion, benefiting assets such as gold and crude oil;

Second, if speeches and meeting minutes by Federal Reserve officials signal a policy shift, it will quickly revise market interest rate expectations;

Third, weaker-than-expected inflation data from Germany and the Eurozone may suppress the euro's performance;

Fourth, significant fluctuations in crude oil inventories may trigger sharp short-term volatility in international oil prices.

This week's conclusion:

This week, the Iranian conflict will continue to be the focus, entering its sixth week. Traders will continue to assess the prospect of de-escalation and any concrete progress on the reopening of the Strait of Hormuz, following the repeated clashes of recent weeks. In the US, attention will shift to the Federal Open Market Committee meeting minutes, Consumer Price Index data, the ISM Services Purchasing Managers' Index (PMI), the preliminary reading of Michigan consumer confidence, and the Personal Consumption Expenditures (PCE) report. Investors will also be watching new corporate earnings reports, including Delta Air Lines' results, as the earnings season accelerates in mid-month. Other important releases include China's consumer price index, Germany's industrial orders, and the Reserve Bank of India's monetary policy decision.

US stocks are poised for their worst quarterly performance in nearly four years, with Wall Street turning cautious and defensive.

2026, initially expected to be a banner year for Wall Street, was anticipated to be a banner year. Accelerated economic growth, the prospect of further interest rate cuts by the Federal Reserve, and the market's gradual digestion of uncertainty surrounding trade disputes led many investors to anticipate double-digit returns. However, the conflict with Iran, which began on February 28, completely changed everything. High energy prices not only pushed up inflation expectations but also sharply increased the risk of a global recession.

US stocks are on the verge of recording their worst quarterly performance in nearly four years, with investors quickly shifting from initial confidence to a defensive stance.

Stock markets shift from optimism to correction, with both the Nasdaq and Dow Jones entering a period of adjustment.

At the beginning of 2026, US stocks showed a relatively positive trend. While some tech stocks stagnated, funds began flowing into previously overlooked market sectors, attracted by low valuations and expectations of an economic recovery. However, the outbreak of conflict in the Middle East brought everything to a standstill.

On March 26, the Nasdaq Composite Index, dominated by tech stocks, fell more than 10% from its recent high, officially entering correction territory. A day later, the Dow Jones Industrial Average, a key indicator of the real economy, followed suit. To date, the S&P 500 has erased all gains from the past seven months. In March, 10 of the 11 sectors in the S&P 500 declined, with an average drop of 8.3%, with only the energy sector being an exception.

The Iranian conflict became the biggest variable in the market, causing oil prices to surge by 55%.

What initially presented a perfect environment for a sustained rally—a confluence of favorable conditions—was brought to a halt by subsequent events. Since the US-Israel military strikes against Iran on February 28, oil prices have risen by a cumulative 55%. The ongoing blockade of the Strait of Hormuz has not only disrupted oil supplies but also impacted the supply chains of other key commodities such as aluminum and urea.

This cascading effect has significantly boosted global inflation expectations, and market expectations for a Federal Reserve rate cut this year have cooled considerably. Before the conflict, traders priced in a near 80% probability of two Fed rate cuts by the end of the year; now, that probability has fallen to less than 2%.

Traditional 60/40 portfolios have become ineffective, putting pressure on both safe-haven assets.

As the stock market accelerated its decline in the second half of March, investors hoping for a hedging effect from bond portfolios also failed to achieve their goals. The US Treasury market experienced its worst sell-off since the tariff crisis last April, resulting in traditional "60% stocks plus 40% bonds" portfolios performing almost as poorly as simply holding stocks.

Markets are warning of the potential impact of the conflict with Iran. If post-war Iran can reintegrate into the global trading system, the increased supply will help lower and stabilize global energy prices. However, if Tehran continues to pose a threat, oil prices could remain above $100 per barrel for years to come.

Fundamentals Remain Resilient, But Energy Shocks Pose New Risks

Despite market pressures, the fundamentals of the stock market have not completely collapsed. S&P 500 companies are expected to achieve their sixth consecutive quarter of double-digit earnings growth in the first three quarters of 2026. Individual investors, while slowing their buying pace, are still net buyers of stocks.

However, the sharp rise in energy prices is putting additional pressure on the U.S. economy. The main risk is that the U.S. economy, which was already somewhat shaky at the start of the first quarter, is now facing the added burden of an energy tax. "The oil shock will significantly increase energy costs for consumers and businesses, thus dragging down economic growth.

