The positive outlook regarding the USA/Iran agreement acted as a major driver for the favourable reaction of international financial markets.
The future trajectory of this situation hinges largely on the authenticity and commitment to the private negotiations, often characterized by what is referred to as backroom bargaining.
Consequently, until a formal and publicly acknowledged agreement is established among all involved parties, the financial market is likely to remain volatile.
Currently, the only confirmed arrangement exists between Iran and Oman, which spans a duration of two to four months, during which Iran is expected to play a pivotal role.
This agreement has yet to receive recognition from the United States and other leading nations on the global stage. As such, until it receives official endorsement, maritime traffic through the Strait of Hormuz is unlikely to revert to its typical levels, currently estimated at less than 10 percent to 15 percent of standard activity.
It is also noteworthy that shipping traffic in the Bab al-Mandeb Strait has seen a significant decline, collectively impacting global trade flows.
Other than oil, these dynamics have contributed to a sharp increase in commodity prices, particularly for copper and aluminum.
Additionally, sugar prices have been trending upward, driven by drought conditions in Europe and the United Kingdom, coupled with a decrease in Brazilian production. The price of wheat remains elevated as a consequence of the ongoing conflict between Russia and Ukraine.
The developments mentioned earlier are closely connected to inflationary pressures, and it is uncertain whether inflation rates will increase due to rising commodity prices or if they will continue on their current path in the coming months.
It is anticipated that oil and energy prices will be instrumental in determining future market directions particularly as global strategic petroleum reserve (SPR) levels continue to dwindle: an unsustainable situation that may aggravate inflationary trends in the fourth quarter unless a durable resolution is achieved in the Middle East.
On the economic front in the United States, recent data has exhibited a mixed outlook. Among the two major reports released, the ISM survey indicated an expansion in manufacturing and services activities.
In contrast, labour market data proved to be disappointing, with non-farm payrolls experiencing a sharp decline of 23,000 jobs in July, significantly below expectations.
As a result, the Consumer Price Index (CPI) numbers for July will be scrutinized closely by policymakers, with market participants reducing the likelihood of a Federal Reserve rate increase in September to approximately 42 percent.
In light of ongoing favorable developments, global stock markets experienced gains during the preceding week, with the MSCI index and other significant US indices witnessing considerable upswings.
Gold, however, emerged as the primary beneficiary, experiencing a notable increase of nearly 7 percent, rising from $4,080 to close at $4,343. Should the situation in the Middle East remain stable, gold could potentially surpass the $4,400 mark.
However, market participants may adopt a more cautious stance if prices continue to rise. It is anticipated that many traders are poised to take profits should gold exceed this threshold, with a single negative development potentially triggering a decline of approximately $200.
Additionally, it is pertinent to note that gold’s recent ascent may have been bolstered by reports of Chinese purchases totaling 20 tons in July, which elevated China’s gold reserves to $306.35 billion from $303.72 billion.
Historical patterns indicate that Central Bank acquisitions have historically contributed to upward movements in gold prices. Unlike many other nations, China does not face liquidity challenges, as evidenced by its foreign exchange reserves, which rose to $3.419 trillion by the end of July 2026.
Conversely, other countries eager to increase their gold holdings might not enjoy the same flexibility to acquire gold in exchange for USD.
The Federal Reserve’s recent sale of Euros against USD to stabilize the Japanese currency exemplifies the vital importance of the US dollar in international markets.
Oil-producing nations are currently receiving reduced dollar amounts for their exports due to subdued oil prices, which have not exhibited significant increases.
The current stability of global economies is significantly influenced by the trend of oil prices. At present, the market appears relatively stable. However, should the peace initiatives continue to progress positively, there is potential for a further decrease of oil prices approximately $5.
Nevertheless, the threat of rising oil prices continues to be a concern, as any disputes or conflicts between factions in the Middle East might heighten geopolitical instability.
It is essential to acknowledge that nearly 25 percent of the world’s oil supply, amounting to approximately 28 million barrels per day (bpd) of crude and refined products, transits through the Strait of Hormuz (20 bpd) and Bab al-Mandeb (8 bpd).
As a result, this crucial pressure point, along with decreasing oil reserves, presents major challenges that could obstruct the ability to sustain lower oil outflows from these key supply routes in the upcoming months.
Given the current trends in supply, it is possible that oil prices could exceed $100 within the upcoming months.
However, I wish for my analysis to be incorrect, since elevated oil prices are unsustainable for countries that import oil.
WEEKLY OUTLOOK - Aug 10-14
#GOLD @ $4343- This week, if gold remains above the support level of $4270, we might witness it rising past $4408 and heading towards $4450 if it breaks through $4388.
On the other hand, a drop below the support level poses a risk of falling to $4150.
#EURO @ 1.1558- If the Euro maintains a level of 1.1510, this support level could drive it upward. However, the Euro must exceed 1.1595 to hit 1.1615. Otherwise, it may fall to 1.1470.
#GBP @ 1.3493- Pound Sterling did not gain from the weaker USD. It may find it challenging to exceed the resistance level of 1.3550, but in the downside, it does have support at 1.3412. While on the upside if it breaks through the resistance, it could then reach toward the 1.3580-90 range.
#JPY @ 157-80- The $/Yen pair approached 158.50 but was unable to advance toward 159.98 and has since fallen back. If it can’t surpass 158.60, there is a chance it could test 157.10. A break below that level could lead to 156.50.
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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