Key Market Drivers – Energy Supply Dynamics, U.S. Yields, and Shifts in Gold ETFs

Oil remains the central macro driver. Brent briefly moved back below $100 after diplomatic signals and limited shipping relief through the Strait of Hormuz, but renewed strength over the last two sessions highlights how quickly supply-risk premium can return. This keeps markets pricing the conflict as a persistent energy shock, not a temporary disruption. As a result, inflation expectations remain elevated and expectations for near-term Fed rate cuts continue to stay limited, tightening financial conditions globally. Sentiment remains weak, hedging levels are elevated, and systematic and long-short funds have already reduced exposure. If geopolitical tensions cool even modestly and oil stabilises lower, the setup exists for a sharp short-covering rally into April, likely led by mega-cap technology and quality growth names. However, such a rally would likely be tactical rather than structural, as growth and earnings risks continue to build beneath the surface.

Structurally, market conditions remain fragile. The index is still operating in a negative gamma environment, meaning dealer hedging flows are amplifying moves in both directions. Thin liquidity and heavy 0DTE options activity are increasingly driving intraday price action, making rallies fast but difficult to sustain. At the same time, PMIs are signalling slower growth with persistent inflation, while rising energy prices are pushing front-end rates and real yields higher, reinforcing tighter global financial conditions.

Technically, the S&P 500 continues to struggle near its 200-day SMA around $6,630, which remains the key resistance level. Above that, the next important resistance zone sits near $6,750, where longer-dated positive gamma begins to build. On the downside, $6,522 remains immediate support, followed by $6,475, where the JPM collar roll-off later this week could reduce downside protection and leave the index more exposed if tensions escalate again. Overall, while short-term squeezes remain possible, the broader setup continues to favour volatile trading with downside risks still dominant.

While the White House insisted peace talks are ongoing, Tehran rejected the US overtures and issued its own conditions, which included having sovereign control over the critical waterway. Further, Iran’s parliament is working on a bill to charge a fee in exchange for providing security to ships passing through the waterway. The plan is expected to be finalised next week.

The global crude benchmark is on pace for the biggest monthly gain since 1990 as the conflict engulfs the energy-rich Middle East and sends shockwaves through the global economy. It is expected that oil may still spike to $150 a barrel even if a ceasefire is announced as soon as tomorrow, as it would take time for supply chains to return to full capacity.

On the daily chart, WTI is trading just below the 9 SMA; however, it still remains above the 21 SMA. RSI is around 54, indicating bullish momentum building up in prices. On the 1-hour chart, immediate resistance is at the 61.8 fib level of $96, followed by the key $100 level. Immediate support is at the 50 SMA at $91, followed by $88.

On the daily chart, Brent is trading just below the 9 SMA; however, it still remains above the 21 SMA. RSI is around 53, indicating strong upward momentum building in prices. On the 1-hour chart, immediate resistance is at the 61.8 fib level of $107, followed by 23rd March high of $114. Support is at key $100 level, followed by 23rd March low of $96.

The White House maintained that talks are ongoing, with the Trump administration reportedly sending a 15-point plan to Iran via Pakistan aimed at resolving the conflict. Top Iranian authorities are reviewing the US proposal, but have indicated no intention of holding talks with Washington. Tehran said it would reject a US ceasefire offer. A counter from their end includes a five-point plan that would grant it control over the Strait of Hormuz. The disruptions from the conflict have pushed energy prices higher, fueling inflation concerns and reinforcing expectations that the Federal Reserve will keep interest rates steady for the rest of the year. Investors now turn to the latest weekly jobless claims data today for fresh signals on labour market conditions. According to Bloomberg Economics’ drivers model, risk sentiment accounts for most of the currency’s swing this month. Major US indices have lost 4-5% this month. Managers rebalancing portfolios typically buy dollars when US assets underperform. This helps them return to target allocations. The other way round is also true, where they sell the greenback when US assets underperform.  Assuming hedges are maintained, the current setup favours the dollar. The yen continues to trade past the 159-per-dollar level, as the greenback rallied overnight.

The bias remains constructive as long as uncertainty about possible peace talks persists, with both sides less willing to budge on their demands to end the conflict. Technically, DXY has support from the $99.40-$99.45 range, followed by the 20-day EMA at $99.15. A resistance test is likely in the $99.70-$99.80 range, with $100 as the next key area of resistance. Daily RSI at 45.2 suggests steady but not accelerating momentum. The EUR/USD pair closed below its 200-day EMA yesterday, which may act as immediate resistance at 1.158, while support appears around 1.153. Euro remains biased to the downside.

Nonetheless, recent price action shows that the 200-SMA support at $4,107 has held firm after being tested, which is a reassuring sign. Moreover, historical analysis shows that gold’s recent slump is in line with how it has initially performed during past market crises or war events. Gold tends to decline sharply for a while since the aftermath of the event. However, once the situation stabilizes, the subsequent rebound is stronger. Thus, a lot hinges on whether the conflict persists or abates over the next few weeks. But on the technical front, gold is down 1.63% today at $4,433 – with immediate support at $4,368 and further down at the 200-SMA located at $4,107. Sustained moves above $4,536 could potentially pave the way for a leg up to $4,600.