Global markets just experienced a dramatic rollercoaster. This ride followed US airstrikes on Iranian nuclear facilities. President Donald Trump ordered the June 23rd bombings. Following this, fear initially gripped investors worldwide. However, a swift, temporary ceasefire announcement came on June 24th. This news triggered a powerful wave of relief. Stocks soared, especially in the US. Meanwhile, currency markets revealed a persistently troubled US dollar. Let’s look into how sterling capitalised on its safe-haven status.
Tension Before the Strike
Markets were already shaky before the bombs fell. Early June saw significant pressure on the US dollar. President Trump’s aggressive tariff policies were a primary cause. Geopolitical uncertainties added further strain. On June 12th, the dollar index plunged below 98. This marked its weakest level in three years. Because of this the dollar struggled significantly.
At the same time, the Dow Jones Industrial Average (DJIA) reflected deep unease. Trump’s tariff threats created persistent volatility. Mixed economic signals confused investors further. On June 17th, the Dow dropped sharply. It fell 299.29 points (0.70%) to 42,215.80. Escalating tensions between Israel and Iran drove this decline. The stage was clearly set for turmoil.
Sterling Shines as Safe Haven
Source: TradingView
The US bombing on June 22nd intensified global uncertainty. Investors instinctively sought safety. Traditionally, assets like the British pound gain in such chaos but war fears led to a fall in GBP/USD from 1.35 to 1.33, a decline of 0.93%. Experts predicted a stock sell-off and dollar surge.
Despite that, the US dollar’s response proved complicated. Its existing weakness undermined any strong rally. Tariff concerns remained a heavy anchor. This all led to the pound strengthening considerably against the dollar after the ceasefire by up to 1.98%. This indicates relative UK market stability compared to America.
Following the June 24th ceasefire announcement, risk eased. The dollar, however, continued its downward trajectory. Treasury yields also fell as tensions cooled. This also led to the pound gaining ground against the dollar. Furthermore, plummeting oil prices after the truce helped the UK economy. Lower oil costs reduce inflationary pressure significantly there.
Dow’s Wild Ride
The bombing initially sent shockwaves through equity markets. Investors braced for heavy losses on June 23rd. Fears centred on prolonged conflict and oil supply chaos. Oil prices spiked immediately on disruption worries. However, the situation evolved rapidly. Iran’s retaliatory strike on June 24th caused minimal damage. US defences intercepted missiles targeting a base in Qatar. Crucially, no casualties were reported. Oil prices then collapsed spectacularly. WTI plunged 17.18% to $64.17 per barrel.
Source: TradingView
This combination sparked a surprising market rebound. Despite the ongoing conflict, the Dow surged. It gained 374.98 points (0.89%) on June 23rd. It closed at 42,581.78. Investors bet the conflict wouldn’t escalate severely. The ceasefire announcement the next day ignited an even fiercer rally. Stocks exploded upwards. The Dow skyrocketed 507.24 points (1.19%) to 43,089.02. Broader markets joined the surge enthusiastically. The S&P 500 rose 1.11%, and the Nasdaq jumped 1.43%.
Broad Market Relief
The “complete and total ceasefire” declared by Trump transformed sentiment. Risk appetite returned with tremendous force on June 24th and 25th. Plunging oil prices provided a massive tailwind.
Ultimately, the Dow’s powerful two-day surge reflected immense relief. Reduced geopolitical risk was the primary driver. Significantly lower oil prices also played a crucial role. This eased inflation fears substantially. Corporate earnings outlooks brightened instantly. Nevertheless, underlying concerns persist. President Trump’s tariff policies remain a major market overhang. They continue to cap potential gains. The US dollar’s deep-seated weakness shows little sign of diminishing. Sterling, on the other hand, demonstrated impressive resilience throughout this crisis. It effectively leveraged its safe-haven appeal against a faltering dollar. Markets now watch anxiously. They wonder how long this fragile truce will truly last.
Written By Fazal Ul Vahab C H
