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Markets reacted predictably to the initial day of trading following the Iran war, with oil prices surging 8% amid broad attacks and retaliations. President Trump's remarks about a 4-5 week war timeline tempered the US dollar's rally, while the yen underperformed as a safe haven amid energy concerns. Commodity-linked currencies like AUD and CAD rebounded quickly, and gold initially spiked before retreating. The unexpected development was the sharp rise in US 10-year bond yields, which climbed 8 bps to 4.04% despite earlier declines. This reversal defied expectations and signals potential inflation risks if oil prices remain elevated. The bond market's technical rebound above 4% is a modest bullish sign, with a large outside day pattern observed. Analysts are closely monitoring whether yields can break 4.10%, which could confirm a bottom and shift the market into a range-bound phase. For traders, the interplay between geopolitical tensions, energy prices, and bond yields will be critical in the coming days. The yen's weakness and gold's volatility also highlight evolving risk dynamics in the post-conflict environment. For Gulf investors, the sustained oil price rally and bond market volatility present both opportunities and risks. Higher crude prices could boost regional energy exports but may also increase inflationary pressures. The technical outlook for US bonds suggests caution, with key levels to watch for potential trend confirmation. MENA traders should focus on the duration of the conflict, central bank responses, and how global inflation expectations evolve in the coming weeks.
