Hormuz Tensions Maintain Commodity Market Volatility Ahead of Fed Testimony by Kevin Warsh

Global Markets Experience Turbulent Week Amid Diplomatic Reversals

A week of sharp diplomatic reversals, from the collapse of US-Iran talks in Islamabad to a surprise ceasefire and a brief reopening of the Strait of Hormuz, drove outsized moves across asset classes. The US dollar index extended its decline for a third consecutive week, slipping to a seven-week low of 97.6 as Iran briefly declared the Strait of Hormuz open, lifting risk sentiment globally.

As a result, Wall Street surged in response, with the Dow adding 3.2 percent, the S&P 500 rising 4.5 percent to cross 7,100 for the first time, and the Nasdaq advancing 6.8 percent. The dollar found partial support as Federal Reserve officials maintained a cautious stance on rate cuts. Mary Daly and US Treasury secretary Scott Bessent echoed a "wait-and-see" approach due to uncertainty around the conflict and oil prices.

Commodity Markets Experience Gains

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COMEX gold and silver extended their fourth consecutive weekly advance, reaching one-month highs. Gold settled near $4,825 per ounce after testing the $4,900 level before encountering profit-taking, while silver surged over 7 percent to close around $82 per ounce, easing from intraday highs above $83. The advance was primarily driven by dollar weakness amid ceasefire optimism, with additional support from the Israel–Hezbollah truce holding steady.

Crude Oil Remains Volatile

Crude oil remained the week's most volatile asset class. WTI and Brent briefly spiked above $105 and $103 per barrel respectively after US–Iran talks in Islamabad broke down, as traders priced in a severe supply risk premium from the Strait of Hormuz, where tanker traffic had been reduced to a trickle against the backdrop of a US Navy blockade and Iranian threats to shipping. However, both benchmarks then plunged sharply, WTI to $80.6 and Brent to $86 a barrel respectively on Friday, after Iran's foreign minister declared the strait open for all commercial vessels and Trump called it "completely open and ready for business."

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Market Outlook

By Saturday, however, Iran had reimposed restrictions citing US "breaches of trust," Islamic Revolutionary Guard Corps (IRGC) gunboats fired on a transiting tanker, and several vessels turned back. With the Strait's status unresolved and the US blockade of Iranian ports firmly in place, crude prices, risk sentiment, and global markets broadly look set for another turbulent week.

On the data front, traders will closely track US retail sales, pending home sales, and weekly jobless claims for further signals on consumer resilience, alongside flash PMI readings from major global economies. However, all eyes will likely be on incoming Fed Chair Kevin Warsh's congressional testimony on Tuesday, his first since nomination, as investors look for early signals on the direction of US monetary policy.