Recently, Israel launched a large-scale military strike against Iran, which suddenly escalated the situation in the Middle East and refocused the global market on geopolitical risks. Crude oil rose in the short term, gold hit a recent high, and the US dollar was also boosted by risk aversion. If the situation escalates further, energy prices and safe-haven asset fluctuations may intensify; at the same time, although short-term market sentiment is dominated by geopolitical risks, the policy path of global central banks and economic data still constitute the key to the medium-term trend.

The situation in the entire Middle East has entered a highly uncertain state. One of the core variables that the market is currently paying special attention to is whether Iran will avoid attacking US military bases in the Middle East in its counterattack, thereby preventing the situation from escalating across the board, or whether it will further push the situation in the direction of direct involvement of the United States.

At a time when risk aversion is high, market funds have clearly flowed to traditional safe-haven assets. This week, gold prices hit a new high under the catalysis of geopolitical risks, and the US dollar index strengthened simultaneously.

Before there is a clear sign of cooling down in geopolitical conflicts, gold and the US dollar may continue to benefit; for institutional investors, the current stage of allocation strategy needs to focus more on defensive positions, while controlling the leverage exposure of risky assets; interest-bearing bonds, US bonds and other assets may also be favored by funds driven by risk aversion.

Review of market performance last week:

The US stock market closed sharply lower on Friday as risk appetite weakened. Iran condemned Israel's air strikes as a "declaration of war" and responded with missile attacks on Friday night local time. These attacks targeted Iran's nuclear and military facilities, significantly escalating geopolitical tensions and making global markets uneasy. The S&P 500 and Nasdaq fell 1.1% and 1.3%, respectively, while the Dow Jones plummeted 769 points. Last week, the S&P 500 rose 0.5% to 5,976.97 points; while the Dow Jones and Nasdaq fell 1.5% to 42,197.79 points; and 0.8% to 19,406.83 points, respectively.

Before the weekend, gold prices rose sharply on Friday, standing above the $3,400/ounce mark, reaching a high of $3,446.60/ounce, a two-month high. The geopolitical tensions in the Middle East have caused investors to flock to safe-haven assets. Previously, Israel's air strikes on Iran have once again raised concerns about a wider conflict in the Middle East. As geopolitical tensions in the Middle East intensified over the weekend, gold prices may continue to benefit from risk aversion next week, and gold prices are expected to target $3,500/ounce at the beginning of next week.

Last week, spot silver continued the high-level fluctuations in recent days. It once fell back below $36 during the session, and then returned to above $36 for consolidation. The overall operation remained sideways near this week's high. The current silver price is only one step away from the stage high of $36.866 set this week. Although market fluctuations have converged, the price center of gravity continues to rise, reflecting the strong consolidation rhythm led by bulls.

Last week, the dollar rose against major currencies such as the euro and the yen on Friday, and the market rushed to buy safe-haven assets as Israel's attack on Iran led to increased geopolitical tensions in the Middle East.

Driven by safe-haven demand, the US dollar index rose significantly on Friday, rising to 98.58 at one point, successfully rebounding from its low since March 2022. Despite its strong performance during the day, the US dollar index still recorded a decline of nearly 1% as a whole this week, the largest weekly decline in three weeks. This contradictory performance reflects the market's complex game between short-term safe-haven demand and long-term economic expectations.

Other safe-haven currencies such as the yen and the Swiss franc rose by about 0.5% in early trading on Friday, but then stabilized. At the same time, the Australian dollar and the New Zealand dollar, which are highly positively correlated with risk sentiment, became "victims" of the US dollar, falling by about 1% each at one point. The euro was not spared, ending a four-day rally and falling 0.6% against the US dollar to $1.1511. The fluctuations in these currencies clearly reflect the market's temporary avoidance of risky assets.

As the British pound is usually regarded as one of the risk-sensitive currencies by the market, the GBP/USD fell to around 1.3530 in early European trading on Friday under the dominance of risk aversion. Overall, the short-term decline of the British pound is more due to the flow of risk funds to safe-haven assets such as the US dollar and the Japanese yen, rather than changes in the economic fundamentals of the British pound itself.

Affected by the geopolitical situation, the global crude oil market has fluctuated violently. WTI crude oil once soared by more than 9%, breaking through the $74/barrel mark. As the situation in the Middle East intensifies, market concerns about the safety of crude oil transportation in the Strait of Hormuz have risen sharply. The global energy supply chain, transportation routes and fuel costs may face far-reaching impacts. As the situation develops, energy traders and logistics companies are closely watching the developments. Any substantial geopolitical conflict may push up transportation costs in a short period of time and cause a rapid increase in fuel prices, which will in turn affect the global industrial chain.

After Israel launched an air strike on Iran last weekend, the situation in the Middle East escalated suddenly, and Bitcoin and other cryptocurrencies fell sharply. Earlier, Bitcoin fell 3% and fell below $103,000, and then rebounded. It has now lost the key 50-day moving average level. Cryptocurrencies reacted negatively to the news of Israel's attack on Iran, in line with the performance of major risk assets, and technical support is expected around $101,000, but geopolitical news will dominate price fluctuations in the short term.

