Anndy Lian
Markets rally on Middle East ceasefire: But is it sustainable?
Markets are a reflection of both human sentiment and hard data, reacting in real-time to geopolitical shifts, central bank rhetoric, and the emergence of new asset classes. Currently, a confluence of events easing tensions in the Middle East, measured commentary from Federal Reserve Chair Jerome Powell, and a surge of momentum in the cryptocurrency space have created a fascinating moment for investors.
Global risk sentiment has found a tailwind, lifting stocks, nudging commodities, and even breathing fresh life into digital assets like Bitcoin.
A ceasefire sparks relief
The Middle East has long been a geopolitical powder keg, and any hint of de-escalation sends ripples through global markets. The recent ceasefire between Iran and Israel, announced by President Trump, has done just that. For weeks, tensions between these two nations had kept investors on edge, with fears of a broader conflict threatening oil supplies and regional stability.
Now, with a delicate truce in place, the sigh of relief is almost audible in trading rooms from New York to Tokyo. This isn’t just about avoiding worst-case scenarios. It’s about the psychological boost it gives to risk-taking. When the world feels a little less chaotic, investors are more willing to step out of the bunkers of safe-haven assets and into the sunlight of equities and growth plays.
The evidence is clear in the US stock markets’ performance on Tuesday. The Dow Jones Industrial Average climbed 1.19 per cent, a hearty gain that reflects broad confidence across industries. The S&P 500 wasn’t far behind, up 1.11 per cent, signalling strength in the backbone of America’s largest companies.
And the Nasdaq Composite? It outpaced them both with a 1.43 per cent rise, suggesting that tech and innovation-driven stocks are capitalising on this newfound optimism. This rally feels like a release valve—after months of bracing for bad news, the market is finally catching its breath. But it’s a fragile moment. Financial markets remain closely watching the region, hopeful yet wary that this ceasefire will hold. One misstep, and that relief could evaporate as quickly as it arrived.
The Fed’s steady hand
While the Middle East offers a dose of good news, the Federal Reserve is playing a more measured tune. On Tuesday, Fed Chair Jerome Powell took the stage, emphasising the central bank’s unwavering focus on taming inflation. His message was clear: don’t expect rate cuts anytime soon, not until the Fed has a firmer grasp on how tariffs might jolt prices.
It’s a pragmatic stance, one that acknowledges the messy interplay between trade policy and economic stability. Powell’s upcoming testimony before the Senate Committee on Banking, Housing, and Urban Affairs on Wednesday night looms large. Investors are hungry for clues; Will he double down on this wait-and-see approach, or hint at flexibility if the data shifts?
To me, Powell’s caution feels like a tightrope walk. On the one hand, holding rates steady could anchor inflation expectations, providing businesses and consumers with a sense of predictability. On the other hand, it risks stifling growth if the economy cools too fast. The bond market seems to share this ambivalence.
US Treasury yields dipped on Tuesday, with the 10-year yield falling about 3 basis points to 4.29 per cent and the two-year yield shedding 1.4 basis points to 3.81 per cent. This suggests some investors are still hedging their bets, parking cash in bonds as they await more clarity. The US Dollar Index, down 0.57 per cent to 97.86, echoes this uncertainty; a weaker dollar often signals less demand for the greenback as a safe haven.
In my view, the Fed’s balancing act is a linchpin here. If Powell’s testimony strikes the right chord, it could solidify this risk-on mood; if it falters, we might see a quick retreat.
Commodities feel the shift
Commodities, ever sensitive to global currents, are telling their own story. Gold, the classic refuge in times of trouble, took a hit, dropping 1.5 per cent to US$3316.80 per ounce. It’s lowest in over two weeks. That’s no surprise. With Middle East tensions easing, the need for a safe-haven metal fades, and investors are cashing out.
