Brent crude futures surged on Thursday to their highest levels in four months, driven by mounting concerns over the possibility of a US military strike on Iran, OPEC’s fourth-largest producer, which pumps around 3.2 million barrels per day.

John Evans, analyst at PVM, said that “the immediate concern for the market is the potential for collateral damage if Iran were to strike its neighbors, or more importantly if it were to close the Strait of Hormuz, through which roughly 20 million barrels per day of oil flows.”

Brent crude rose by about $1.65, or 2.4%, to $70.05 per barrel by 13:08 GMT. During the session, prices touched $70.35 per barrel, the highest level since late September. Brent is on track to post monthly gains exceeding 15% in January, marking its largest monthly rise in four years.

US West Texas Intermediate crude also climbed by around $1.59, or 2.5%, to $64.80 per barrel. Earlier in the session, WTI breached the $65 per barrel level, likewise hitting a four-month high. The benchmark is heading for monthly gains of about 13%, its strongest since July 2023.

US President Donald Trump has stepped up pressure on Tehran to halt its nuclear program, warning of possible military strikes, as a US naval group arrived in the region.

Reuters reported, citing informed US sources, that Trump is weighing options that include limited strikes targeting Iranian security forces and leadership, in an effort to spark internal unrest that could lead to the collapse of the country’s rulers.

Some analysts expect further upside in oil prices due to tensions linked to Iran. Citi analysts said in a note on Wednesday that “the probability of an attack on Iran has lifted the geopolitical risk premium in oil prices by around $3 to $4 per barrel,” adding that further escalation could push Brent toward $72 per barrel over the next three months.

Elsewhere, production is gradually resuming at Kazakhstan’s giant Tengiz oil field after electrical fires last week curtailed output, with a return to full capacity targeted within a week.

In the United States, the world’s largest oil producer and top exporter of liquefied natural gas, oil and gas producers have begun restarting wells after disruptions caused by the winter storm “Fern” over the weekend.

Giovanni Staunovo, analyst at UBS, said: “Disruptions in Kazakhstan, whether at the Caspian Pipeline Consortium terminal or at the Tengiz field, removed significant volumes of oil from the market. Combined with cold weather in the US that temporarily curtailed oil production, the oil market has become tighter than previously expected.”

The US dollar edged slightly higher on Thursday, but remained near multi-year lows, as limited support from the Federal Reserve failed to offset persistent concerns over US policy that continued to weigh on investor sentiment.

The dollar ended last week with its largest weekly loss since April, as investors grew increasingly uneasy about their exposure to US assets amid escalating debate over Washington’s stance on Greenland.

US President Donald Trump said on Tuesday that the dollar’s value was “excellent” when asked whether it had fallen too far, a comment that added to pressure on the currency after it touched a four-year low.

The dollar posted gains on Wednesday, snapping a four-day losing streak, after Treasury Secretary Scott Bessent reaffirmed the United States’ preference for a strong dollar policy. However, that momentum failed to carry through into Thursday’s session.

Federal Reserve Chair Jerome Powell indicated that interest rate cuts could take longer to materialize, while some economists argue that the US economy does not currently require further monetary easing.

David Doyle, head of economics at Macquarie Group, said: “While uncertainty remains elevated, particularly with a new Fed chair expected to be appointed in the coming months, our base case is that the rate-cutting cycle has come to an end, with an improvement in the labor market ahead.” He added: “We see the next move as a rate hike, possibly in the fourth quarter of 2026.”

Analysts believe the dollar’s performance will hinge largely on developments surrounding the Federal Reserve’s independence, including an anticipated US Supreme Court ruling on President Trump’s attempt to remove Fed Governor Lisa Cook.

Against a basket of major currencies, the dollar index rose 0.1% to 96.33, hovering near Tuesday’s four-year low of 95.566.

Euro draws renewed ECB attention

The euro eased slightly to $1.1948 after briefly breaking above the $1.20 level on dollar weakness, following warnings from European Central Bank policymakers about the potential deflationary impact of a rapidly strengthening single currency.

