US-Iran Escalation Drives Oil Spike; FOMC Minutes, ECB Speakers in Focus

European Session: Range-Bound Markets Amid US-Iran Tensions

The European trading session lacks major economic data releases, leaving markets largely range-bound. However, escalating geopolitical risks between the US and Iran have injected volatility into energy markets. The US conducted airstrikes on Iranian targets in response to attacks on commercial vessels in the Strait of Hormuz, prompting Iran to retaliate by targeting US military installations in Bahrain and Kuwait. While the immediate flare-up appears contained, traders remain cautious amid lingering uncertainty over potential further escalation.

The heightened tensions have pushed crude oil prices higher, with Brent futures rising over 2% intraday. The risk-off sentiment has supported safe-haven assets, including gold and the Swiss franc, while weighing on risk-sensitive currencies like the Australian and New Zealand dollars.

American Session: FOMC Minutes Take Center Stage

The primary event in the American session is the release of the Federal Open Market Committee (FOMC) meeting minutes from the June policy meeting. While the minutes are typically not a major market mover, traders will scrutinize them for additional insights into the Fed's policy trajectory following the recent lack of forward guidance from Fed Chair Christopher Waller. Market participants are particularly focused on signals regarding the timing of potential rate cuts amid persistent inflation concerns and a resilient labor market.

The dollar index (DXY) has traded sideways in recent sessions, reflecting uncertainty over the Fed's next steps. Any hawkish undertones in the minutes could reignite expectations for delayed easing, while dovish signals may bolster hopes for near-term rate cuts.

Central Bank Commentary: ECB Speakers Line Up

A series of European Central Bank (ECB) officials are scheduled to speak throughout the day, including Executive Board members and Governing Council members. Notable speakers include Jens Nagel (hawkish), who may reiterate concerns over inflationary pressures, and Isabel Schnabel (neutral), whose comments on monetary policy normalization could influence euro sentiment. Traders will monitor for any shifts in tone ahead of the ECB's July policy meeting.

Implications for Traders

Forex traders should remain vigilant on oil price movements and their spillover effects on commodity-linked currencies. The USD faces key technical resistance around the 105.50 level against major peers, while EUR/USD remains vulnerable near 1.0750. Gold (XAU/USD) could extend gains if geopolitical risks intensify.

Risk sentiment remains fragile, with equity markets likely to react to both the FOMC minutes and developments in the Middle East. Traders are advised to maintain tight stop-losses amid heightened volatility.

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