For Week 5 of the US-Israel-Iran War, expect US equities to keep falling, bond yields to keep ascending, and the USD to maintain its ill-gotten haven status. Gold’s softening amid Brent crude’s firm persistence around $100-120 per barrel represents a grim transition from a war premium to a growth tax. Markets should not treat US President Donald Trump’s 10-day delay on US military strikes against Iranian energy infrastructure (set to expire on April 6) the same way as last year's post-Liberation Day "TACO" (Trump Always Chickens Out) trade.

The delay is not a truce or a mutual agreement to stop fighting. This is a unilateral ultimatum that Trump has extended twice, which he has framed as Iran’s request (duly denied by Tehran) to allow talks to proceed.  Israeli and American forces are still engaged in Operation Epic Fury. Unlike tariffs, Trump cannot delete, with a tweet, the physical destruction of Iran’s command centres and weapons production sites and end the Strait of Hormuz chokepoint.

Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that the 10-day delay and April 6 deadline was a smokescreen and a countdown to war rather than a diplomatic milestone. Tehran’s deficit of trust was rooted by Trump’s repeated use of diplomatic windows as tactical covers for escalation. Notably, on February 28, the US and Israel launched Operation Epic Fury while the Geneva talks were in progress. Omani negotiators had described the talks as productive and within reach when the strike killed Iran’s Supreme Leader.

The Washington Post also reported that Pentagon is finalizing plans for a weeks-long ground campaign on Kharg Island to forcibly reopen the Strait of Hormuz. The Islamic Revolutionary Guard Corps (IRGC) has issued an urgent directive for civilians across the Middle East to vacate areas near US military bases, signalling their intentions to strike these locations if a US ground operation begins.

The Gulf Cooperation Council (GCC) states are currently trapped between Iranian retaliation and a Trump administration they perceive as unpredictable. There is a growing perception among GCC specialists that President Trump is prioritizing Israeli strategic interests over the security of Gulf partners who are bearing the brunt of Iranian retaliation. While initially prioritizing de-escalation, nations like Saudi Arabia and the UAE have reportedly pivoted, privately urging the US to "finish the job" by toppling the Iranian regime to permanently end the threat. The GCC has demanded direct participation in any ceasefire negotiations, fearing that a US-Iran deal might leave Iran's regional missile and proxy capabilities intact. Most GCC members have expelled Iranian diplomats and revitalized the GCC Unified Military Command, representing a historic pivot from "strategic patience" to "hard-power diplomacy" in the Gulf. The GCC has formally invoked Article 51 of the United Nations Charter, establishing a legal framework for collective military action if any member is targeted.

European currencies

One month after Operation Epic Fury, the CHF has depreciated the most by 3.7% against the USD, unable to unseat the USD’s haven status. Although markets were pricing in rate hikes from the European Central Bank, the Bank of England, and the Swiss National Bank, US Treasury yields rose above the Fed Funds Rate, signalling that the Fed may not be far behind if Brent crude pushes above $120 in April.



GBP was the most resilient, shedding 1.7% in the first four weeks, while EUR depreciated 2.6%. Although the UK is a net oil importer, it still has significant North Sea production, providing a partial terms-of-trade hedge that the Eurozone lacks. UK inflation was slower than the EU during its decline in 2023 and rebounded above 3% in April 2025. The BOE bank rate is at the same level as the 3.75% Fed Funds Rate, while the ECB’s deposit facility rate is lower at 2%, with the SNB lowest at 0%.

Commodity and Asian currencies

President Trump’s ultimatum has signalled to markets that he prioritizes total victory in Iran over market stability. At this juncture, he does not appear as concerned about the S&P 500’s 9.2% drop from its peak this year, as he was with the post-Liberation Day capitulation of 21.4%. Nonetheless, investors are worried that the S&P 500 Index broke the 6500-support level last week and wiped out the Trump Trade rally ahead of the 2024 presidential elections.

Hence, the pro-cyclical commodity currencies will remain vulnerable as markets treat another surge in energy prices as a growth tax driven by supply disruption, rather than as reflecting healthy demand. Hence, in the first four weeks of the war, NZD fell by 4.2%, followed by AUD at 3.4%, and lastly, by CAD at 1.8%.

Viewed from its position at the start of the year, AUD is still vulnerable to profit-taking as it enters the second quarter as the G10’s top-performing currency. While Australia’s status as a primary exporter of LNG and coal allows it to bypass Middle Eastern chokepoints, the reality remains that Australia’s largest export markets in East Asia cannot evade the tightening stagflation pincer.

The JPY sits on especially thin ice after breaching the 160 per USD threshold, with markets dismissing the Finance Ministry’s unconventional plan to sell oil futures to defend the currency as unfeasible under current volatile conditions. Furthermore, the upside for the AUD may be capped by Beijing’s apparent resistance to further CNY appreciation, as evidenced by the steady USD/CNY daily fixing around 6.90 this month. Nonetheless, India has resorted to forcing banks to liquidate their long USD positions by capping the Net Open Position (NOP-INR) at USD 100 million at the end of the trading day. Except that this effort to decouple the INR from the volatile offshore market has an April 10 deadline, after Trump’s April 6 ultimatum, with the INR still exposed to the risk of higher crude prices.

Quote of the Day
“The secret of getting ahead is getting started.”
     Mark Twain

March 30 in history
In 1867, the United States bought Alaska from Russia for $7.2 million.