Geopolitical tensions in the Middle East continue to play a significant role in influencing financial markets. A key point of concern is the stability of the ceasefire between Tehran and Tel Aviv, a development that was prominently announced earlier by the U.S. President.

All countries directly involved in the military conflict — Israel, the U.S., and Iran — understand that a clear victory for either side is unattainable. The Americans and Israelis did not achieve their intended goals, but Iran is also incapable of launching active operations. This effectively downgrades the conflict to the more familiar, simmering nature it has held in this unstable region for decades.

Arguably, the beneficiaries of this status quo are crude oil-producing countries, as the situation supports oil prices. This outcome appears to suit many of the major players in this broader Middle Eastern game, especially those outside the region. A temporary truce is unlikely to be final. The parties will take time to recover before the cycle potentially repeats.

For now, investors view the slight easing of tensions as a positive development, boosting demand for stocks and cryptocurrencies. The U.S. dollar and gold prices remain under pressure.

The pause in the military conflict allows market participants to shift their focus to other important events, such as today's speech by Federal Reserve Chair Jerome Powell.

How significant will Powell's speech be?

His remarks will likely offer nothing new to investors. Speaking before Congress yesterday, he noted that there is currently no need to rush into resuming interest rate cuts. The Fed Chair reiterated his position and that of other Fed officials, which is that it is prudent to wait for a clearer understanding of the impact of Trump-era tariffs — both existing and those that may soon be introduced by the U.S. government — on the national economy before changing interest rates.

This means markets will continue to look for new drivers, primarily arising from geopolitical issues, particularly those in the Middle East.

Today's schedule includes remarks from Bank of England officials Bailey, Pill, and Breeden. However, the localized nature of the UK economy and its limited global impact are unlikely to significantly affect market dynamics. Even the British pound, in this case, is more influenced by the U.S. dollar's trajectory than anything else.

What to expect from the markets today?

Market participants will continue to assess the durability of the Iran–Israel ceasefire, which includes direct U.S. involvement. The longer it holds, even in a fragile form, the more reason markets will have to climb. As for the U.S. dollar's behavior, various uncertainties — developments in the Middle East, the Fed's rate outlook, and prospects for U.S. economic growth — will continue to exert downward pressure. A similar picture is expected in the cryptocurrency market, likely to remain in a sideways range.

Crude oil prices show little change, held in check by the fragile ceasefire. They could quickly spike if tensions escalate again. The steady recovery in gold prices underscores the persistent instability of the Middle East situation. A second round of conflict appears likely, given that all parties involved — except the U.S. — are dissatisfied with the outcomes of the first stage of the war.

Forecast of the Day

EUR/USD

The pair is trading at its highest level since November 2021, primarily supported by general U.S. dollar weakness. A downside correction may occur due to local technical overbought conditions and uncertainty regarding the trajectory of the Middle East ceasefire. A drop below the 1.1600 mark may lead to a fall toward 1.1545. The 1.3596 level could serve as a potential selling point for the pair.

GBP/USD

The pair has been trading at its highest level since February 2022, supported by overall dollar weakness. A pullback may happen due to local overbought conditions and uncertainty about developments in the Middle East. A decline below the 1.3600 level could send the pair down to 1.3550. The 1.1595 level could serve as a potential selling point.