Markets tumbled on Thursday as escalating US-Iran conflict drove Brent crude above $100 for the first time since 2022, while signs of stress in the $1.8 trillion private credit market triggered sharp selling in financials and pushed the S&P 500 to its lowest levels since November. The dollar rallied to near two-month highs as traders pared back Federal Reserve rate cut expectations amid rising inflation concerns tied to the energy shock.
Check out the forex news and economic updates you may have missed in the latest trading session!
Forex News Headlines & Data:
- New Zealand Manufacturing Sales for December 31, 2025: -0.7% y/y (1.2% y/y forecast; 0.9% y/y previous)
- Japan BSI Large Manufacturing for March 31, 2026: 3.8% q/q (2.8% q/q forecast; 4.7% q/q previous)
- Australia Consumer Inflation Expectations for March 2026: 5.2% (4.2% forecast; 5.0% previous)
- U.K. RICS House Price Balance for February 2026: -12.0% (-8.0% forecast; -10.0% previous)
- Canada Balance of Trade for January 2026: -3.65B (-0.9B forecast; -1.31B previous)
- Canada Building Permits for January 2026: 4.8% m/m (2.1% m/m forecast; 6.8% m/m previous)
- Canada Wholesale Sales Final for January 2026: -1.0% m/m (-0.6% m/m forecast; 2.0% m/mprevious)
- U.S. Building Permits Prel for January 2026: -5.4% m/m (-1.5% m/m forecast; 4.8% m/m previous)
- U.S. Housing Starts for January 2026: 7.2% m/m (-2.4% m/m forecast; 6.2% m/m previous)
- U.S. Goods Trade Balance Adv for January 2026: -80.8B (-93.0B forecast; -98.5B previous)
- U.S. Balance of Trade for January 2026: -54.5B (-65.0B forecast; -70.3B previous)
- U.S. Initial Jobless Claims for March 7, 2026: 213.0k (217.0k forecast; 213.0k previous)
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Broad Market Price Action:
Thursday delivered a classic risk-off session as the escalating Iran conflict sent shockwaves through global markets, with crude oil’s surge above the psychologically significant $100 mark amplifying concerns about inflation, growth, and financial stability.
WTI crude oil dominated the session as the standout performer, rallying 9.48% to close around $95 per barrel. The sharp advance appeared to correlate with intensifying geopolitical tensions as Iran struck multiple oil tankers in Iraqi waters near Basra and launched drone attacks on energy infrastructure in Oman. The Strait of Hormuz blockage continued to choke off flows through the critical trade artery, with Brent settling above $100 for the first time since August 2022 despite the International Energy Agency’s announcement of a coordinated 400 million barrel strategic reserve release. The rally likely reflected market fears that supply disruptions would persist despite official intervention, particularly after Iran’s supreme leader vowed to keep the strait effectively closed and warned of opening additional fronts if US and Israeli attacks continue.
The S&P 500 fell 1.31% to close at 6,675, extending losses through most of the session and settling at the lowest levels since November. The index opened lower during overnight trading and continued its descent through the London and US sessions, with selling pressure intensifying during US afternoon hours. The decline appeared driven by multiple factors. Financial stocks came under particular pressure following reports that Morgan Stanley and Cliffwater LLC had capped withdrawals from private credit funds amid redemption requests, while Deutsche Bank disclosed $30 billion in exposure to the sector. The equal-weighted S&P 500 held up modestly better than the cap-weighted index, suggesting the selloff was broad-based rather than concentrated in mega-cap technology names. Late-session weakness may have been exacerbated by Adobe’s announcement after the close that its CEO would resign alongside a tepid outlook.
Gold declined 1.15% to settle near $5,075 per ounce, pulling back from recent highs despite the risk-off environment that would typically support safe-haven demand. The precious metal traded with relative stability through the Asian and early London sessions before experiencing selling pressure during US trading hours. The weakness appeared counterintuitive given the geopolitical backdrop, but possibly reflected profit-taking after recent gains, dollar strength providing headwinds, or traders favoring liquid assets like Treasuries and cash over gold during acute market stress. The move could also suggest markets are pricing the Iran conflict as primarily an oil supply shock rather than a broader systemic crisis that would typically drive sustained gold buying.
Bitcoin traded essentially just under flat, declining just 0.22% to close around $70,359. The cryptocurrency showed remarkable stability given the turbulence across traditional asset classes, possibly reflecting its growing role as an uncorrelated asset during geopolitical stress, though the modest decline suggested limited safe-haven flows into crypto during this particular episode of market turmoil.
