BY COMFORT OGBONNA
The U.S. dollar remained largely steady on Monday, while the Japanese yen hovered near the critical 160-per-dollar mark as investors monitored escalating tensions in the Middle East and weighed the potential economic fallout from the ongoing conflict involving Iran. Market participants were also closely watching a new deadline issued by Donald Trump regarding the reopening of the strategically vital Strait of Hormuz.
In a strongly worded social media post on Easter Sunday, Trump warned that the United States could strike Iranian infrastructure—including power plants and bridges—if Tehran does not reopen the key shipping route. The ultimatum set a precise deadline of 8 p.m. Eastern Time on Tuesday (0000 GMT), raising concerns about further escalation in the conflict and adding uncertainty to global financial markets.
Trading conditions were expected to remain thin on Monday as many markets across Asia and Europe remained closed due to the Easter holiday, limiting liquidity and potentially amplifying price swings. Investors remained focused on whether diplomatic efforts could produce a ceasefire, especially after reports suggested that negotiators were making a final attempt to halt the conflict.
According to Charu Chanana, chief investment strategist at Saxo Bank in Singapore, the latest ultimatum from Trump has increased market anxiety even if investors do not necessarily believe that immediate military action is guaranteed. She explained that repeated deadlines and warnings suggest the disruption could last longer than initially expected, which could have broader negative implications for global economic conditions.
In currency markets, the euro traded around $1.1523, while the British pound stood at roughly $1.3211 against the U.S. dollar. The U.S. Dollar Index—which tracks the dollar’s performance against a basket of six major currencies—was slightly lower at about 100.12.
Meanwhile, the Australian dollar gained roughly 0.3% to reach $0.69045, though it remained close to the two-month low it hit the previous week. The movement reflected ongoing uncertainty in global markets, with commodity-linked currencies reacting to shifts in oil prices and geopolitical risks.
Markets were further confused by mixed signals from Washington. Trump said in an interview with Fox News on Sunday that negotiations with Iran were underway and suggested a potential agreement could emerge as soon as Monday. Adding to speculation, a report from Axios indicated that the United States, Iran, and regional mediators were discussing a possible 45-day ceasefire that could eventually pave the way for a permanent end to the war.
Global financial markets have been under pressure since the conflict between the United States, Israel, and Iran intensified earlier this year. Tehran’s decision to effectively close the Strait of Hormuz has had significant implications for global energy supply. The waterway serves as one of the world’s most critical shipping routes, with roughly one-fifth of global oil and liquefied natural gas passing through it.
Analysts say the reopening of the strait could quickly calm markets. Prashant Newnaha, senior rates strategist at TD Securities, noted that if the passage is restored around the time of Trump’s deadline, oil prices could drop sharply while riskier assets such as equities and emerging-market currencies could rally strongly. However, he warned that if tensions escalate further, global markets may need to rapidly reprice assets to reflect higher geopolitical risk.
The disruption to energy flows has already pushed oil prices above $100 per barrel, raising concerns about inflation and complicating the outlook for global monetary policy. Higher energy costs could increase inflationary pressures worldwide while simultaneously slowing economic growth, raising fears of stagflation.
Because of these uncertainties, traders have significantly adjusted their expectations for U.S. monetary policy. Investors are now pricing in the possibility that the Federal Reserve may delay any interest rate cuts until well into the second half of 2027. Earlier in the year, markets had anticipated at least two rate reductions in 2026.
Recent economic data showed that conditions in the U.S. labor market remained relatively stable in March. However, economists caution that a prolonged conflict in the Middle East could eventually weigh on business investment, trade flows, and consumer confidence.
In currency markets, the Japanese yen remained under intense scrutiny as it traded near ¥159.55 per dollar. The currency is close to its weakest level in nearly two years, prompting speculation that Japanese authorities could intervene to stabilize the exchange rate.
Japanese Finance Minister Satsuki Katayama recently warned that the government was prepared to respond to excessive currency volatility, particularly if speculative trading continued to push the yen lower. Officials in Tokyo have already signaled their willingness to act if market movements become disorderly.
Despite these warnings, some analysts remain skeptical about the effectiveness of intervention in the current environment. The safe-haven appeal of the U.S. dollar has strengthened amid geopolitical turmoil, drawing investors toward dollar-denominated assets.
The yen has weakened by about 1.5% since the conflict began, remaining stuck close to the psychologically significant 160 level. Market data also show that speculators have increased their bearish bets on the Japanese currency, with short positions reaching roughly $5.7 billion—the largest since July 2024, when Japan last intervened in foreign exchange markets.
For now, global investors remain in a wait-and-see mode, closely watching developments in the Middle East and the fate of the Strait of Hormuz. The next few days could prove decisive, with financial markets poised to react sharply depending on whether diplomatic negotiations succeed or tensions escalate further.
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