Hormuz Strait Tensions Rise | Dollar Strength Persists | Gold Pulls Back | Chinese Tech Attracts Cap

Market Overview

Geopolitical tensions resurfaced over the weekend as Iran, speaking through military channels, once again announced the closure of the Strait of Hormuz. The U.S. military dismissed the claim, stating that Iran lacks the capability to effectively control the waterway. Meanwhile, President Trump warned that if negotiations fail, the United States could assume operational control of the strait and impose transit fees on vessels passing through. Despite the escalating rhetoric, Iranian negotiators traveled to Switzerland for another round of technical-level discussions.

On the monetary policy front, newly appointed Federal Reserve Chair Kevin Warsh maintained a hawkish stance. Deutsche Bank now expects an additional 50 basis points of rate hikes this year, with the possibility of an earlier move as soon as July. The outlook has prompted markets to reassess the trajectory of the U.S. dollar. The widening U.S.-Japan yield differential continued to pressure the yen, pushing USD/JPY toward 161, its weakest level in nearly four decades.

A stronger dollar weighed on precious metals. Spot gold settled at $4,155.71 per ounce, down 1.3% on the week, marking its third consecutive weekly decline. Goldman Sachs lowered its year-end gold target to $4,900 per ounce.

In Europe, the STOXX Europe 600 Index fell 0.24% to 635.61, though it still posted a modest weekly gain of 0.38%. U.S. equities were closed Friday in observance of Juneteenth, while Chinese mainland markets remained shut for the Dragon Boat Festival holiday.

Chinese technology companies continued to attract investor interest. AI startup DeepSeek secured RMB 51 billion in fresh funding from strategic investors including Tencent and CATL. Meanwhile, China Resources New Energy raised RMB 24.5 billion through its IPO, setting a new fundraising record for the Shenzhen Stock Exchange.

Key Themes AheadOil Markets Caught Between Diplomacy and Geopolitical Risk

Whether the Strait of Hormuz remains open has become the most important near-term variable for global oil prices. Iran maintains that the waterway has been closed, while Washington insists that shipping lanes remain fully operational.

Combined with President Trump's threat to take control of the strait and impose transit fees, geopolitical risk premiums continue to fluctuate around the Brent crude $80 per barrel level.

Should the technical talks in Switzerland resume and produce tangible progress, the geopolitical premium embedded in oil prices could continue to fade. Conversely, any disruption to shipping activity would likely trigger a swift rebound in crude prices.

Market participants are also monitoring substantial crude inventories accumulated across the Persian Gulf region, which could provide a degree of supply flexibility should disruptions occur.

Asset Repricing Under a Stronger Dollar Regime

Warsh's hawkish policy stance, together with Deutsche Bank's expectation of a potential July rate hike, is driving a broad repricing of dollar-denominated assets.

The stronger U.S. dollar has placed direct pressure on gold and industrial metals, a dynamic reflected in Goldman Sachs' recent downgrade of its gold price forecast. At the same time, the widening rate differential between the United States and Japan has pushed the yen to multi-decade lows, while offshore Chinese yuan trading has also come under pressure.

For emerging markets and commodity-linked assets, the trajectory of the U.S. dollar and interest rates remains the dominant macro driver in the weeks ahead. This week's Chinese Loan Prime Rate (LPR) announcement and South Korea's export data should provide important signals regarding demand conditions across Asia.

Market Watch

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