Winners and losers diverge, with the energy sector emerging as the biggest bright spot.

Amidst the sharp fluctuations, the market has also shown clear divergence. The S&P 500 energy sector has risen 39% year-to-date, on track for its best quarterly performance on record.

"Capital-intensive" industries such as materials have also shown relative resilience, with investors favoring companies less susceptible to disruption by artificial intelligence.

Meanwhile, many analysts maintain their forecasts for a modest stock market rally in 2026, but these forecasts are all based on a key assumption: that the Middle East conflict will be relatively short-lived and that its impact on the global economy can be effectively controlled.

A single variable dominates the market; future trends depend on oil prices and the course of the conflict.

Overall, the Iranian conflict has become the single largest variable currently dominating the US stock market. High oil prices have not only pushed up inflation and suppressed expectations of interest rate cuts, but have also rendered traditional hedging mechanisms ineffective, with Wall Street rapidly shifting from initial optimism to cautious defensiveness. This is a market driven by a single variable. If oil prices don't fall, the market won't rise—it's that simple.

Conclusion" Analysis of the Future Trend of the US Stock Market

In the short term, the US stock market still faces significant downward pressure. If the conflict with Iran continues for an extended period, the blockade of the Strait of Hormuz will be difficult to lift, oil prices will remain high, inflation expectations will be difficult to decline, the probability of a Fed rate cut will further decrease, and stock market valuations will be squeezed. The energy sector and some defensive heavy asset sectors may continue to be relatively strong, while technology stocks and growth stocks will face greater adjustment pressure.

A substantial easing of tensions or a diplomatic breakthrough could lead to a decline in oil prices, reigniting market expectations for a Fed rate cut and potentially triggering a corrective rebound in the stock market. However, if the conflict becomes protracted or escalates, causing continued disruptions to global supply chains and persistently high energy prices, the risk of a US recession will significantly increase, potentially leading to a deeper stock market correction.

Overall Assessment: The US stock market will maintain high volatility in the second quarter of 2026, with its performance heavily dependent on oil prices and geopolitical developments.

Investors should remain cautious, focusing on the actual impact of energy costs on corporate profits and consumer spending. In terms of portfolio allocation, it is advisable to appropriately increase the weighting of defensive and energy-related sectors while controlling overall portfolio risk.

Fed's Dovish Signals Support Gold Rebound; Bull Market Rebound Imminent?

Gold prices surged, testing the $4,600 level last week. Driven by safe-haven demand and changing policy expectations, gold prices rebounded to high levels, but momentum subsequently weakened. Currently, spot gold is trading within a key range, and the market has entered a phase of correction, with a cautious short-term outlook.

From an institutional perspective, the market has recently raised its gold price forecast, expecting gold to reach $5,000/ounce by the end of this year, up from the previous forecast of $4,900. It also anticipates a further rise to $5,200/ounce by 2027. This long-term bullish expectation is primarily based on factors such as global uncertainty, central bank gold purchases, and changes in the monetary environment, reinforcing gold's strategic position as a safe-haven asset.

On the fundamental side: The Middle East conflict continues.

On the fundamental side, the Middle East conflict continues, but its marginal impact on the market is weakening. As the conflict enters its fifth week, the market has gradually priced in extreme risks, and safe-haven sentiment has failed to sustain further increases in gold prices. Meanwhile, the expectation of a pullback in oil prices has also reduced concerns about a rapid resurgence of inflation, weakening short-term support for gold.

Policy signals from the Federal Reserve.

Policy signals from the Federal Reserve have become an important variable influencing the market. In his latest speech, Federal Reserve Chairman Powell stated that the current inflation outlook is generally manageable, and there is no immediate need to raise interest rates. This statement was clearly dovish, easing market concerns about further policy tightening and providing support to the previously pressured bond market. Personally, I believe Powell's dovish stance is reshaping market expectations; the easing of upward pressure on interest rates provides some support for gold, but it also weakens the sustainability of the safe-haven drive.

Meanwhile, interest rate pricing has changed significantly. Market surveys show that CME Group tools indicate only a 2.6% probability of a 25 basis point rate hike by the Fed in April, almost entirely ruled out by the market. This change means that the downward pressure of interest rates on gold has weakened significantly in the short term, but it also reflects a recovery in market risk appetite.

