- U.S. President Donald Trump and Iran have mutually rejected each other's latest peace proposals, indicating that the ongoing 10-week geopolitical conflict is unlikely to achieve a substantial ceasefire in the short term. The fragile ceasefire agreement reached on April 8 is at risk of failing.
- The foreign exchange market switched to a risk-averse mode at the opening on Monday, with the U.S. dollar appreciating structurally against major currencies. New Zealand Bank strategists pointed out that the price trends of some assets face reversal risks.
- Saudi Aramco, the world's largest oil company, warned that even if the shipping blockade of the Strait of Hormuz is immediately lifted, it will take months for the global energy and fuel market's supply-demand mismatch to be substantially resolved.
Fragility of the Ceasefire Agreement and Immediate Geopolitical Pricing
The ongoing 10-week conflict has not seen a breakthrough due to recent proposal exchanges. Washington's demands focus on Iran first opening the Strait of Hormuz for passage and subsequent nuclear negotiations, while Tehran insists on unfreezing assets, lifting oil sales sanctions, and demanding the U.S. end its blockade of the Gulf of Oman. This misalignment of bottom-line demands makes it impossible to strip geopolitical risk premiums from asset prices in the short term. The drone attack on a cargo ship near Qatar in the Persian Gulf over the weekend, along with interception actions by the United Arab Emirates and Kuwait, further confirmed the fragility of the ceasefire agreement at the execution level, and market concerns about shipping disruptions have risen again.
Disagreements on Nuclear Facilities and the Middle East Security Framework
The existence of nuclear capabilities is the core obstacle in the current negotiations. According to media disclosures and cross-verification with semi-official Iranian institutions, Tehran refuses to dismantle its nuclear facilities, with compromise only possible in the handling of uranium enrichment stockpiles. Meanwhile, Israeli Prime Minister Benjamin Netanyahu's statements about destroying Iran's nuclear capabilities and clearing high-enriched uranium stockpiles have injected more uncertainty into the region's long-term security framework. This multilateral game not only increases the difficulty of third-party mediation but also requires global capital markets to adopt more conservative discount models when assessing Middle Eastern geopolitical tail risks.
Core Inflation Pressure and Political Maneuvering in the Midterm Elections
The geopolitical stalemate is transmitting to the U.S. domestic macroeconomic and political levels. With the midterm elections approaching in November, the persistently high gasoline prices across the U.S. pose significant political pressure on the current administration. While criticizing Iran for stalling, Trump also faces the urgent need to lower domestic fuel costs. If the conflict keeps energy prices high, it will directly increase the stickiness of U.S. core inflation indicators, thereby compressing the Federal Reserve's monetary policy operation space in the second half of the year. The tug-of-war between political demands and geopolitical realities makes the White House's subsequent decision-making path complex.
Spread of Risk Aversion and Structural Volatility in the Foreign Exchange Market
The observations of New Zealand Bank strategists reflect the real flow of macro funds. After the peace proposals were rejected, the global foreign exchange market quickly entered a risk-averse mode, strengthening the safe-haven attributes of U.S. dollar assets. Since the market had previously priced in some optimistic expectations from the ceasefire agreement, the price reversal in early trading shows that institutional investors are rapidly closing high-risk exposures. If subsequent U.S. warnings of escalated attacks materialize, or if the actual passage rate of the Strait of Hormuz further declines, the exchange rates of emerging market currencies and economies highly dependent on energy imports will face deeper downward pressure.
Energy Supply Chain Disruption and Forward Contract Revaluation
Saudi Aramco's warning highlights the lagging effect of repairing the physical energy supply chain. Over the past 10 weeks, the conflict has severely distorted the logistics network of the global oil and gas market. Even if both parties reach a compromise next month and end the port blockade, due to the long physical cycles involved in tanker capacity allocation, insurance rate revaluation, and port inventory rebuilding, the tight supply situation in the spot market cannot be alleviated instantly. This has prompted energy traders to reassess the forward curve structure of crude oil and natural gas, reflecting a fundamental consensus in the market's lack of confidence in medium- to long-term energy supply security.
