Markets:

  • Gold down $14 to $2285
  • US 10-year yields down 4 bps to 4.31%
  • S&P 500 down 1.2%
  • WTI crude up $1.17 to $86.60
  • AUD leads, GBP lags

The day completely turned in the past three hours as talk of Iran retaliatory strikes against Israel began to grip the markets. There wasn't a real catalyst behind the fears aside from some poorly-sourced reports from Lebanon TV and low-tier UK press. Despite that, the market became fearful of Iran hitting back after the Israeli strike on its embassy in Syria.

The initial move came in a jump in oil prices with brent hitting $90 and eventually $91.30 at the highs. Stocks also began to sell. The bond and FX markets were more skeptical but eventually came around as the US dollar and yen attracted enough bids to largely erase what had been some decent losses.

Gold was caught in the crosswinds as it hit a new record at $2305 late in the day but was then slammed down to $2280. Bitcoin gained 3% but some heavy selling also hit in the past few minutes, dulling the move.

It's a highly uncertain market as few believe an Iran-Isreal war is coming but no one wants to fade the price action ahead of Friday's non-farm payrolls report and the weekend.

Before the Middle East took over, there was a deluge of Fedspeak. There were some incrementally more-hawkish comments but it was all conditional on data and whatever happens with inflation. Goolsbee pointed to housing services inflation as something he watched closely. Some pointed to Kashkari talking about the possibility of no cuts as a catalyst for the drop in stocks, but given falling Treasury yields and rising Fed cut probabilities, that doesn't add up.

FX news wrap
FX news wrap