Oil prices hit a near five-month high as worries grow that rising tensions in the Middle East could lead to more direct US involvement. In Asia, West Texas Intermediate crude rose by up to 1.1% after reaching its highest level in nearly five months on Tuesday.
This followed President Donald Trump’s demand for Iran’s unconditional surrender and a warning of a possible strike on its leader. Meanwhile, Asian stocks showed mixed performance ahead of the Federal Reserve’s monetary policy decision.
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Asian Market Wrap
Shares slipped in Hong Kong but gained in Japan after the S&P 500 dropped 0.8% in New York.
Investors showed mixed confidence in the US economy. Longer-term Treasury bonds underperformed, even after a $13 billion sale of 20-year bonds met expected yields, an improvement from last month’s disappointing auction that triggered a market selloff. The dollar showed mixed performance against major currencies.
Treasury prices dipped slightly in Asia but kept most of their gains from Tuesday, which were boosted by geopolitical tensions and weak US data on retail sales, housing, and industrial output. Meanwhile, the dollar stayed steady after seeing its biggest jump in a month during the US trading session.
For more on the Asian session, read Asia mid-session: Geopolitical tensions fuel oil surge, hit stocks, while Silver outperforms Gold
UK Inflation Rate Falls to 3.4%
The UK’s annual inflation rate slightly dropped to 3.4% in May 2025 from 3.5% in April, as expected. The biggest factor in the decrease was lower transport costs (0.7% vs 3.3%), driven by cheaper airfares (-5%) due to the timing of Easter and school holidays, along with falling fuel prices. An error in April’s Vehicle Excise Duty data, now corrected, also contributed to the drop.
The most important number though was the service inflation print which came in at 4.7%, a drop from 5.4%. This is a huge win for the Bank of England who had earmarked services inflation as an area of concern.
I still think the BoE will hold rates steady tomorrow and a lot of this is down to the recent rise in Oil prices which is sure to concern global central banks. The rise in oil will have a knock on impact on Global inflation and thus could be a reason Central Banks opt for a wait and see approach, something which has been a dominant theme this year.
European Open
European stocks showed little movement overall, with the STOXX index staying flat. Meanwhile, the UK’s FTSE 100 and Germany’s DAX both edged up by 0.2%.
Oil prices have eased slightly this morning but overall concerns remain that the US may get more involved in the Iran-Israel conflict. This morning, we heard comments from the Iranian Ambassador to the United Nations in Geneva, who said: If we come to the conclusion that the United States is directly involved in attacks on Iran, we will start responding to the US. Remarks by Donald Trump are completely unwarranted and very hostile, we cannot ignore them, we will put it in our calculations and assessments.
This will keep markets on edge as the European session progresses.
U.S. stock futures showed little movement, with S&P 500 and Nasdaq 100 futures both rising about 0.2%.
In currency markets, the dollar held onto most of its recent gains, supported by the U.S. being an energy exporter.
The euro struggled to recover from Tuesday’s 0.7% drop, trading at 1.1535. The British pound rose 0.2% to 1.3458 after falling 1.1% the day before, while the yen also edged up 0.2% to 1.4498/USD.
Currency Power Balance
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Source: OANDA Labs
Economic Data Releases and Final Thoughts
Looking at the economic calendar, market participants will now be focused on the FOMC meeting later today and more important the updated economic projections.
The Fed was already grappling with a lot of challenges and different ideas by policymakers. However, similar to the Bank of England (BoE), the Israel-Iran situation will now add a new layer of uncertainty that the Central Bank will have to grapple with.
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For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
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Chart of the Day – FTSE 100 Index
From a technical standpoint, the FTSE 100 continues to hold above the key support level at 8781.
The Index continues to display resilience in the face of growing challenges from geopolitics and slowing growth in the UK.
Yesterday daily candle closed as a indecision candlestick, a sign that markets remain in limbo.
The all-time high around 8915 continues to hold firm for now with a break looking unlikely in the current climate.
A break off support at 8781 could open a retest of the 100-day MA at 8612.
FTSE Daily Chart, June 18. 2025
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Source: TradingView.com (click to enlarge)
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