From a market sentiment perspective, the current trading logic has gradually shifted from "safe-haven driven" to "correction and repricing." After the previous sharp rise, funds began to take profits, weakening the upward momentum of gold. At the same time, with the marginal decline in geopolitical risks, the market is more inclined to wait for new driving factors to emerge.

Gold remains in an overall upward trend.

From a technical perspective, on the daily chart, gold remains in an overall upward trend, but has entered a short-term consolidation phase at high levels. The key resistance level is around $4,660, a level that has repeatedly suppressed price increases, forming a significant technical resistance. Support is seen at the psychological level of $4,500; a break below this level could trigger further pullbacks. Looking at the 4-hour chart, the price rebound has been accompanied by weakening momentum, and technical indicators show signs of bearish divergence, suggesting a short-term need for correction. If the price fails to break through $4,660 effectively, it may maintain a weak and volatile trend, or even test key support areas downwards.

Conclusion:

In summary, the gold market is currently caught in a tug-of-war between long-term bullish sentiment and short-term corrective pressure. Upward revisions to institutional price expectations provide support for the medium- to long-term trend, but the marginal easing of geopolitical risks and the recovery in market sentiment in the short term have resulted in a lack of sustained upward momentum for gold prices. Future price movements will depend on new macroeconomic drivers, including changes in inflation, the path of monetary policy, and geopolitical developments. Against this backdrop, gold is more likely to maintain a high-level consolidation with periodic pullbacks. Investors should pay attention to key technical levels and changes in market expectations.

Will oil become a new safe-haven asset in 2026?

Whenever global situations become turbulent and uncertainty intensifies, investors invariably flock to the three traditional safe-haven assets—gold, government bonds, and the US dollar—seeking a safe haven for their funds. In 2026, oil will no longer be merely a short-term tactical asset for investors betting on inflation, but rather a core macroeconomic hedging tool spanning this decade-long cycle. During periods of collective weakness in risk assets, declining credibility of global monetary policy, and escalating geopolitical conflicts, crude oil, with its scarcity, strategic value, and resilience, is expected to continue to outperform, becoming a "new safe haven" for global funds.

In the past, oil has been viewed as a highly cyclical asset, heavily influenced by geopolitical interference, and subject to significant price volatility. Its price movements are highly dependent on global economic conditions, often rising during booms and falling during recessions, lacking the core attributes of a safe-haven asset: preserving and increasing value while hedging against risk. However, in 2026, this decades-old perception is being completely overturned by real-time changes in global markets, and oil is entering the realm of safe-haven assets with a completely new image.

Global inflation is currently sticking much tighter than market expectations, with economic growth in major economies generally slowing. Coupled with escalating geopolitical conflicts in the Middle East, key global energy transport routes are facing a precarious situation. Under the interplay of these multiple factors, the price logic of crude oil has fundamentally shifted. It no longer simply follows economic fluctuations but is gradually breaking free from cyclical constraints, emerging as one of the core defensive assets in the global market and becoming a new choice for investors to hedge against stagflation risks and avoid market volatility.

The logic of safe-haven assets is being reshaped.

The current global economy is not facing ordinary inflationary panic, but rather a typical stagflation scenario: economic growth continues to slow, the job market is under pressure, while price levels remain high, and inflationary pressures are stubbornly persistent, creating a vicious cycle. This unique economic environment has forced global financial markets to repric a series of negative expectations—central banks have significantly reduced the number of interest rate cuts, with some even maintaining a stance of raising rates; government bond yields remain high; the overall financial environment continues to tighten, and liquidity pressures are constantly increasing.

Against this backdrop, funds are rapidly withdrawing from risky assets such as stocks and cryptocurrencies, seeking safer allocation options. Global stock market volatility surged, putting overall downward pressure on the market. The S&P 500 even recorded its longest weekly losing streak since 2022, with market panic spreading. While risk assets collectively weakened, physical assets, with their scarcity and value-preserving properties, regained control of market pricing, with oil being a prime example.

Currently, the vast majority of traders are still clinging to outdated trading logic, failing to keep up with the structural changes in the market. The COVID-19 pandemic has completely reshaped the global market landscape from 2020 to 2025, and from 2026 onwards, energy will become the core variable dominating the global market trend for the remaining decade. Those investors who fail to recognize this structural shift and continue to adhere to traditional safe-haven asset allocation logic will ultimately miss market opportunities and find themselves in a passive position.

