US-Iran Peace Framework Drives Risk-On Sentiment Across Global Markets

Key Takeaways:

*US-Iran peace progress has triggered a risk-on shift, weakening the US dollar while supporting equities and gold.

*The expected reopening of the Strait of Hormuz has driven oil prices sharply lower, easing global inflation concerns.

*Gold has rallied despite geopolitical de-escalation, benefiting from a weaker dollar and reduced expectations for further Fed tightening.

Market Summary:

The US dollar and gold have been among the most closely watched assets following the announcement of a preliminary peace agreement between the United States and Iran. The proposed framework, which includes the reopening of the Strait of Hormuz, the lifting of the US naval blockade on Iran, and a formal signing ceremony expected later this week, has significantly improved global risk sentiment and reduced demand for traditional safe-haven assets. As a result, the US Dollar Index (DXY) declined toward the 99.45–99.50 region, its lowest level in roughly ten days, while risk-sensitive currencies such as the euro, Australian dollar, New Zealand dollar, and British pound strengthened as investors rotated into higher-yielding and growth-oriented assets.

The de-escalation has also triggered a sharp decline in oil prices as traders rapidly removed the geopolitical risk premium that had built up during the conflict. With expectations growing that shipping through the Strait of Hormuz will gradually normalize and Iranian crude exports could return to global markets, lower energy prices have helped ease inflation concerns and reduced expectations for additional Federal Reserve tightening later this year. This shift has weighed on the US dollar while simultaneously providing support for gold prices.

Interestingly, gold has rallied above the $4,300 level despite the reduction in geopolitical tensions. Traditionally, improving risk sentiment and lower safe-haven demand would be expected to pressure bullion lower. However, the combination of a weaker US dollar, falling oil prices, and declining expectations for future rate hikes has boosted demand for the precious metal. Lower energy costs have eased concerns about persistent inflation, leading markets to scale back expectations for further Fed tightening and reducing real yield expectations, which improves the attractiveness of non-yielding assets such as gold.

Despite the recent weakness in the dollar, its downside may remain limited. Inflation in the United States remains above the Federal Reserve’s target, while recent CPI and PPI data continue to indicate that underlying price pressures remain persistent. Investors are now closely watching the upcoming Federal Reserve meeting, where policymakers are widely expected to leave rates unchanged but maintain a cautious and potentially hawkish tone. This higher-for-longer policy outlook, combined with resilient economic data and elevated interest rates, should continue to provide medium-term support for the greenback.

Meanwhile, gold’s broader outlook remains supported by factors extending beyond the immediate geopolitical environment. Ongoing central bank purchases, concerns surrounding fiscal deficits and rising government debt, currency debasement risks, and the prospect of declining real yields continue to underpin long-term demand for the precious metal. At the same time, uncertainty remains regarding the implementation of the US-Iran agreement, particularly surrounding Iran’s nuclear negotiations, the timeline for fully reopening shipping routes, and the risk of renewed tensions should diplomatic efforts falter.

Overall, the US-Iran peace agreement has created a short-term risk-on environment that has pressured the US dollar and supported gold through lower oil prices and softer rate expectations. However, while gold continues to benefit from a weaker dollar and improving macro conditions, the Federal Reserve’s higher-for-longer stance and persistent inflation pressures should prevent a sustained collapse in the greenback. As a result, both assets are likely to remain highly sensitive to developments surrounding the Iran agreement, energy markets, and upcoming Federal Reserve guidance.

Technical Analysis 

DXY, H4: 

The U.S. Dollar Index (DXY) has come under renewed selling pressure after failing to hold above the psychological 100.00 region. Price has retraced sharply from the recent highs near 100.10 and is now testing the ascending trendline support around the 99.50 area, a level that coincides with a key horizontal support zone. The pullback suggests that bullish momentum has weakened significantly following the rejection from resistance.

Momentum indicators continue to favor the downside. The RSI has fallen to around 39, moving below the neutral 50 level and indicating that sellers have regained near-term control. Meanwhile, the MACD remains in bearish territory, with the MACD line trading below the signal line and the histogram extending further into negative territory, reflecting increasing downside momentum.

Overall, DXY remains at an important technical juncture. While the broader structure is still constructive above the ascending trendline, the recent rejection from 100.10 and weakening momentum indicators suggest further downside risks in the short term. Traders will be closely watching whether the 99.50 support zone can hold, as a break below this level could trigger a deeper correction toward lower support areas.

Resistance Levels: 100.10, 100.65

Support Levels: 99.50, 98.90

Gold, H4: 

Gold has staged a strong rebound after finding support near the 4,100 region, recovering sharply toward the broken descending trendline resistance. Price is currently testing the confluence zone between the downtrend line and the 4,375 resistance level, making this a key area that could determine the next directional move. The recent bounce suggests buyers have regained short-term control, but a confirmed breakout is still required to signal a broader trend reversal.

Momentum indicators have improved notably. The RSI has climbed to around 59, moving back above the neutral 50 level and indicating strengthening bullish momentum. Meanwhile, the MACD has completed a bullish crossover, with the MACD line crossing above the signal line and the histogram turning firmly positive, suggesting that upside momentum continues to build following the recent recovery.Overall, the short-term outlook has shifted from bearish to cautiously bullish following the strong rebound from support. 

Resistance Levels: 4250.00, 4375.00

Support Levels: 4095.00, 3970.00