Geoff Yu, senior macro strategist for EMEA at BNY, said: “While EUR/USD has remained above the ECB’s baseline scenario over the past year without triggering strong deflationary risks, trade-related uncertainty remains elevated.”

Economists have warned that a stronger euro could amplify deflationary pressures stemming from Chinese exports, potentially prompting the ECB to consider further interest rate cuts.

Yu added that ECB staff projections from December suggest a euro-dollar rate of 1.25 would represent a clear overshoot of the expected range and could be sufficient to alter forward guidance.

ECB Executive Board member Isabel Schnabel said on Wednesday that monetary policy is “in a good place,” indicating that interest rates are likely to remain at current levels for an extended period, with markets pricing in no change until early 2027.

Some strategists, however, argue that the traditional relationship between EUR/USD and interest rate differentials has broken down since Trump took office, warning that any ECB rate cuts may be insufficient to move markets increasingly driven by geopolitical and economic risks rather than relative monetary policy.

Japanese policy under scrutiny

Dollar weakness provided modest support to the Japanese yen, which traded at 153.40 per dollar on Thursday, after moving within a 152–154 range for much of the week.

This followed reports that US and Japanese authorities reviewed exchange rates last week, a step often seen as a precursor to potential market intervention.

Goldman Sachs said in a note that coordination between Japan’s Ministry of Finance and the US Treasury could limit short-term downside pressure on the yen, but cautioned that any impact would be temporary unless supported by fundamental factors, such as faster monetary tightening by the Bank of Japan or tighter fiscal discipline.

Meanwhile, the Australian dollar extended its gains on expectations of a possible local interest rate hike as early as next week, touching a three-year high before stabilizing near $0.7038.

Silver prices rose in the European market on Thursday, extending gains for a sixth consecutive session and continuing to set new record highs, after breaking above the $120 per ounce level for the first time ever. The rally is driven by strong buying interest from retail investors, alongside continued weakness in the US dollar.

In line with market expectations, the Federal Reserve left interest rates unchanged, adopting a cautious tone in its statement and avoiding any clear signals regarding a resumption of the rate-cutting cycle in the near term.

Price overview

• Silver prices today: Silver rose by 3.15% to $120.46 per ounce, the highest level on record, from an opening level of $116.79, after touching a session low of $115.38.

• At settlement on Wednesday, silver prices climbed by 4.15%, marking a fifth consecutive daily gain, supported by sustained safe-haven demand for precious metals.

US dollar

The US dollar index fell by 0.3% on Thursday, resuming losses that had briefly paused in the previous session, and hovering near a four-year low at 95.55 points. The move reflects renewed weakness in the US currency against a basket of major and secondary currencies.

The dollar remains under persistent pressure, as comments from Treasury Secretary Scott Bessent failed to ease growing concerns over US economic policies and geopolitical developments.

On Wednesday, Bessent denied reports suggesting potential US intervention in currency markets, amid heightened speculation surrounding intervention in the Japanese yen and with the US dollar trading at multi-year lows.

Bessent said the United States has long followed a strong-dollar policy, adding that such a policy is based on sound fundamentals. He noted that if fundamentals are strong, capital will flow in, and that efforts to reduce the trade deficit would, over time, naturally support a stronger dollar.

Federal Reserve

At the conclusion of its first monetary policy meeting of the year, and in line with most expectations, the Federal Reserve kept interest rates unchanged at a range of 3.50%–3.75%, the lowest level since September 2022.

The decision was not unanimous, as the Federal Open Market Committee voted 10–2, with two members, Stephen Miran and Christopher Waller, dissenting in favor of an additional 25 basis point rate cut.

The Federal Reserve said available indicators show that economic activity continues to expand at a steady pace, while inflation remains somewhat elevated and labor market indicators point to a degree of stabilization.

Federal Reserve Chair Jerome Powell said current monetary policy is “appropriate,” adding that policymakers are well positioned to determine the pace and timing of any further adjustments to interest rates.

