Dollar, Energy, Gold, Stocks, & Treasury: The Global Markets as U.S.-Iran Ceasefire Hopes Linger

The U.S. dollar steadied against major currencies on Friday but remained on track for a weekly decline as reports of progress toward extending a ceasefire between the United States and Iran reduced safe-haven demand and weighed on oil prices.

Sources familiar with the matter told Reuters that the two sides have largely agreed on terms to extend the truce for another 60 days and reopen the Strait of Hormuz to shipping, while negotiators tackle thornier issues such as Iran’s nuclear program. The deal still requires final approval from President Donald Trump.

This development helped ease some of the geopolitical premium that had supported the dollar earlier in the conflict, when it benefited from its status as the world’s primary safe-haven currency and the relatively limited direct exposure of the U.S. economy to imported energy inflation.

The dollar index, which measures the greenback against a basket of major currencies, was trading in a narrow range near 99, down 0.3% for the week after snapping two consecutive weeks of gains.

Currency Market Movements

The euro held steady at $1.1643, while the pound slipped 0.2% to $1.3418 after Bank of England Governor Andrew Bailey signaled there is no immediate need for rapid rate hikes to combat a recent jump in inflation.

The Australian dollar was little changed at $0.7160, while the New Zealand dollar rose 0.5% to $0.5968, extending a recent rally after the country’s central bank governor indicated earlier and steeper rate hikes were likely.

Kirstine Kundby-Nielsen, senior analyst at Danske Bank, said the near-term path for the dollar appears softer.

“In the near term, you’ll likely see a weaker dollar,” she said.

However, she expects the greenback to strengthen against the euro over the longer term due to divergent growth trajectories, expansionary U.S. fiscal policy, underlying inflationary pressures linked to AI infrastructure buildout, and a still-resilient American labor market.

Oil Prices Ease but Remain Elevated

Brent crude futures fell for a third consecutive day, trading near their lowest level since mid-April. U.S. West Texas Intermediate futures also declined, though both benchmarks remain well above pre-conflict levels. The market has been highly sensitive to headlines, swinging between optimism over potential peace and concern over depleting global inventories as flows through the Strait of Hormuz have slowed to a trickle.

“The optimism of a relatively imminent truce and bearish rhetoric whenever Brent approaches $110 prevents oil prices from rallying significantly higher,” PVM Oil Associates analyst Tamas Varga noted

Bond Yields and Inflation Dynamics

U.S. Treasury yields resumed a modest climb after a brief pause, reflecting persistent concerns about the inflationary impact of elevated energy prices. The 10-year note yield rose to around 4.60%, while longer-dated bonds also edged higher. European government bond yields remained elevated but showed limited movement.

Data released earlier in the week showed U.S. inflation rising at its fastest pace in three years in April, driven largely by higher energy costs tied to the Iran conflict. This has reinforced expectations that the Federal Reserve will keep interest rates unchanged well into 2027, with some pricing in the possibility of further hikes if inflation proves sticky.

Stock Markets Mixed Amid Geopolitical Developments

European stocks rose modestly on Friday as investors assessed the prospects for an extended ceasefire. The pan-European STOXX 600 gained around 0.45%, with most sectors and major bourses in positive territory. Defense stocks extended their recent rally, supported by ongoing geopolitical risks and increased NATO-related spending expectations. Creotech Instruments and Airbus were among the top performers in the sector.

Asian markets closed mostly higher overnight, with South Korea’s KOSPI and Japan’s TOPIX hitting fresh record highs, reflecting continued optimism around technology and AI-related themes despite regional geopolitical concerns.

Gold and Precious Metals

Gold rose for a second straight session on ceasefire hopes, though it remained on track for a monthly decline as broader inflation concerns and higher interest rate expectations continued to weigh on the metal. Spot gold climbed 0.6% to $4,519.64 per ounce. It had fallen to a two-month low of $4,365.76 earlier in the week.

“Gold bounced from a key technical support level, while optimism over the ceasefire extension pushed oil prices and the dollar lower — both supportive for bullion,” Phillip Streible, chief market strategist at Blue Line Futures, said.

However, he noted that the “higher-for-longer” interest rate theme remains largely intact, as disruptions to shipping and energy infrastructure could keep oil prices elevated and the Federal Reserve cautious.

Spot silver fell 0.2% to $75.51 per ounce, platinum steadied near $1,923.55, and palladium gained 0.6% to $1,375.57.

The bottom line: The market’s reaction this week indicates once again that a durable extension of the ceasefire and reopening of the Strait of Hormuz would likely ease some inflationary pressures globally, support risk assets, and potentially allow central banks more flexibility. However, even a temporary deal may not fully resolve underlying supply concerns, meaning energy prices and inflation expectations could remain elevated for some time.

For the dollar, the near-term softening is seen as an indication of reduced safe-haven demand, but longer-term strength drivers, including relative U.S. growth advantages and fiscal dynamics, remain in place.