Why Oil Has Transformed into a Hedging Tool

The global market has changed not only the price trend of oil, but also the perception of its core value. In today's context where global energy security takes far greater priority than energy parity, carbon neutrality, and development goals, oil has been redefined as a core reserve asset carrying geostrategic value and ensuring national energy security; its strategic significance far exceeds its simple energy commodity attributes.

Currently, the global energy supply chain is extremely fragile. Upstream oil and gas production capacity has long suffered from insufficient investment, with many oil and gas companies preferring dividend buybacks to expanding capacity, leading to a continuous decline in supply elasticity. At the same time, the energy transition process is not yet complete, and the stability and supply capacity of new energy sources still cannot meet demand. Meeting global energy demand, coupled with the supply and demand pressures brought about by the global economic recovery, makes the entire energy system highly vulnerable to sudden shocks. This inherent vulnerability on the supply side precisely gives crude oil a new safe-haven attribute—the more volatile the market and the greater the risks, the more prominent the scarcity and strategic value of oil becomes, and the more resilient its price is to declines and the greater its upward momentum.

From the perspective of physical supply, the current supply risks are unprecedentedly severe. The situation in the Strait of Hormuz is of utmost concern. According to the latest market estimates, the probability of the strait remaining closed is as high as 85%, and any attempt to pass through the strait will be severely punished. It should be noted that the Strait of Hormuz is the world's most important energy transport route. This vital shipping route, if disrupted for 31 days, would result in a daily outage of 18.5 million barrels of crude oil, totaling 575 million barrels – roughly 1.4 times the size of the US Strategic Petroleum Reserve. This would be a fatal blow to global crude oil supply.

More alarming is that this crisis is not limited to crude oil. The transportation lifelines of other key commodities such as natural gas, fertilizers, and industrial metals also heavily rely on this crucial route. A disruption of this scale to the main energy logistics artery will inevitably trigger disorderly repricing across all asset classes, further fueling global inflationary pressures. As a core energy source, oil's value as a hedge against risk will become even more apparent.

If major global economies and energy companies simultaneously scramble for energy reserves, creating an "oil rush," the rise in oil prices will far exceed the predictions of most institutions, and may even reach historical highs.

An Unmissable Trading Opportunity

As a result, anxiety about missing out on the global market is intensifying, and more and more smart money is quietly positioning itself in oil-related assets. Historical experience shows that top safe-haven assets are often difficult for the general market to detect in the early stages of a rally. Only after large-scale capital migration and the main upward wave has ended do ordinary investors realize their mistake. Entering the market at this point often results in higher costs, or even becoming a bagholder.

Conclusion: In 2026, oil will no longer be merely a short-term tactical asset for investors betting on inflation, but rather a core macroeconomic hedging tool spanning the current decade-long cycle. Amidst a collective weakening of risk assets, declining credibility of global monetary policy, and escalating geopolitical conflicts, crude oil, with its scarcity, strategic value, and resilience, is poised to continue outperforming, becoming a new safe haven for global capital.

While the market still views energy as a peripheral theme, the reality is quite the opposite: energy is the core narrative of the global market in 2026, a key variable determining asset returns for the entire year. When the next global black swan crisis arrives, and the safe-haven effect of gold and government bonds diminishes, oil may become the safest and most potentially lucrative safe haven for capital.

Currently, smart money has already quietly positioned itself, seizing market opportunities. The only choice is to recognize the structural changes in the market and enter early, or to cling to traditional thinking and become a latecomer left holding the bag.

Under the Energy Storm; Hidden Concerns in the US Dollar Exchange Rate?

Last week, The US dollar index traded near 100 during the European session, retreating from the beginning of the month but maintaining an overall strong range. Brent crude oil prices traded around $107 per barrel, with energy costs surging due to supply disruptions caused by tensions in the Middle East. Federal Reserve Chairman Powell recently stated that he prefers to maintain interest rates and observe the impact of energy price shocks, while closely monitoring changes in inflation expectations. Against this backdrop, the dollar exchange rate has shown resilience, and traders are closely watching the ripple effects of global growth divergence, policy response functions, and yield curve adjustments.

