Time is swiftly running out without yielding any results. It has been 80 days since the US-Iran conflict began, and no resolution has been achieved. While I believe negotiations are still occurring behind closed doors, it appears they are far from reaching an agreement regarding the opening of the Strait of Hormuz, sparking concerns among world leaders and business executives.
Oil prices are consistently increasing on trading platforms. However, the actual landed cost is significantly higher due to supply constraints and additional logistics and insurance expenses.
This situation is becoming unbearable for oil-importing nations, as increasing debt and the financing costs are stifling growth and causing a sharp rise in inflation.
This puts additional pressure on their foreign exchange reserves and ultimately weakens their currencies.
What is even more troubling is that the pace of negotiations between the US and Iran is not encouraging, as things are not progressing favorably.
Additionally, a recent visit by US President Donald Trump to meet with Chinese President Xi did not yield any diplomatic breakthroughs concerning the Strait of Hormuz, which is an especially disappointing sign for global financial markets concerned about shortages in energy, fertilizers, and other industrial resources.
With no clear diplomatic advancements, hopes for a resolution appear to be fading, and risk sentiment is rising, leading to an anticipated sharp increase in inflation.
Delays in reaching a ceasefire could cause disruptions.
China’s Foreign Ministry has only stated that shipping routes should be reopened quickly and that a ceasefire must be both comprehensive and lasting.
The two main outstanding issues are Iran’s nuclear programme and the uranium.
In summary, any closure or disruption of the Strait of Hormuz would likely result in increased sales of US oil globally as supply would be rerouted from the US.
On Friday, the rise in oil prices triggered a sell-off in equities, gold, and silver. The US economy, already weighed down by an enormous debt exceeding $ 38.9 trillion, cannot sustain expensive financing.
As treasury yields soar, financial conditions have tightened. Consequently, the US Dollar has strengthened due to heightened risk factors.
The overall global economic climate is benefiting the US Dollar, making it the primary advantage during times of geopolitical instability and economic challenges faced by multiple countries.
The sensitive Japanese Yen, heavily defended through intervention near 160.70 Yen to the dollar, has once again come under pressure as it rises past 158.
This is due to 10-year US treasury yields climbing above 4.5% and 30-year yields at 5.12%, reaching their highest close since July 2007.
The interest rate differential between the US and Japan enhances the appeal of the US Dollar, as investors borrow inexpensive Yen to invest in higher-yielding US assets, securing profits against yield spreads.
Market estimates suggest that on April 30 and during the first week of May, the Japanese Ministry of Finance and the Bank of Japan (BOJ) intervened significantly, contributing more than $ 65 billion to push the Yen down from 160.70 to below 156 levels.
This was a purely defensive maneuver, and unless the Bank of Japan raises interest rates, the interest differential will continue to attract investors. The challenge for the Japanese government is that in the current environment, intervention becomes less effective until US bond yields stabilize.
As things stand, the Japanese currency may weaken further unless the BOJ intervenes or US yields decrease.
In the meantime, the robust UK GDP data from the first quarter has not eased the pressure on Pound Sterling, which is facing challenges due to rising inflation that conflicts with its current monetary policy.
Even with the improved economic figures, consumer spending remains stagnant, raising concerns about the overall economic sentiment. Additionally, the political landscape is becoming more complex as Prime Minister Starmer’s government has been weakened following a cabinet member’s resignation. The 30-year UK gilt has reached a 20-year high of 5%, adding further strain on the Pound Sterling, which has fallen nearly 2%.
The combination of political unrest and a bleak growth outlook is negatively impacting the British currency.
Meanwhile, concerns about inflation are gradually shifting the market sentiment from a potential easing of US interest rates to stricter conditions, which are likely to remain in place until inflation subsides, expected to take several months.
Observing US bond prices indicates that the current long-term yield curve supports this outlook. The next movements in gold prices will likely be influenced by factors like inflation rates, US Treasury yields, and oil prices.
As long as oil prices remain high, gold will continue to face pressure. A reversal in bond yields could help gold recover its lost value.
However, economic and geopolitical developments are becoming so complicated that the release of economic data is increasingly viewed as less significant by investors and traders.
WEEKLY OUTLOOK - MAY 18-22
#GOLD @ $ 4540- Gold must remain above the support level of $ 4460 to reach $ 4650. A breakout could lead to $ 4740. However, there is a risk that, a drop below the support could drive it down toward $ 4370.
#EURO @ 1.1626- The Euro must maintain a level of 1.1510 to achieve some stability. If it rises above 1.1758, it could lead to an increase towards 1.1810. Conversely, if the decline continues, the next support level is at 1.1460.
#GBP @ 1.3325- Pound Sterling is likely to continue facing pressure as long as it remains below 1.3480. The next level of support is at 1.3205, and only a break could lead to a decline towards 1.3150. Otherwise, Cable will stabilise.
#JPY @ 158.77- If the $-Yen pair remains above the support level of 157.70, it is expected to attempt to surpass 159.50, posing a challenge for the Bank of Japan (BOJ). A rise above 160.50 could lead to a push towards 161.50, while movement below the support level could see it drop to 155.60.
Copyright Business Recorder, 2026
The writer is former Country Treasurer of Chase Manhattan Bank. The views expressed in this article are not necessarily those of the newspaper
He tweets @asadcmka
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