📊 War-Driven Dollar Buying Pauses as Oil Falls — Yen Selling Dominates for Now, Middle East Risks Persist

📊 War-Driven Dollar Buying Pauses as Oil Falls — Yen Selling Dominates for Now, Middle East Risks Persist

■ Market Overview

The safe-haven dollar buying that had been driven by Middle East tensions has paused temporarily.

The main reason is the sharp decline in oil prices, which has slightly eased inflation concerns.

As a result, financial markets are currently seeing:

• Equities: recovering

• Foreign exchange: weaker U.S. dollar

• Currency markets: continued yen selling

However, military tensions in the Middle East are still escalating, meaning markets could shift suddenly depending on new headlines.

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■ Geopolitical Risk (Middle East)

The military balance is generally viewed as:

United States / Israel > Iran

However, the key focal point remains:

The Strait of Hormuz

• Around 20% of global oil shipments pass through the strait

• Iran may have deployed naval mines

• The United States has demanded their removal

If the situation deteriorates further, markets could quickly return to the pattern of:

Oil surge → Inflation fears → Dollar buying

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■ Oil Market

Oil prices appear to be stabilizing after the panic rally.

The main factor:

Discussions among G7 countries about releasing strategic petroleum reserves.

If an agreement is reached, it could lead to:

• Reduced risk of an oil price spike

• Lower inflation concerns

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■ Foreign Exchange Market

The current core structure is:

Weak yen + weak dollar

With equity markets recovering, yen selling has become dominant.

However, during the London session:

• European equities declined

• Middle East tensions intensified

This triggered both dollar buying and yen buying, highlighting the extremely unstable market conditions.

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■ Australian Dollar

The Australian dollar has shown relative strength.

The main driver:

Expectations of further rate hikes from the Reserve Bank of Australia (RBA).

Comments from RBA Deputy Governor Andrew Hauser included:

• Higher oil prices represent an upside risk to inflation

• The Australian economy remains strong

• Spare capacity in the economy is limited

These remarks strengthened AUD buying pressure.

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■ European Financial Markets

In Europe, rate hike expectations are rising rapidly.

Market pricing:

ECB officials are also expressing concerns about:

• The need to control inflation

• Inflationary pressure driven by war

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■ Key Events Today

Most Important Event

📊 U.S. CPI (Consumer Price Index)

Forecast:

If CPI exceeds expectations, markets could see:

Higher U.S. yields → Dollar buying

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Other Events

• U.S. 10-Year Treasury Auction ($39B)

• U.S. Weekly Oil Inventory

• OPEC Monthly Report

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Central Bank Speakers

• Luis de Guindos (ECB Vice President)

• Sarah Breeden (BoE Deputy Governor)

• Isabel Schnabel (ECB Executive Board Member)

• Michelle Bowman (Fed Vice Chair)

However, the market remains especially sensitive to:

Statements from President Trump.

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■ Market Structure

Key drivers currently influencing the market:

1️⃣ Middle East war developments
2️⃣ Oil prices
3️⃣ Inflation expectations
4️⃣ Interest rates
5️⃣ Economic data

In other words:

The energy market is currently leading the FX market.

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■ Trading Perspective

Key characteristics of the current market:

• Geopolitical headline-driven

• Oil-led price action

• High volatility

• Strong algorithmic reaction to news

Therefore:

⚠ Position management must be more cautious than usual.

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■ Summary

The market is currently in a “correction phase within a war-driven market.”

Basic structure:

• Oil decline → Lower inflation concerns

• Equity recovery → Yen selling

• Dollar buying pauses

However:

⚠ The Strait of Hormuz risk remains.

If tensions escalate, markets could quickly shift back into:

Renewed safe-haven dollar buying.