The U.S. 10-year Treasury yield rebounded to about 4.4% after falling to a one-month low of 4.31% early last weekend, as investors assess the escalation of tensions in the Middle East. Meanwhile, last week's $30 billion 30-year Treasury auction saw stronger-than-expected demand, bringing some relief to the bond market and easing ongoing trade uncertainties. Investors also began to focus on the Federal Reserve's policy decision next week. The Fed is expected to keep the federal funds rate unchanged, but softer-than-expected CPI and PPI data strengthened expectations of two rate cuts in 2025.

Market Outlook This Week :

Macro and central bank dynamics remain the "anchor" of the market this week

Although geopolitical events dominate market direction in the short term, macro data and central bank policies still constitute important factors affecting medium-term trends. This week, the Bank of Japan will announce its latest policy decision, and analysts generally expect it to maintain its current monetary policy unchanged. There is still great uncertainty in the outlook for global trade, which makes it difficult for Japan to advance its interest rate hike path in the short term, and the easing tone may continue.

In addition, the Swedish Central Bank and the Norwegian Central Bank will also announce their interest rate decisions one after another. Against the backdrop of falling inflation and external shocks, the attitudes of the two central banks will become an important signal for the market to assess the monetary policy path in the Nordic region.

The biggest focus this week is undoubtedly the Federal Reserve FOMC meeting. Analysts expect it to keep the policy interest rate unchanged, an expectation that is highly consistent with market pricing. The dot plot still indicates that there will be two interest rate cuts in 2025, and the pace of interest rate cuts in 2026 will be more obvious. Powell may still maintain a wait-and-see stance at this meeting, with risks leaning towards a moderate dovish stance, but he does not expect to release too strong forward guidance.

In addition, Germany's ZEW economic sentiment index will also be released this week. As a leading indicator of investor confidence in the eurozone, this data is of great reference significance to the foreign exchange market. Analysts believe that any fluctuations at the macro level may be superimposed on geopolitical risks, further amplifying market volatility.

Middle East conflict ignites uncertainty, dollar's safe-haven halo reappears?

Last week, against the backdrop of turbulent global financial markets, the sudden escalation of the geopolitical situation in the Middle East injected new uncertainties into the foreign exchange, bond and gold markets. Israel launched a large-scale military strike against Iran, and Iran quickly counterattacked with drones. Driven by risk aversion, global investors flocked to traditional safe-haven assets such as the US dollar, US Treasuries and gold, pushing up the prices of these assets. At the same time, although the US dollar index recorded an increase on Friday, it still faced pressure to fall on a weekly basis as a whole, and market sentiment appeared particularly fragile under the interweaving of multiple factors.

Driven by safe-haven demand, the US dollar index rose significantly before the weekend. However, despite its strong performance during the day, the US dollar index still recorded a decline of nearly 1% as a whole last week, the largest weekly decline in three weeks. This contradictory performance reflects the complex game between the market's short-term safe-haven demand and long-term economic expectations. Market uncertainty is not only due to geopolitical risks, but also closely related to the upcoming economic data.

Geopolitical "noise" may temporarily disrupt the dollar's downward trend and weigh on risk assets, especially as the week approaches, when market uncertainty may be further amplified. Investors are more cautious in this context and have adjusted their positions to cope with possible fluctuations.

From a broader perspective, although the US dollar index rebounded last Friday due to safe-haven demand, its weekly decline shows that the market's long-term confidence in the dollar is still challenged by multiple factors. Geopolitical risks, inflation expectations and the direction of the Fed's policy will continue to dominate market sentiment in the coming weeks. Investors need to pay close attention to the development of the situation in the Middle East, especially whether oil supply will be substantially threatened, which will directly affect crude oil prices, global inflation and the performance of safe-haven assets.

Geopolitical situation drives risk aversion, gold accelerates its rise

In the early morning of last Friday (June 13), a shocking news swept the world: Israel launched a preemptive air strike on Iran, targeting Iran's nuclear program and military facilities. This action not only triggered a sharp escalation of tensions in the Middle East, but also caused gold and crude oil prices to soar instantly, and global financial markets fell into violent fluctuations.

At the same time, safe-haven asset gold also saw explosive growth. Spot gold prices soared by more than $30 in a short period of time, breaking through $3,410/ounce, reaching a new high since May 8 at $3,446.60/ounce. Investors are concerned about the global economic uncertainty that may be caused by the conflict in the Middle East, and have flocked to safe-haven assets such as gold.

As news of Israel's attack on Iran spread, traders chose to hedge, and market sentiment was extremely tense. Details about the scale and impact of the attack are still unclear, and the initial market reaction may be just the tip of the iceberg. In the coming days, Iran's retaliatory actions and the attitude of the international community will become key factors affecting market trends.

