A sense of caution has taken hold of financial markets as investors evaluate the prospects of more sanctions on Russia for the alleged destruction in Bucha, a town on the outskirts of Ukraine’s capital.

Asian shares wobbled on Tuesday morning due to the rising geopolitical risks, while oil benchmarks jumped over 1% on supply-side fears. European and U.S futures fluctuated, pointing to a mixed open despite Wall Street closing higher overnight. In the currency space, the dollar gained for the third straight session yesterday as investors sprinted to safety. But interestingly, trading activity in gold was like watching paint dry.

With geopolitics at the forefront of investors’ minds, the next few days could be rough and rocky for global markets. The devastation in Bucha has prompted not only the European Union but also world leaders to discuss new sanctions on Russia. As ongoing geopolitical risks fuel uncertainty and trigger volatility, this could sap risk sentiment, extending further support to safe haven assets.

The Reserve Bank of Australia (RBA) left interest rates unchanged at 0.1% at its overnight meeting. However, the central bank signaled a growing willingness to raise interest rates soon, by dropping the phrase “the board is prepared to be patient”. The RBA’s hawkish tilt sent the aussie to its highest level in nine months, above 0.76.

FOMC minutes and Fed speeches in focus

This could be a big week for the dollar due to the FOMC meeting minutes as well as scheduled speeches from Fed officials.

The minutes of the FOMC March policy meeting are expected to offer investors fresh insight into how officials view monetary policy, after raising interest rates for the first time since 2018. Market players will also comb through the minutes for details on the plans for balance sheet reduction which could start as soon as May.

Should the minutes strike a hawkish tone with policymakers discussing the possibility of a 50-basis point rate hike in May, this could boost the dollar. Expect the greenback to be influenced by numerous policymakers scheduled to speak this week as well, including Fed Governor Lael Brainard and Philadelphia Fed President Patrick Harker among others.

Commodity spotlight – Oil

Oil benchmarks appreciated over 1% on Tuesday morning as bulls drew strength from supply-side fears due to the Russia-Ukraine conflict. With the European Union working on new sanctions that may target Russia’s oil industry, crude prices could edge up in the near term.

However, last week’s announcement by President Biden to release a mammoth 180 million from the country’s strategic petroleum reserves (SPR) between May and October is taming oil bulls. The idea of the SPR plugging the gaping hole in the absence of Russian oil could cap upside gains in the global commodity. In addition, China’s most populous city Shanghai is under lockdown and given how China is the world’s largest crude consumer, this development may further weigh on prices.

Brent is trading around $109.15 as of writing. A move to the upside could open a path back towards $114.50. If prices slip below $108, then a decline towards $104 could be on the cards.

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