The two-week ceasefire agreement between the United States and Iran is set to expire on April 22. Initially established on April 8, this truce had fostered market hopes for a series of positive developments, or at least a reduction in bilateral tensions.
Prior to the expiration date, if no new agreement is reached, both nations are likely to revert to a state of conflict. Last Sunday, Iran's state news agency reported that Iran would skip the second round of negotiations, citing excessive U.S. demands, unrealistic expectations, shifting positions, repeated contradictions, and the ongoing maritime blockade. Iran views these actions as violations of the ceasefire terms.
With a new U.S.-Iran agreement highly unlikely before April 22, market anxiety is intensifying. This is expected to bolster crude oil prices while putting renewed pressure on gold.
Inflation data should not be overlooked, even as media focus remains on the potential U.S.-Iran conflict. This Tuesday, the U.K. will release its March core CPI annual rate, followed by Japan's March core CPI on Friday. International oil prices surged significantly in March, which is anticipated to influence inflation figures in both countries.
The most affected metric will be the nominal CPI annual rate, which includes volatile energy prices. The U.K. is forecast to see a 0.3 percentage point increase, while Japan is expected to rise by 0.2 percentage points. However, central banks typically place less emphasis on nominal CPI due to its instability.
For the core CPI annual rate in March, the U.K. is projected to remain unchanged, whereas Japan is anticipated to increase by 0.2 percentage points. The impact of high oil prices on core inflation appears limited. As long as elevated oil costs do not trigger a surge in core inflation, central banks are likely to maintain their current monetary policies.
On Wednesday at 22:30, the U.S. Energy Information Administration (EIA) will release its weekly crude oil inventory report. Given the current market focus on international oil prices, changes in EIA inventories carry heightened significance.
The previous reading showed a decrease of 913,000 barrels, with expectations for a larger decline of 1 million barrels. This anticipated drop is partly linked to the blockade of the Strait of Hormuz, which has forced some European and Asian nations to purchase more U.S. oil, thereby reducing U.S. commercial crude stockpiles.
Nevertheless, data-driven market movements are generally less impactful than news-driven shifts. Should the U.S. and Iran reach a new ceasefire agreement, even a further decline in EIA crude inventories might be overshadowed by optimistic sentiment, potentially influencing oil prices accordingly.
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