Israel's air strikes on Iran not only ignited the war in the Middle East, but also triggered violent fluctuations in global markets. In the short term, the surge in gold prices reflects the market's strong concerns about geopolitical risks. Gold's position as a safe-haven asset has been further consolidated, and it is expected that gold prices may continue to remain high or even challenge higher points if the conflict continues or escalates. However, if the US-Iran nuclear talks achieve a breakthrough, the market risk aversion may ease and the gold price may fall back.

The current global financial market is in a stage where policy and geopolitical risks are intertwined. As a core safe-haven asset, gold still has room to rise in the short and medium term driven by risk aversion demand and expectations of monetary easing. However, it is necessary to pay close attention to whether the situation in the Middle East will spread out of control. If the negotiations break down or retaliation escalates, gold may face greater volatility.

The Middle East powder keg detonates the oil market: long and short game under the black swan event

The global oil market was ignited overnight! In the early morning of Friday (June 13th) Beijing time, Israel's raid on Iran's nuclear facilities, missile factories and military commanders triggered a sudden escalation of the geopolitical situation in the Middle East, and international crude oil prices soared. US crude oil once rose by more than 14%, setting the largest single-day increase in nearly three years. Brent crude oil futures and US WTI crude oil both hit multi-month highs, and market concerns about oil supply disruptions quickly pushed up risk premiums. The Middle East is the core area of ​​the global energy lifeline. This conflict not only affects the shipping safety of the Strait of Hormuz, but also puts the global energy market in a highly uncertain vortex.

Israel's surprise attack on Iran has injected a strong geopolitical shock wave into the global oil market. From the sluggish market dominated by supply and demand fundamentals to the drastic fluctuations driven by geopolitical risks, the trend of oil prices has undergone a dramatic turn in a short period of time. Shipping safety in the Strait of Hormuz, the intensity of Iran's retaliatory actions, and the results of the mediation of the international community will become the key variables that determine the short-term trajectory of oil prices. Market participants have shown a cautious attitude in the face of black swan events. They are worried about the extreme risk of supply disruptions and are vigilant about OPEC+'s production increase plan and the long-term pressure of the global economic slowdown.

Looking ahead, the oil market is at a critical point where long and short forces are fiercely competing. In the short term, geopolitical risks will continue to dominate market sentiment, and oil prices may fluctuate at high levels or even rise further. But in the medium and long term, OPEC+'s production increase plan, the uncertainty of global economic recovery, and the acceleration of energy transformation may push oil prices down again. In any case, the subsequent evolution of the Middle East powder keg will profoundly affect the operating logic of the global energy market in the second half of the year. Investors need to pay close attention to the development of the situation and respond flexibly to this oil market storm full of variables.

Conclusion:

Recently, Israel launched a large-scale military strike against Iran, which has suddenly escalated the situation in the Middle East and refocused the global market on geopolitical risks. Although Iran's energy facilities have not yet been affected, the market has begun to factor in the potential risks of crude oil and natural gas supply disruptions, especially the extreme case of the blockade of the Strait of Hormuz. Crude oil rose in the short term, gold hit a recent high, and the US dollar was also boosted by risk aversion. If the situation escalates further, energy prices and safe-haven asset fluctuations may intensify; at the same time, although short-term market sentiment is dominated by geopolitical risks, the policy path of global central banks and economic data still constitute the key to the medium-term trend.

In summary, although the latest military conflict between Israel and Iran has not touched the core of energy facilities, its intensity is enough to trigger systemic concerns about supply chain security in the market. The uncertainty of energy prices has been transmitted to exchange rates and safe-haven assets {gold}, affecting market structure and pricing logic.

Overview of important overseas economic events and matters this week:

Monday (June 16): US New York Fed Manufacturing Index in June; US New York Fed Manufacturing Expectations Index for the Next 6 Months in June; OPEC releases monthly crude oil market report

Tuesday (June 17): Japan's central bank policy benchmark interest rate on June 17 (%); Bank of Japan Governor Kazuo Ueda holds a monetary policy press conference; Eurozone June ZEW Economic Sentiment Index; US May retail sales monthly/annual rate (%); US May GDP-related retail sales control group monthly rate-seasonally adjusted (%): US May industrial output monthly rate (%);

Wednesday (June 18): Japan's May merchandise trade account-unseasonally adjusted (billion yen); UK May CPI annual rate (%); UK May Retail Price Index annual rate (%); Eurozone May Harmonized CPI annual rate-unseasonally adjusted final value (%); US May Building Permit monthly rate initial value (%); Change in U.S. EIA crude oil inventory for the week ending June 13 (10,000 barrels)

Thursday (June 19): Australia's seasonally adjusted unemployment rate in May (%); Australia's employment population change in May (10,000 people); UK central bank benchmark interest rate in June (%); Federal Reserve Chairman Powell held a monetary policy press conference; Swiss National Bank announced interest rate decision

Friday (June 20): Japan's May national CPI annual rate (%); UK May seasonally adjusted retail sales monthly rate (%); US Philadelphia Fed manufacturing index in June; Eurozone June consumer confidence index preliminary value

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