Energy Shocks Exacerbate Global Growth Divergence

The ongoing conflict in the Middle East continues to push up energy prices, with both Brent and WTI crude oil breaking through the $100 per barrel mark, up more than 30% from levels at the end of 2025. This shock is highly dependent on energy imports. The impact on economies was particularly pronounced, with parts of Europe and Asia facing higher imported inflationary pressures, rising business costs, declining consumer confidence, and downward revisions to economic growth forecasts. In contrast, the US has a relatively diversified energy production structure, and its net export status provides some buffer, making dollar assets relatively more attractive. However, this shock was accompanied by a relatively restrained policy response from the Federal Reserve, a stark contrast to the situation in 2022.

Fed Policy Signals and Falling US Treasury Yields

Fed Chairman Powell recently emphasized that the Fed prefers to maintain interest rates in the current range of 3.5% to 3.75% and "observe" the impact of energy price shocks, but will closely monitor whether inflation expectations are at risk of decoupling. This statement was interpreted by the market as relatively dovish, and the 2-year US Treasury yield fell by about 20% from its recent high. The basis point is currently stable around 3.82%. In-depth analysis shows that if energy prices remain high, the Federal Reserve may face a dilemma in the medium term: it must guard against rising inflation expectations while avoiding excessive tightening that could drag down growth. This balancing act provides short-term support for the dollar, but its long-term path depends on the speed of supply recovery.

Major Central Bank Policy Divergence and Dollar Dynamics

Compared to the Fed's cautious stance, the European Central Bank and the Bank of England face greater upward pressure on inflation and may diverge in their policy paths. Soaring energy costs are directly pushing up import inflation in these regions, and central bank officials have recently warned that if the supply shock persists, they will have to maintain a tight stance for longer. The Bank of Japan continues to monitor yen exchange rate fluctuations. It is worth noting that policy divergence is not linear; if the ECB tightens prematurely, it may temporarily weaken the dollar. The dollar's gains. Traders need to track the quantitative assessments of energy inflation in the minutes of the next meetings of the European Central Bank and the Bank of England to determine whether the divergence will widen further.

Yield Adjustments and Exchange Rate Transmission Mechanism

The decline in US Treasury yields directly impacts the dollar's funding cost advantage. After the 2-year yield fell to 3.82%, the dollar's short-term interest rate premium narrowed. However, the decline in global risk appetite triggered by the energy shock maintained the dollar's resilience. Traders noted that the dollar index is fluctuating around 100.40, still with room to fall from its high at the same time last year, but volatility has increased significantly. In depth, the flattening yield curve signal suggests a repricing of the Fed's path in the market. If energy prices fall, the dollar may face downward pressure; conversely, if the conflict escalates, safe-haven buying will push up the dollar's central level.

Conclusion The Middle East conflict has led to energy supply disruptions and high global oil prices. Regions heavily reliant on energy imports are facing greater economic pressure, while the US economy has a relative buffer, increasing the attractiveness of the US dollar as a safe-haven asset. Meanwhile, the Federal Reserve's relatively dovish response has reinforced this difference, with capital flows supporting the exchange rate.

Overview of Important Overseas Economic Events and Matters This Week:

Monday (April 6): Global March ANZ Commodity Price Index MoM (%); US March ISM Non-Manufacturing PMI; Global March Supply Chain Stress Index

Tuesday (April 7): Australia's ANZ Consumer Confidence Index for the week ending April 5; Eurozone's April Sentix Investor Confidence Index; UK's March SPGI Services PMI Final; US; US March New York Fed 1-Year Inflation Expectations (%)

Wednesday (April 8): US April EIA Monthly Report Forecast - Current Year WTI Crude Oil Price (USD/barrel); US April API Crude Oil Inventory Change (10,000 barrels) for the week ending April 3; New Zealand's Official Cash Rate Decision for April 8 (%); Eurozone February Retail Sales MoM/YoY (%); US April IPSOS Main Consumer Sentiment Index (PCSI); Reserve Bank of New Zealand Governor Brehman's Monetary Policy Press Conference

Thursday (April 9): US Q4 Real GDP Annualized QoQ Final (%); US Q4 Core PCE Price Index Annualized QoQ Final Reading (%); US Q4 Consumer Spending Annualized QoQ Final Reading (%); US February Wholesale Inventories MoM Preliminary Reading (%); US Initial Jobless Claims for the Week Ending April 4 (thousands); US February Wholesale Inventories MoM Final Reading (%); Federal Reserve Releases Monetary Policy Meeting Minutes

Friday (April 10): US March CPI Annual Rate (Unadjusted) (%); US February Factory Orders MoM (%); US April University of Michigan Consumer Sentiment Index Preliminary Reading

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