Brent crude oil followed suit, plunging 6.1 per cent to US$67.14 per barrel. This drop is a double-edged sword. On one side, it’s a sign of supply stability as fears of disrupted oil flows recede; on the other, it could signal softer demand or an oversupply looming on the horizon.
I find the oil move particularly striking. Lower energy costs could ease inflationary pressures, giving the Fed more breathing room; however, if prices continue to decline, energy-dependent economies might feel the pinch.
Asia’s quiet watch
Across the Pacific, Asian markets are holding steady, if not exactly surging. Wednesday’s open saw equities mostly flat, mirroring a cautious tone in US equity index futures. But there’s plenty on the radar. Thailand’s Bank of Thailand (BOT) is expected to maintain its key rate at 1.75 per cent, a decision that signals a vote for stability in a region navigating global crosswinds.
Meanwhile, the Summer Davos in Tianjin is drawing attention, with heavyweights like China’s Premier Li Qiang, Vietnam’s PM Pham Minh Chinh, and Singapore’s PM Lawrence Wong set to speak. Their words could sway sentiment, offering insights into Asia’s economic playbook at a time when every policy signal counts. Asia’s muted response so far suggests a wait-and-see approach, watching the US and the Middle East before making any big moves.
Crypto’s big moment
And then there’s the cryptocurrency market, which is seizing this moment with both hands. Bitcoin blasted past US$105,000 on Tuesday, Ether leapt above US$2,400, and XRP hit US$2.19—a rally sparked by the ceasefire but fuelled by something bigger. The Senate’s Banking Committee dropped a bombshell: a new crypto bill aimed at reining in the SEC’s oversight and setting clear rules for digital assets.
Led by Chairman Tim Scott and Senator Cynthia Lummis, this legislation could redefine cryptocurrency as a commodity or security, allow exchanges to register with the CFTC, and loosen the regulatory chokehold envisioned by SEC Chair Gary Gensler. Robinhood CEO Vlad Tenev called it a game-changer on CNBC, arguing it could help the US reclaim its edge in a space where Europe has been gaining ground.
The momentum doesn’t stop there. Financial titans like Goldman Sachs and Citadel Securities poured money into Digital Asset, a blockchain-focused firm, signalling that Wall Street is warming to crypto’s potential. And in Norway, Green Minerals—a deep-sea mining company—announced a US$1.2 billion plan to build a Bitcoin treasury, joining a wave of public firms betting on digital gold.
Their stock took a hit Tuesday, perhaps reflecting investor skepticism, but the move underscores a broader trend: corporations are starting to see Bitcoin as a legitimate asset. Since January, public companies have snapped up 251,700 BTC, worth US$26.51 billion today. This feels like a tipping point. The ceasefire gave crypto a spark, but these regulatory and institutional shifts could turn it into a wildfire.
My take: A market at a crossroads
Stepping back, I see a global market teetering on the edge of opportunity and caution. The Middle East ceasefire has unlocked a wave of relief, lifting stocks and cryptocurrencies while easing pressure on safe-haven plays like gold and bonds. Powell’s steady hand at the Fed offers reassurance, but his reluctance to signal rate cuts keeps a lid on exuberance.
Investors want certainty, and he isn’t ready to provide it. In Asia, the calm feels deceptive; big decisions and speeches could shift the tide. In the crypto world, we’re witnessing a potential sea change, with regulatory clarity and institutional buy-in that could catapult digital assets into the mainstream.
The takeaway is this: we’re in a moment of transition. The risk-on vibe is real, but it’s fragile, hinging on a ceasefire that could unravel, a Fed that could pivot, and a crypto market that’s still finding its footing. As an observer, I’m cautiously optimistic. The data points to resilience.
Stocks are up, crypto is soaring, and yields are steady, but the human element, the unpredictability of geopolitics and policy, keeps me on edge. This isn’t a time for blind bets; it’s a time to watch, analyse, and adapt.
Source: https://e27.co/markets-rally-on-middle-east-ceasefire-but-is-it-sustainable-20250625/
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