Hello traders, welcome on Wednesday. The markets are reacting to a significant geopolitical event: the recent attack on Israel by Iran. While this is a deeply troubling and critical event on the geopolitical stage, the market reaction has been surprisingly muted so far. The primary instrument affected, as one might expect, is oil. With rising tensions in the Middle East—a key region for oil production—oil prices have surged significantly. Any uncertainty in this region tends to create upward pressure on oil, as concerns about supply disruptions take center stage. Today, oil is definitely the standout performer in the commodities sector.
While oil shines, other commodities such as metals are experiencing a much quieter session. Precious metals like gold and silver remain rather flat, neither gaining nor losing much ground. This is despite the geopolitical tension, which often pushes traders toward safe-haven assets like gold. It seems that, for now, oil is the primary commodity in focus as markets digest the potential ripple effects from the Middle East conflict.
On the currency front, we are seeing continued strength in the Australian dollar. Over the past weeks, the Australian dollar has become one of the most consistent performers, showing resilience in a generally mixed currency market. On the other end of the spectrum, the Japanese yen remains weak, continuing its decline as risk sentiment improves in other markets.
As for the indices, we see mixed results today. European markets had a rough session on Tuesday, with significant drops, but are trying to stage a minor recovery today. The American indices, while also facing some downward pressure, haven't experienced the same degree of bearishness as their European counterparts. US markets are holding up relatively well, but the correction continues. The ADP non-farm employment change and crude oil inventories reports on the calendar today will be key indicators, although today's economic calendar is relatively light. Traders are likely positioning themselves for Friday's non-farm payrolls report, which could set the tone for markets heading into the weekend.