The US dollar held firm while risk-sensitive currencies struggled as President Trump extended the Iran ultimatum, offering only temporary relief to markets amid ongoing geopolitical uncertainty.
Pound to Euro (GBP/EUR): 1.15227
Pound to Dollar (GBP/USD): 1.32602
Euro to Dollar (EUR/USD): 1.15079
President Trump Extends the Iran Ultimatum and Buys Some Time for Markets to Stabilise
Risk markets were on the brink of another collapse heading into the weekend as the 5-day US ultimatum on Iran was due to end.
Trump bought some time by extending the ultimatum to 10 days.
Markets recovered, but only briefly and are back near the lows on Friday.
The second US ultimatum on Iran was due to expire on Saturday evening, at which time they were due to “obliterate” Iran’s energy infrastructure.
That was causing a lot of concern for global markets and Thursday’s session made a 2026 closing low in the S&P500, and oil was rising again.
Friday’s session may well have crashed going into the weekend given the prospect of this major escalation, but President Trump stepped in to save markets once again:
“I’m going to give them 10 days,” he said. “They asked for seven, and I said, ‘I’m going to give you 10…’ They want to make a deal so badly, you have no idea. They’re begging to make a deal. And they did something very nice yesterday, they let a lot of ships through—eight, nine, maybe ten big tankers. They sent us a big present. So we’re going to pause the energy plant destruction for 10 days, until Monday night, April 6th, and if we don’t have a total deal by then, a total opening of the Strait, then we hit them like they’ve never been hit before. We’ll obliterate those plants. But I think we’re going to have a very big, beautiful outcome.”
That calmed markets briefly, but Trump’s comments are having diminishing returns and the recovery in the S&P500 only lasted a matter of hours and travelled just over 1% before fading all the way back again. On Friday, it is back at fresh 2026 lows and oil is higher by 2%.
An extended ultimatum at least buys some time and there may not be a collapse into Friday’s close.
Perhaps better news could come out over the weekend. A gesture, concession or action from Trump (such as pulling out some military) would be a step forward.
Iran and markets do not trust vague comments.
From Iran’s perspective, they are understandably cautious/distrusting and also trying to leverage the situation to their best advantage.
However, they will surely be seeking a peace deal as there is no way they can win the war. Any progress should lead to a large rally in stocks and risk assets and pull down oil and the US dollar.
Were Central Banks Too Hasty?
Central banks such as the Fed, ECB and BoE swiftly shifted hawkish last week in response to higher oil prices and their likely effect on inflation. It seemed a hasty move as rate hikes will not help drive down oil prices, and they could have serious unwanted effects on the economy.
Unlike the 2022 energy shock, the Eurozone enters this current crisis with significantly less fiscal and labor market resilience. Governments are facing tighter budget constraints that limit their ability to subsidize household energy bills, and the labor market is displaying more fragility than it did four years ago.
This suggests that the ECB must carefully weigh the risk of price stability against the very real danger of a deep economic contraction.
The upcoming April meeting is unlikely to produce a significant policy pivot simply because the available data—consisting of preliminary March inflation prints and initial first-quarter GDP estimates—will not be robust enough to justify a departure from the current hold.
Markets may also have overreacted to the war and to the central bank shift. Three rate hikes are now priced in this year from the ECB. That seems excessive at this stage and may well be walked back by the ECB over the coming months IF oil prices come down.