The 10-year Treasury yield climbed 1.07% to settle near 4.267%, with the increase likely correlating with concerns that sustained high oil prices would fuel inflation and limit the Federal Reserve’s ability to cut rates. Short-dated Treasuries experienced particular weakness as traders pulled back rate cut expectations, with Fed funds futures now pricing only around 26 basis points of easing for 2026 compared to approximately 60 basis points before the conflict began. The yield curve’s behavior suggested markets are increasingly concerned that the Fed will need to keep policy restrictive longer to prevent an energy-driven inflation spiral, despite President Trump’s social media post demanding Powell “should be dropping Interest Rates, IMMEDIATELY.”
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FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Majors – Chart Faster With TradingView
The U.S. dollar rallied to emerge as the best performing major currency on Thursday, driven by safe-haven flows and a repricing of Federal Reserve rate expectations as the Iran conflict intensified and oil prices surged.
During the Asian session, the dollar traded net positive but mostly choppy sideways price action against the major currencies. The session appeared dominated by cautious positioning as traders digested overnight developments in the Middle East, including reports of Iranian attacks on oil tankers and energy infrastructure. With limited regional economic data to provide direction, currency pairs traded in relatively tight ranges.
During the London morning session, the dollar traded sideways but leaned net bearish. European data releases came through with mixed signals. UK housing market data showed continued cooling, with the RICS house price balance falling to -12.0% versus -8.0% expected, though this generated limited market reaction. Canadian trade data disappointed significantly, with the balance coming in at -3.65 billion versus -0.9 billion forecast, as exports missed expectations by a wide margin. Despite these weaker readings from trade partners, the dollar struggled to find consistent buying interest during European hours, possibly as traders awaited the US data slate later in the session.
After the US session opened, the dollar traded strongly net higher against the major currencies, stabilizing just after the London session closed. The turn appeared to correlate with multiple factors. US trade data came in better than expected, with the January balance at -54.5 billion versus -65.0 billion forecast, as exports surged to 302.1 billion against 286.0 billion expected. Housing data presented a mixed picture, with building permits declining 5.4% versus a 1.5% drop expected, but housing starts jumping 7.2% versus expectations for a 2.4% decline. Initial jobless claims printed in line with forecasts at 213,000. The key driver for dollar strength, however, likely stemmed from the broader market context rather than the data itself. As equity markets sold off and crude oil rallied sharply higher, traders appeared to favor the dollar as a safe-haven asset. Additionally, the sustained high oil prices likely fueled expectations that the Federal Reserve would need to maintain higher rates longer to combat potential inflation pressures, providing fundamental support for the greenback.
From there, the dollar continued a lean net bullish but mostly sideways trade through the remainder of the US session. Currency pairs stabilized in relatively narrow ranges as the initial dollar rally lost momentum, possibly as traders consolidated positions ahead of Friday’s economic calendar. The choppy price action suggested markets were in a wait-and-see mode, balancing the competing forces of geopolitical risk-off sentiment supporting the dollar against concerns about how sustained high energy prices might impact US growth.
Upcoming Potential Catalysts on the Economic Calendar
- New Zealand Business NZ PMI for February 2026 at 9:30 pm GMT
- New Zealand Visitor Arrivals for January 2026 at 9:45 pm GMT
- Germany Wholesale Prices for February 2026 at 7:00 am GMT
- U.K. GDP for January 2026 at 7:00 am GMT
- U.K. Manufacturing & Industrial Production for January 2026 at 7:00 am GMT
- Euro area Industrial Production for January 2026 at 10:00 am GMT
- Canada Employment Change for February 2026 at 12:30 pm GMT
- Canada Manufacturing Sales Final for January 2026 at 12:30 pm GMT
- U.S. Core PCE Prices 2nd Est for December 31, 2025 at 12:30 pm GMT
- U.S. Durable Goods Orders for January 2026 at 12:30 pm GMT
- Germany Current Account for January 2026 at 1:45 pm GMT
- University of Michigan Consumer Sentiment Index for March 2026 at 2:00 pm GMT
Friday’s calendar features key growth indicators from the UK and euro area that could influence market expectations for how the Iran conflict and energy shock are impacting European economic activity. UK GDP data for January arrives as housing market indicators continue to show stress, while euro area industrial production will provide insight into manufacturing momentum before the oil price surge took hold.
The US session brings the University of Michigan consumer sentiment survey, which could show early signs of how Americans are reacting to rising gasoline prices and geopolitical uncertainty. The Core PCE Prices report represents a second estimate for December data that predates the Iran conflict but may still influence baseline inflation expectations. Canadian employment data could prove market-moving given Thursday’s significant trade balance miss, with weakness potentially signaling broader economic challenges for the energy-importing northern neighbor.
Markets remain highly sensitive to any developments in the Iran conflict, with particular focus on whether the US Navy will begin escorting tankers through the Strait of Hormuz by month-end as Energy Secretary Chris Wright indicated. Any signs of de-escalation or additional supply disruptions could drive sharp moves in crude oil and broader risk sentiment.
Stay frosty out there, forex friends!
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