Dow Jones at Record High; Oil Slumps After Rubio’s Iran Comments

Market Wrap-up: Oil Slump and Fed Repricing Keep Markets on Edge Ahead of Core PCEMarkets remained fixated on the US-Iran peace negotiations as conflicting developments continued to cloud investor sentiment. Speaking during a cabinet meeting at the White House, US Secretary of State Marco Rubio stated that negotiations with Iran had shown signs of progress, adding that Washington would give the talks “every chance to succeed.”

The comments triggered a sharp selloff in crude oil on May 27, with both WTI and Brent falling more than 5%. However, downside momentum was partially limited after President Donald Trump delivered a more confrontational tone later in the session.

Trump stated that he would not be pressured into reaching a deal, warning that any attempt by Iran to outmaneuver him would fail as he does not “care about the midterms.”

He also declared that the Strait of Hormuz would remain “open to everybody” and said the US would oversee the waterway, adding that such conditions were part of ongoing negotiations with Iran.

Meanwhile, the US military reportedly launched additional airstrikes on an Iranian military site believed to threaten both US forces and commercial activity near the Strait of Hormuz.

Uncertainty surrounding the negotiations continues to dominate market pricing, while traders increasingly focus on the possibility that the Federal Reserve may need to maintain a more hawkish stance. Attention now turns to today’s PCE inflation report, which could significantly shape Fed expectations.

Gold prices declined sharply, while the DXY rebounded strongly toward the 99.35 region. A hotter-than-expected inflation reading could further reinforce USD strength and pressure broader risk sentiment. However, economists currently expect inflation to remain in line with the previous month, which may help limit additional upside in the Dollar following the release.

Looking ahead, markets will also monitor Prelim GDP, Unemployment Claims, Core Durable Goods Orders, New Home Sales, and speeches from FOMC members later today.

Gold: Gold Falls Toward Two-Month Low as Hawkish Fed Expectations Strengthen

Key takeaway:

Gold prices fell toward their lowest levels in nearly two months on May 27, pressured by expectations that the Federal Reserve could raise interest rates further while the conflict in Iran shows little sign of resolution.

Markets continue to believe that energy driven inflation risks may force the Fed to deliver an additional 25bps rate hike before year end.

Minneapolis Fed President Neel Kashkari stated that the central bank must remain focused on containing inflation risks, although he noted that it is still too early to determine when policymakers may adjust current interest rate settings.

Technical Outlook:Daily Bias: Bearish.Support: 4,350  Resistance: 4,465

WTI: WTI Extends Losses as Iran Diplomacy Eases Immediate Supply Fears

Key takeaway:

Oil prices declined sharply on May 27 after US Secretary of State Marco Rubio stated that Washington would give negotiations with Iran “every chance to succeed.”

However, fresh US airstrikes in Iran reignited concerns over potential disruptions to commercial shipping flows through the Strait of Hormuz.

Veteran energy market participants also remain skeptical that global oil flows can quickly return to pre-war conditions.

Technical Outlook:Daily Bias: Neutral.Support: 88.65  Resistance: 93.82

DXY: US Dollar Rebounds as Fed Rate Hike Expectations Return

Key takeaway:

The DXY strengthened amid persistent skepticism surrounding the Middle East crisis.

That dynamic, combined with growing expectations for additional Fed tightening, helped the US Dollar rebound from near two-week lows.

Investors are now shifting focus toward a series of key US economic releases, including the April PCE inflation report due later today, for further clues on the Fed’s policy path.

Technical Outlook:Daily Bias: Bullish.Support: 99.30Resistance: 99.70

EUR/USD: Euro Weakens on Middle East Escalation Despite Hawkish ECB Tone

Key takeaway:

The Euro weakened after the US military launched additional airstrikes on Iran.

However, hawkish rhetoric from European Central Bank policymakers could help limit downside pressure on the single currency.

Francois Villeroy de Galhau stated on Tuesday that the central bank “will do whatever is necessary” to keep inflation within target.

Meanwhile, ECB board member Isabel Schnabel argued that the central bank should raise interest rates in June despite ongoing peace negotiations.

Technical Outlook:Daily Bias: Bearish.Support: 1.15662  Resistance: 1.16100

USD/JPY: Japanese Yen Climbs as Hormuz Risks Weigh on Japanese Yen

Key takeaway:

The Japanese Yen fell to a four-week low against a firmer US Dollar as concerns surrounding Hormuz-related energy risks outweighed intervention speculation.

Investors remain concerned that Japan’s economy could face meaningful pressure from prolonged disruptions to energy supply routes through the Strait of Hormuz.

In addition, renewed US airstrikes on Iran increased the risk of further regional escalation, continuing to weaken the JPY and support USD/JPY.

Technical Outlook:Daily Bias: Bullish.Support: 159.30  Resistance: 159.60

Overall, markets are currently trading around two dominant themes: geopolitical risk in the Middle East and expectations that the Federal Reserve will maintain a more hawkish stance for longer. Oil prices dropped sharply following renewed diplomatic signals from the US, although downside pressure remained limited by fresh US airstrikes on Iran and ongoing disruption risks around the Strait of Hormuz. That continues to keep inflation concerns elevated in the eyes of the market.

The US Dollar rebounded strongly as investors increasingly price in the possibility that the Fed may still have room for another rate hike later this year. Meanwhile, gold remains under pressure from rising yields and Dollar strength, while risk-sensitive currencies such as the EUR and JPY continue to react to geopolitical developments.

The immediate focus now shifts to the US Core PCE report. A hotter-than-expected inflation reading could trigger further hawkish repricing across markets, supporting the USD while adding pressure on gold and broader risk assets.

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