investingLive Americas FX news wrap 5 Mar: Geopolitics continue to drive the markets

Geopolitics remained the story of the day as markets reacted to the threat of Iranian scorched earth policy toward the US. Reports of bombings in Dubai and Bahrain and of targeted missiles at a Microsoft data center, are indicative of the war objective of the regime. Foreign ministers of Arab League member states will hold an emergency meeting on Sunday to discuss Iran’s attack on several countries in the region.

WTI crude oil futures settled sharply higher at $81.01, gaining $6.35 or 8.51% on the day, marking one of the largest daily advances in recent months and pushing prices to their highest level since early 2025. The surge reflects a strong geopolitical risk premium in energy markets as traders react to escalating tensions in the Middle East and the potential for supply disruptions in key oil-shipping routes. The sharp move higher highlights how quickly crude prices can respond to geopolitical developments, with traders increasingly focused on whether the situation could threaten global oil flows.

With the US jobs report scheduled for tomorrow at 8:30 AM, the did have some jobs related news events:

• Challengers U.S. job-cut announcements fell sharply in February with employers announcing 48,307 layoffs compared with 108,435 in January. The drop of more than 50% month-to-month suggests some easing after a surge in job-cut plans at the start of the year. Layoffs were also far lower than the 172,000 announced in February a year earlier, pointing to a less aggressive pace of corporate downsizing. The technology sector led the cuts, followed by education and industrial manufacturing, with companies citing factors such as economic uncertainty, restructuring, cost-cutting, and the impact of artificial intelligence. Despite the improvement in February, analysts note that geopolitical risks and rising costs could still lead to additional layoffs later in the year as companies remain cautious about the economic outlook
• U.S. initial jobless claims came in at 213,000, slightly better than the 215,000 expected, while the prior week was revised to 213,000. Continuing claims rose to 1.868 million, above the 1.85 million estimate, suggesting that while layoffs remain relatively low, some workers are taking a bit longer to find new jobs. Overall, the data remains within the recent range and does not signal a meaningful shift in labor market conditions, which is why the market reaction was limited as investors remain more focused on broader geopolitical developments and the upcoming U.S. jobs report.
• U.S. nonfarm productivity increased 2.8% in Q4, beating expectations of 1.9%, showing stronger-than-expected efficiency gains in the economy. At the same time, unit labor costs also rose 2.8%, above the 2.0% forecast, reflecting higher wage pressures despite the productivity improvement. The rise in labor costs was driven largely by a 5.7% surge in hourly compensation, which more than offset the gains in productivity. Overall, the report suggests that while worker productivity remains solid and supportive of growth, labor cost pressures are still building, which could keep some inflation concerns in focus.

In other news

• U.S. import prices rose 0.2% in January, matching expectations, while the prior month was revised higher to a 0.2% increase as well. In contrast, export prices increased 0.6%, stronger than the 0.3% expected, continuing the upward momentum seen in the previous month. The stronger export price gains reflect rising prices for both agricultural and non-agricultural goods, including capital goods and industrial supplies. Overall, the data suggest moderate price pressures in international trade, with import prices coming in as expected while export prices showed stronger-than-forecast gains.

From the Federal Reserve

• Richmond Fed President Thomas Barkin said that recent inflation data raises doubts about whether the Fed’s fight against inflation is fully finished, suggesting policymakers still need to remain cautious. He noted that productivity growth of around 2.8% is solid and is helping companies maintain margins, allowing firms to absorb some cost pressures, including tariffs. Barkin added that recent employment data has been reassuring and overall demand in the economy remains healthy, even though monetary policy is still modestly restrictive. He emphasized that the Fed will continue to evaluate policy on a meeting-by-meeting basis, while also noting that higher gasoline prices could add to inflation pressures and weigh on consumer spending if they persist.

Pres. Trump got rid of a recent headache by announcing the replacement of the Sec. of Homeland Security Kristi Noem. Noem threw her boss under the bus during congressional testimony this week saying that the president approved of the $220 million ad campaign. Whether he did or not we will likely never know but when will prices are higher than the start of his term and the war in Iran is having its own issues, a scapegoat is a good relief. The president replaced Noem with Markwayne Mullen who once challenged a union boss to a fight during a Senate hearings. Time will tell, but his initial comments were humble and he is likely to get the support to be nominated.

The USD is ending the day higher vs the major currencies with the largest gains vs the AUD (+.96%) and the NZD (0.74).. The greenback rose the least vs the GBP (+0.15%) and the CAD (+0.23%).

The major indices closed lower but rebounded off the worst levels going into the close.

The key catalyst for the late recovery was crude oil pulling back from a session high of $82.16 down to $79.65, which shifted sentiment and gave stocks a meaningful boost into the close.

In plain terms: oil spiking = inflation fears = stocks sell off. Oil pulling back = relief rally into close.

The Dow’s recovery from −1,162 points to −784 points at close, and the NASDAQ recovering from −307 to just −58, shows just how dramatic the intraday reversal was.

The Iran factor is the macro driver. The broader news context makes clear this is a geopolitical oil shock day — Iran conflict fears drove crude higher, which spooked inflation-sensitive markets hard, particularly the Dow and Russell 2000.

Why did the Dow get hit harder than NASDAQ? The Dow is heavy with industrials and traditional economy stocks — exactly the sectors that got hammered in your screenshot (Industrials −2.21%, Materials −2.27%). NASDAQ is tech-heavy, and Tech held up (+0.39%).

The Russell 2000’s −1.91% drop is telling. Small caps are most sensitive to domestic economic fears and credit conditions — their sharp drop signals real worry about US economic slowdown, not just geopolitical noise.

Energy sector green (+0.59%) now makes complete sense. Oil spiking on Iran tensions is a direct tailwind for energy stocks — that’s why SPN was the day’s top performer while everything else bled.

US yields moved higher which helped the USD’s move to the upside:

• 2 year yield rose 4.2 basis points to 3.584%
• 5-year yield rose 6.1 basis points to 3.730%
• 10 year yield rose 5.8 basis points to 4.140%
• 30 year yield rose 3.8 basis points to 4.754%