Tech Earnings Helping Insulate Markets from Middle East Uncertainty

Solid US corporate earnings are proving highly effective at insulating stocks and risk assets from the worst effects of the ongoing US-Iran war. While not every member of the Magnificent 7 has reported yet - with Nvidia still to come - the results delivered so far have been impressive. Strong revenue beats, accelerating demand for cloud and AI services, and aggressive capital expenditure plans have dominated the narrative. This combination of robust earnings and clear corporate conviction in the AI theme has given investors the confidence to largely look through the geopolitical headlines, providing meaningful support to risk assets amid periodic oil spikes and Middle East uncertainty.

Oil prices, as always, remain extremely sensitive to the latest headlines. Crude pushed higher at the start of the week on reports of increased hostilities between Iran and its UAE neighbour, but the rally quickly faded after President Trump’s ‘Project Freedom’ - the initiative to protect neutral shipping through the Strait of Hormuz - was promptly paused. The White House cited progress on a potential broader deal with Iran, which helped ease some of the immediate pressure. Nevertheless, the Strait of Hormuz continues to act as a major flashpoint. With both sides still enforcing elements of a blockade and physical tanker traffic heavily constrained, oil prices remain anchored above $100. The market is pricing in persistent risk rather than any near-term resolution.

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In the currency markets, the US Dollar has been artificially softened since suspected heavy Japanese intervention to support the yen late last week. Despite this, the DXY has held relatively firm, supported by elevated oil prices and still-resilient US economic data. A standout performer has been the Australian Dollar, which strengthened after the RBA delivered its third successive rate hike this week, highlighting Australia’s exposure to higher global energy costs. The AUDUSD rate was last seen trading around 0.7230, up 8% year-to-date.

Gold has remained highly susceptible to swings in oil prices. A welcome pullback in crude over the past 24 hours helped spot gold reclaim the $4,600 level, providing some relief after recent pressure. However, stubbornly high US Treasury yields continue to act as a brake on any sustained upside, reminding investors that the metal must contend with both elevated real rates and competition from a still-resilient Dollar. Technically, there is decent support for gold at around the $4500 level, with sturdier support awaiting at $4360. On the topside, resistance around $4650 and $4710 are levels to watch.

Looking ahead to the remainder of the week, attention may start shifting away from the Middle East and back toward the US macro picture. Wednesday’s ADP private payrolls report will offer an early read on the labour market, while Friday’s all-important Non-Farm Payrolls (NFP) release will take centre stage. Strong jobs data could reinforce the higher-for-longer rate narrative, while softer figures might revive hopes of eventual Fed easing. Consensus expectations for the April NFP number are +65k, down from March’s +178k upside surprise.

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