US interest rates

• Following the meeting, and according to the CME FedWatch Tool, market pricing for keeping US interest rates unchanged at the March meeting rose from 82% to 88%, while the probability of a 25 basis point rate cut declined from 18% to 12%.

• Investors continue to price in two rate cuts over the course of the coming year, while the Federal Reserve’s own projections point to a single 25 basis point cut.

Gold prices rose in the European market on Thursday, extending gains for a ninth consecutive session and continuing to smash record levels, after breaking above the $5,500 per ounce mark for the first time in history. Prices are now approaching the $5,600 level, supported by strong demand for the metal as a safe haven and by persistent weakness in the US dollar, despite comments from US Treasury Secretary Scott Bessent aimed at supporting global exchange rate stability.

In line with market expectations, the Federal Reserve kept interest rates unchanged, adopting a cautious tone in its statement. The central bank avoided providing clear signals about resuming an interest rate cutting cycle in the near term, stressing the need for more data to assess the path of inflation and economic activity before taking any further monetary policy steps.

Price overview

• Gold prices today: Gold rose 3.4% to $5,598.39 per ounce, the highest level on record, from an opening level of $5,416.39, while the session low was also $5,416.39.

• At settlement on Wednesday, gold gained about 4.6%, marking its largest daily rise since March 24, 2020, and its eighth consecutive daily gain, within the longest winning streak since late February 2024, amid record demand for the metal as a safe haven.

US dollar

The US dollar index fell 0.3% on Thursday, resuming losses that had paused in the previous session and moving closer to a four-year low at 95.55 points, reflecting renewed weakness in the US currency against a basket of major and minor currencies.

The dollar remains under sustained pressure, as remarks from Treasury Secretary Scott Bessent failed to dispel growing concerns over US economic policies and geopolitical developments.

Supportive comments

On Wednesday, Bessent denied reports suggesting potential US intervention in currency markets, at a time when markets are closely watching for possible intervention in the Japanese yen and with the US dollar trading near multi-year lows.

Bessent said: The United States has always pursued a strong dollar policy, but that policy means putting sound fundamentals in place. He added: If we have sound policies, capital will flow. We are working to reduce our trade deficit, which will naturally strengthen the dollar over time.

Federal Reserve

At the conclusion of its first regular monetary policy meeting of the year, and in line with most expectations, the Federal Reserve left interest rates unchanged within the 3.50%–3.75% range, the lowest level since September 2022.

The decision was not unanimous, as the Federal Open Market Committee voted 10–2, with two members (Stephen Miran and Christopher Waller) dissenting in favor of an additional 25 basis point rate cut.

The Federal Reserve said that available indicators show economic activity expanding at a “steady” pace, noting that inflation remains somewhat elevated, while labor market indicators show signs of stabilization.

Federal Reserve Chair Jerome Powell said current monetary policy is “appropriate,” adding that policymakers are “well positioned” to determine the magnitude and timing of any further adjustments to interest rates.

US interest rates

• Following the meeting, and according to CME’s FedWatch tool, the probability of keeping US interest rates unchanged at the March meeting rose from 82% to 88%, while the probability of a 25 basis point rate cut declined from 18% to 12%.

• Investors continue to price in two US rate cuts over the coming year, while the Federal Reserve’s own projections point to one 25 basis point cut.

Gold outlook

Edward Meir, analyst at Marex, said that rising US debt levels and uncertainty driven by signs of a global trade system fragmenting into regional blocs rather than a US-centered model are pushing investors toward gold.

Analysts at OCBC said in a note that gold is no longer viewed merely as a hedge against crises or inflation, but increasingly as a neutral and trusted store of value that also provides portfolio diversification across a broader range of macroeconomic regimes.

Tony Sycamore, market analyst at IG, said that while the sharp rally suggests the risk of a near-term pullback, underlying fundamentals are expected to remain supportive throughout 2026, making any dips attractive buying opportunities.