Risk Sentiment in Full View as Israel-Iran Conflict is Likely to Continue

Risk assets, like the S&P 500, have printed the deepest pullback witnessed throughout the latest bull run as concerns around a broader Middle East conflict build and The Fed appears more likely to delay rate cuts due to stubborn inflation.

(AI Video Summary)

Escalating geopolitical tensions due to Iran’s preparation for an Israeli attack, following conflict involving drone strikes. This uncertainty, coupled with unexpected inflation directions contrary to Federal Reserve hopes, has prompted a stronger dollar, negatively impacting equity markets like the S&P 500. The Fed's revised forecast suggests fewer interest rate cuts, intensifying market concerns. Additionally, U.K. economic data indicating rising unemployment but stubborn wage inflation presents challenges for the Bank of England. Inflation levels surpassing estimates have influenced the British pound, while speculation about Japanese yen intervention at the 155 dollar-yen level adds to market volatility. Gold remains resilient, supported by central bank and retail purchases amidst geopolitical and economic uncertainty.