Decision Analysis: One Sentence from Trump Reveals Fragility of the Ceasefire! Oil Prices Surge Again Approaching $100, Fed Likely to Hold Rates Steady This Year

On Thursday (April 9), Asian stock market sentiment became cautious as the fragile Gulf ceasefire agreement began to show cracks, pushing oil prices higher again and reminding investors that the subsequent impact of inflation will persist for quite some time.

The MSCI Asia-Pacific ex-Japan index fell 0.7%. Japan's Nikkei index fluctuated near flat after a sharp 5.4% surge in the previous session. South Korea's stock market dropped 0.4% after previously soaring 6.8%. China's blue chips fell 0.6%.

European markets were mixed, with Eurozone STOXX 50 futures down 0.1%, German DAX futures down 0.5%, while UK FTSE futures rose 0.4%.

On Wall Street, S&P 500 futures and Nasdaq futures both declined 0.2%, indicating that Wednesday’s strong rebound is losing momentum.

US President Donald Trump stated on social media that the US military will remain stationed in the Gulf region until an agreement is reached and enforced, otherwise hostilities will reignite. Meanwhile, Israel launched its most intense attack on Lebanon since last month’s conflict with Iran-backed Hezbollah militants, resulting in over 250 deaths. #IranCrisisTracking#

Currently, there are virtually no signs that the Strait of Hormuz has truly reopened. Iran is demonstrating its control over this crucial oil passage and is demanding that ships pay a toll for safe passage.

Nigel Green, CEO of deVere Group, stated: “A fifth of the world’s oil supply passes through this channel, which in effect remains under the influence of one side of the conflict. This is not stability.”

He added: “A complete blockade isn’t necessary to drive oil prices significantly higher again. Missiles are still being launched in the Gulf, Israel is still fighting on another front, yet the markets are behaving as if the region has returned to normal.”

As a result, US crude futures rebounded 3.1% to $97.33 per barrel; Brent crude rose 2.1% to $96.86 per barrel.

Inflation Is Inevitable

Since oil prices remain about 40% above levels before the conflict erupted, key data from around the world will soon reflect a new wave of inflation shock. US core prices for February, to be released later Thursday, are expected to rise 0.4% for the second consecutive month—without yet reflecting the surge in energy costs.

The latest Federal Reserve meeting minutes showed that more officials now believe that raising rates may be necessary to contain inflation, although many still hope the next move will be a rate cut. This has limited the rally in US Treasuries, leaving the bounce in US bonds relatively subdued compared to a sharp increase in European debt markets. The US 10-year Treasury yield stood at 4.296%, compared with 3.96% before the attack on Iran occurred.

Fed funds futures indicate that markets currently price in just 6 basis points of cuts for the remainder of the year; compared with the end of February, markets have given up on expectations for 50 basis points of rate reductions this year.

JPMorgan analysts said in a report: “The committee generally thinks it is too early to act, which implies the Fed is likely to stand pat this year—consistent with our view.” They also believe that the rate outlook for the European Central Bank is shifting, with market expectations moving from two cuts this year to possibly only one.

Changes in the rate outlook enabled the US dollar to recover some of its reflexive losses, with the euro steady at $1.1669, below the previous peak of $1.1721. The dollar traded at 158.68 yen, having slipped to 157.89 on Wednesday.

In the commodities market, gold edged up to $4,721 after rebounding to $4,777 overnight.