20% of the global oil supply passes through the Strait of Hormuz

Last week, the market was anticipating the Federal Open Market Committee’s (FOMC’s) decision on interest rates, with expectations for no changes, and indeed, the rates remained stable. However, the Fed did not offer any new insights to the markets.

In contrast, Brazil’s Central Bank raised its interest rate, while Norway’s Central Bank surprised market participants with a reduction in its benchmark rate. Both the Swiss National Bank and Sweden’s Central Bank also announced rate cuts.

On the other hand, Pakistan’s Central Bank, the State Bank of Pakistan (SBP), the Bank of Japan (BoJ), the Bank of England (BoE), and the Chilean Central Bank kept their rates steady.

In his press conference, Fed Chairman Powell indicated that the outlook for monetary policy is quite uncertain.

Although the Federal Reserve maintained its interest rate, market indicators are suggesting a potential up to 50 basis-point cut in September and in December. Discussions are already circulating about the possibility of a US rate cut as early as next month in July.

Fed member Waller has said the Federal Reserve should not delay rate cuts for too long.

Additionally, recent US data indicates that the 10% tariff levied on foreign goods has had minimal effect on consumer behaviour.

Though spending has slowed, but it is clear that the ongoing trade war is negatively impacting business confidence and overall economic activity.

The potential consequences of the Iran-Israel situation should also be taken into account. Oil prices have already risen, and any further escalation in tensions in the Middle East could lead to even higher prices. Analysts are particularly attentive to the increase in oil prices, as Europe relies heavily on foreign gas, with Iran being the third-largest supplier. Gas prices have also climbed alongside oil prices and should not be overlooked.

Since the onset of the Iran-Israel conflict, oil prices have increased by nearly 10% per barrel. This past weekend, the market remained cautious and anxious amid deteriorating geopolitical conditions, avoiding risk-taking.

This hesitancy was fueled by Donald Trump’s statement that the US would take approximately two weeks to decide on potential involvement. However, this also implies that by the time this analysis is published, the US could take action against Iran. Only time will reveal the actual outcome.

One thing is certain: if the US intervenes, oil prices could approach $ 100 as roughly 20% of the global oil supply passes through the Strait of Hormuz. Additionally, gold is likely to benefit significantly if the situation worsens. In the meantime, the Bank of Japan (BoJ) released policy minutes last week that highlighted “extremely high uncertainties” due to global concerns. The bank has lowered its growth and inflation forecasts, worrying that a potential increase in US tariffs could hinder economic recovery.

However, its board members have indicated their readiness to raise interest rates if conditions stabilize.

As expected, the Bank of England (BOE) decided to keep its policy rate unchanged. Still, one vote leaned towards a dovish stance, with three members supporting a rate cut, while six opted to maintain the current rate. This decision reflects the growing global uncertainties and the rising prices of food and oil.

Furthermore, the G7 focused heavily on geopolitical issues and their potential repercussions.

Regarding tariffs, they committed to working on a new trade agreement with the US over the next 30 days.

Turning to gold, this week it remains in a neutral zone. Much depends on the developments between Iran and Israel. If the situation persists without US intervention, gold prices may decline, but if others become embroiled in the conflict, gold could surge. There’s no definitive outlook, making any predictions about gold’s next trend speculative. Unless situation eases, bias for gold will remain on the rise.

Next week, several important data releases are scheduled, starting with the S&P flash PMI on Monday. On Tuesday, the Consumer Confidence Index will be published alongside Fed Chair Powell’s testimony before the House Financial Services Committee. Then on Wednesday, New Home Sales data will be released and Powell will testify before the Senate Banking Committee.

On Thursday, the US data to be released will include weekly jobless claims, durable goods orders, and pending home sales, as well as the final Q1 GDP for the US. Finally, on Friday, the PCE Core Inflation for May will be the last data point of the week.

WEEKLY OUTLOOK — June 23-27

GOLD @ USD 3368— Gold is expected to remain unstable because of unpredictable circumstances. Only a breakout above USD 3395-00 could lead to a test of USD 3450. However, there is a risk that if it breaks below USD 3322, the fall could extend to USD 3272.

EURO @ 1.1525— Support 1.1420 should hold for 1.1610 or 1.1650 before the fall. Otherwise 1.1350.

GBP @ 1.3481— Pound Sterling has support at 1.3370 and is not expected to give way. The currency pair needs to rise above 1.3595 in order to reach 1.3640. Or else 1.3320.

JPY @ 145.81— The USD has the potential to make some progress, but it must surpass the 146.75-85 range for additional gains. If it fails to do so, a drop below 144.60 could lead to a test of the 143.50 or 142.20 level.

Copyright Business Recorder, 2025