Macro update
Oil rebounds on renewed supply fears:
Brent crude oil rose around 4% to roughly $104 and West Texas Intermediate (WTI) crude oil to about $92 after Iran rejected US talks, reviving concerns over disruption in the Strait of Hormuz, a route for roughly 20% of global oil flows.
Conflicting geopolitical signals keep uncertainty high:
While Donald Trump pointed to “major points of agreement” with Iran, Tehran denied negotiations, leaving risk premia elevated across energy markets.
Hormuz disruption remains critical:
With a significant share of global oil and Liquefied Natural Gas (LNG) shipments passing through the strait, analysts warn prices could drift back towards $110 and potentially spike higher if disruptions persist.
Markets volatile but stabilising:
Asian equities rebounded and oil recovered after sharp moves earlier in the week, though trading remains choppy as headlines shift and military timelines evolve.
Rate expectations pared back:
Falling yields reflect reduced expectations for further tightening, with markets now pricing fewer policy moves from the Federal Reserve (Fed), Bank of England (BoE) and European Central Bank (ECB) as growth risks increase.
Cross-asset moves highlight uncertainty:
Gold extended recent losses as higher rate expectations weigh, while the US dollar steadied and safe-haven demand remains highly sensitive to developments in the Middle East.
Dow Jones remains within downtrend channel
The Dow Jones Industrial Average rallied sharply on Monday, retesting but being rejected by its February to March downtrend channel resistance line at 46,712. While it caps on a daily chart closing basis, the medium-term downtrend remains intact.
The 20 November low at 45,729 may offer support ahead of the mid-October 45,452 low.
A slip through Monday’s 45,369 low is currently not on the cards but were it to occur, would have bearish implications.
A rise above Monday’s 46,712 high would likely provoke further upside being seen with the 17 March high at 47,428 being in focus.
Short-term outlook:
Neutral with a bullish stance while above the 23 March 45,370 low.
Medium-term outlook:
Neutral while above the 23 March 45,370 low, failure there would likely put the December 2024 to January 2025 highs at 45,073 – 45,054 on the map.
