Dollar Gains as Oil Tops $105 Amid Iran Tensions

The US dollar pushed higher this morning as Brent crude held above 105.5, with tensions around the Strait of Hormuz continuing to unsettle markets. Sterling eased to 1.346 while the yen weakened towards 159.8, prompting renewed intervention warnings from Japanese authorities. Gold drifted lower to around 4683, while equity futures in Europe pointed to a softer open. Broader sentiment remained cautious as investors reacted to ongoing geopolitical developments.

Equities

The FTSE 100 closed 0.2% lower on Thursday, marking a fourth straight daily decline, while the FTSE 250 dropped 0.9%. Losses were led by financial stocks, with Barclays falling 1.5% and HSBC slipping 0.4% by the close as rising oil prices and geopolitical tensions weighed on sentiment.

Retail and travel names were more volatile. Domino's Pizza Group climbed 10% on Thursday after reporting first-quarter like-for-like sales growth of 4.5%, while WH Smith dropped 9.2% after cutting its annual profit forecast and suspending its dividend. J Sainsbury fell 3.4% after warning that the ongoing Iran conflict could weigh on its outlook, echoing concerns from Tesco. In mining, Fresnillo lost 6.4%, while Anglo American rose 4.1% following reports of takeover interest in its Australian coal assets.

In the US, the S&P 500 closed 0.41% lower on Thursday, while the Dow Jones Industrial Average fell 0.36% and the Nasdaq Composite declined 0.89%. Technology stocks led the retreat, with the sector down sharply as concerns resurfaced over AI disruption to software revenues.

IBM dropped 8.25% after reporting slowing revenue growth in its software division, while ServiceNow fell 17.75% after delays in closing government contracts in the Middle East dented its outlook. Tesla closed 3.56% lower after raising its annual spending plans to above $25 billion.

Not all earnings disappointed. Texas Instruments surged 19.43% on Thursday, its strongest daily gain in over two decades, after issuing upbeat second-quarter revenue and profit guidance. Meanwhile, Avis Budget Group plunged 48.38% over two sessions following a sharp rally, reversing much of its recent gains.

Forex & Commodities

The US dollar strengthened earlyFriday morning, with the dollar index holding around 98.84 and heading for a weekly gain. Sterling moved down to 1.346, while the euro slipped to 1.168. The Japanese yen continued to weaken, trading near 159.8 per dollar, as officials repeated warnings that intervention remains possible if further declines develop.

The Australian dollar and New Zealand dollar both edged down during Asian trading, while several emerging market currencies, including the Philippine peso and Malaysian ringgit, also softened against the dollar. Japan’s latest inflation data showed core consumer prices remaining below the Bank of Japan’s 2% target for a second consecutive month in March. The Bank of Japan is expected to keep interest rates unchanged at next week’s meeting, although it is still signalling that rate increases may follow later in the year.

Attention is also on the European Central Bank, with economists expecting no change in rates at the end of April but a potential increase in June. Policymakers are assessing the impact of rising energy costs linked to ongoing tensions in the Middle East.

Gold prices moved down early this morning, with spot gold trading near 4683 and heading for a weekly decline after a recent run of gains. The stronger dollar and rising US Treasury yields have coincided with this softer tone, leaving prices within a defined trading range.

Oil prices moved up early this morning, with Brent crude trading around 105.5 and US crude near 96.00. Gains this week have been supported by continued disruption in the Strait of Hormuz, with uncertainty over shipping routes persisting.