The unexpectedly strong US jobs report is a positive sign for the economy and may have eased concerns for the Federal Reserve, as it has lessened fears of a recession.
However, the ongoing conflict between the US and Iran continues to be a significant worry for market participants, who are increasingly focused on the geopolitical factors affecting prices.
US employment figures remained stable, with an unemployment rate of 4.3 percent. Additionally, non-farm payrolls (NFP) exceeded expectations by a substantial margin, doubling to reach 115,000.
Despite this positive news, traders did not place much emphasis on the updated economic data, which also saw the March NFP revision increase to 185,000. This indicates that the Federal Reserve is unlikely to alter its policy stance in the coming couple of quarters.
While the market remains optimistic about a potential resolution in geopolitical tensions as observers hope for a compromise between the two nations regarding the proposed agreement.
In a related development, Russia and Ukraine have agreed to a three-day truce, but the market seems less responsive to the ceasefire news.
Interestingly, the US stock market has continued to rise, reaching new highs despite the persistent geopolitical crisis.
This week, if the US-Iran situation remains unresolved, market watchers will closely analyse Tuesday’s inflation report, particularly in light of rising gasoline and diesel prices, which are crucial data points for the Federal Reserve.
Leadership transitions are on the horizon as Federal Reserve Chairman Jerome Powell is set to be succeeded by Kevin Warsh on May 15.
This shift is especially significant because the market will be looking for guidance during a possible ideological transition seen in recent months between the two leaders of the Federal Reserve, with Powell taking a hawkish position while Warsh leans towards a dovish perspective.
However, the new chairman faces the challenge of navigating changed economic conditions both in the US and globally over the past few months.
The challenge for global economies is that even a swift resolution to the US-Iran conflict is unlikely to provide immediate relief to world markets. Despite favourable developments, oil and gas prices are expected to remain high, close to $ 90 to $ 100 a barrel, for the next one or two quarters due to supply constraints and significant depletion of the Strategic Petroleum Reserve (SPR).
This situation will likely add to the concerns of global central banks, potentially prompting them to increase interest rates.
Despite the ongoing geopolitical crisis, China has emerged as the leading purchaser of gold in the global market. This is one of the primary reasons we frequently observe gold prices rising during downturns.
The growing demand for gold and increased involvement from both new buyers and central banks worldwide certainly underscores the evolving dynamics of the global monetary system.
This shift in the mind-set of central banks indicates that declining gold prices could present opportunities for buyers seeking more affordable gold.
However, this also hinges on the eventual outcome of the conflict in the Middle East. Significant rises in oil prices could negate this perspective, as tighter liquidity conditions might compel central banks to either liquidate their gold reserves or engage in gold swap transactions with the USD to fulfil payment requirements.
In the meantime, even though oil producers are in demand for US Dollars due to oil unloading challenges and countries seeking foreign exchange to fulfils their balance of payments responsibilities, numerous central banks are accumulating gold to enhance their reserve portfolios.
Regarding oil prices, it remains uncertain when the conflict will conclude. On Thursday, both the US and Iran exchanged fire in the Strait of Hormuz, each blaming the other for instigating the hostilities. Nevertheless, oil prices are projected to stay elevated, and demand is expected to persist due to supply shortages and disruptions in shipping routes.
It is important to highlight that the International Energy Agency (IEA) has announced the release of 400 million barrels of oil from strategic petroleum reserves, marking the largest release to-date.
This situation disrupts both supply and demand, with a daily shortfall exceeding 10 million barrels. Data indicates that due to soaring prices and oil shortages, the demand for oil has significantly declined. Countries are exploring various strategies to lessen their reliance on oil, but these are merely temporary fixes that are unlikely to last.
The reality is that this is not a sustainable solution, and as long as the conflict continues, economic challenges are likely to escalate until a resolution is achieved.
Some economies are managing the strain by offering concessions to the public, but this could soon lead to exhaustion, and the subsidisation policy may backfire, ultimately impacting the balance of payments and pushing the current account deficit into negative territory, resulting in higher inflation and increased foreign borrowing unless the conflict ends.
WEEKLY OUTLOOK - MAY 11-15
#GOLD @ $ 4715- As uncertainty persists and volatility increases, gold is expected to fluctuate within a broader range. To climb higher, it must surpass $ 4798 in order to attain $ 4860. However, if it falls below $ 4622, it could fall further below to test $ 4540 levels.
#EURO @ 1.786- Euro must surpass 1.1860 to advance toward 1.1910. Otherwise, it may weaken. A drop below 1.1705 could lead to a decline toward 1.1660.
#GBP @ 1.3634- Pound Sterling has been gaining an upward momentum, but it must surpass the 1.3680 level. If it fails to do so, a correction may be on the horizon. A drop below 1.3520 would likely lead to further declines.
However, if it holds, the Cable could rebound.
#JPY @156.67- The $/Yen pair is supported at 155.10. As long as this level holds, a recovery is expected. It will need to surpass 157.80 to hit 158.50. However, a break below support levels poses a risk down to 154.20.
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