• Trump has warned Iran that there will be ‘hell’ if the Strait of Hormuz is not opened by Tuesday.
• But the hopes of a cease-fire are still alive on reports of US-Iran talks.
• Oil prices off highs, dollar soft, gold edge up
• US futures remain stable after upbeat NFP report, PMI and inflation data.

Hope and fear keep markets moving.

It’s another Monday with developments in the Middle East over the weekend and President Trump’s running commentary setting the tone, even as most markets are closed for Easter Monday, while Chinese markets are closed for Tomb-Sweeping Day. But despite the thin liquidity, there is unusual calm as hopes of a ceasefire deal with Iran keep nerves steady after Trump’s latest attack on Truth Social.

Trump’s growing frustration with Iran’s opposition was revealed on Sunday when he threatened to bomb the country’s power plants and bridges, warning that he would “live in hell” if he did not open the Strait of Hormuz by 20:00 ET on Tuesday. With Iran not only maintaining its grip on the strait, but also continuing to fire missiles and drones at its neighbors that side with the United States, investors are increasingly skeptical that the war will end within weeks.

Ceasefire renewal for Trump to speak again

Yet, amid the dire headlines, it’s not all fear as Axios is reporting that regional powers are mediating talks between the US and Iran with the goal of reaching a 45-day ceasefire, during which a permanent end to the war will be negotiated. The new effort comes as a ceasefire by yesterday’s deadline, which was extended by a day, is highly unlikely.

Trump is scheduled to hold another press conference later today at 17:00 GMT where he will likely update Americans on the war and the recovery of two American pilots, whose fighter jets were shot down in Iran. Fox News is reporting that Trump has said a deal with Tehran is possible by Monday, but investors aren’t holding their breath.

Oil prices are retreating from highs.

What is likely helping sentiment more than fresh prospects for peace is that Iran is slowly allowing more traffic to flow through the Strait of Hormuz. According to Bloomberg, 16 ships have crossed the key oil passage since Saturday, with French and Japanese vessels among those that managed to pass through the strait last week.

Iran’s willingness to gradually loosen its grip on Hormuz is certainly encouraging, especially as a full reopening is unlikely while ceasefire talks continue, as it is negotiating with Oman to establish a toll-based system to enable the “smooth flow” of transit.

Meanwhile, OPEC+ agreed to increase oil production by 206,000 barrels per day at its monthly meeting on Sunday. The decision is largely symbolic as the blockade of Hormuz means about 15 percent of the world’s oil supplies are cut off, while the ongoing conflict in Ukraine means Russian supplies are also disrupted amid damage to oil infrastructure.

Hence, there is a slight relief in oil prices today. It has fallen below $110 after rising above $115 at the start of the week’s trading, and is off its highs to settle near $108.

Stronger NFP unable to boost dollar, more US data on tap

It is also trending lower after a sharp move higher earlier in the session, helping to claw higher and rechallenge the $4,700 level.

If President Trump declares a truce later today or in the coming days, the dollar could give back a significant portion of its recent safe-haven-led gains, even as the latest data shows the US economy is resilient.

Fed funds futures are once again pricing in a few basis points for the rest of the year after Friday’s solid jobs report. The US rebounded by 178k jobs in March, although February’s figure was revised down to -133k. But it unexpectedly fell to 4.3 percent, undercutting a smaller recovery.

More US data is on the way this week, starting today and concluding with the March report on Friday.

Yen Can’t Catch Break, US Futures Turn Positive

Profits are leading against the greenback, along with a decent amount. But it has been lagging, only marginally higher at 159.40 per dollar, as concerns grow about the impact of the energy shock on the Japanese economy.

Japan’s jump above 2.4% to its highest level since 1997 is not doing much to support the yen, adding to fears of stagnation. There were fresh remarks from Finance Minister Satsuki Katayama on Friday when he warned that FX volatility had “increased significantly”, so investors were braced for possible intervention.

In equities, most European markets remain closed, but Wall Street futures are marginally positive today, indicating traders are clinging to hopes of some slowdown in the Middle East, as well as good reason to be optimistic about the US economy.