Prices push oil above $100 per barrel

• The Canadian dollar rose above 1.37 against the US dollar, reaching a one-month high and leading performance among G7 currencies.
• Mexican peso slid to 17.8 per dollar, a seven-week low and its weakest weekly result since summer 2024.
• Swiss franc trades near historic highs at 0.78 per USD, supported by safe-haven demand amid escalating tensions in the Middle East.
• Natural gas prices reached $3.4 per MMBtu, the highest in a month, on supply fears linked to Ras Laffan.

Oil prices surge above $100 per barrel

Trading on the US stock market ended lower. By the close of Friday, the Dow Jones (US30) fell by 0.95% (-2.27% for the week). The S&P 500 (US500) shed 1.33% (-1.41% for the week), and the tech-heavy NASDAQ (US100) closed down 1.59% (-0.60% for the week). This unanimous negative trend was driven by a dangerous combination of a geopolitical crisis and weak macroeconomic data, which heightened fears of stagflation. Washington’s ultimatum to Tehran and warnings from Middle Eastern exporters regarding force majeure circumstances propelled WTI oil prices to critical levels. Against this backdrop, the shocking contraction of 92,000 jobs in the US and the jump in the unemployment rate to 4.4% confirmed investor fears that high energy costs have begun to undermine the real economy and consumer activity.

The Canadian dollar (CAD) strengthened to a one-month high above 1.37 against the US dollar, demonstrating the best performance among G7 currencies. The primary driver of the rally was the surge in WTI oil prices above $92 per barrel, which provided a massive influx of foreign exchange earnings into the Canadian economy amid the blockade of the Strait of Hormuz.

The Mexican peso (MXN) weakened to a seven-week low of 17.8 per dollar, showing its worst weekly performance since the summer of 2024. The main trigger for the decline was the shock contraction of US jobs, which amplified fears of an economic cooldown in Mexico’s largest trading partner. Despite a local weakening of the dollar index, the peso fell victim to a mass exodus of investors from risky emerging market assets, triggered by the escalation in the Middle East and the threat of global stagflation.

Equity markets in Europe mostly declined. The German DAX (DE40) fell by 0.94% (-4.80% for the week), the French CAC 40 (FR40) closed down 0.65% (-5.53% for the week), the Spanish IBEX 35 (ES35) lost 0.99% (-4.57% for the week), and the British FTSE 100 (UK100) finished 1.24% lower (-5.33% for the week).

The Swiss franc (CHF) continues to trade near historical highs at 0.78 against the US dollar. Investors view the currency as the primary safe-haven asset amid the catastrophic escalation in the Middle East. However, further strengthening of the franc is limited by the hawkish rhetoric of the SNB. Vice President Antoine Martin confirmed that the regulator is ready for active currency interventions to prevent a deflationary spiral.

Silver prices (XAG) made a sharp move on Friday, consolidating above the $32.5 per ounce level. The main driver was the shocking US labor market report: the loss of 92,000 jobs and the rise in unemployment to 4.4% forced investors to urgently revise their anticipations. While the market had been preparing all week for a “higher-for-longer” interest rate scenario due to oil-driven inflationary pressure, Friday’s data sharply increased the likelihood of early Fed policy easing, reducing the opportunity cost of holding the metal.

WTI oil prices demonstrated historic volatility: after a 31% surge, quotes stabilized above $100 per barrel (+13% for the day). This is the most powerful daily jump since the 2020 pandemic, caused by the paralysis of production in the Persian Gulf. In Iraq, production at southern fields collapsed by 70%, and Kuwait declared force majeure, which, combined with disruptions in Qatar, created a critical supply deficit on the global market. The situation is exacerbated by the risk of technical production halts in the UAE and Saudi Arabia; due to the blockade of the Strait of Hormuz, exports are impossible, and domestic storage facilities are filling up critically fast. Against this background, a power transition occurred in Tehran. Mojtaba Khamenei, the son of the late Ali Khamenei, became the new Supreme Leader of Iran, adding uncertainty regarding further escalation or the possibility of negotiations.

The US natural gas prices (XNG) rose to $3.4 per MMBtu, reaching a one-month high amid critical global supply disruptions. The main factor behind the panic was the production halt at the Qatari giant Ras Laffan following Iranian drone strikes and the declaration of force majeure. Since the Strait of Hormuz is effectively closed to commercial shipping, approximately 20% of global LNG trade has been blocked, sharply increasing demand for American gas as the only stable alternative for Europe and Asia. The situation is further complicated by the war entering its second week: Israel and the US are striking Iranian fuel depots, while Tehran attacks the energy infrastructure of its neighbors.

Asian markets were also under a sell-off last week. The Japanese Nikkei 225 (JP225) fell by 3.70% over the trading week, the FTSE China A50 (CHA50) declined 0.98%, the Hong Kong Hang Seng (HK50) shed 2.23%, and the Australian ASX 200 (AU200) showed a negative result of 2.95% over the 5 days.

On Monday, the Nikkei 225 (JP225) plummeted by 6%, dropping to 32,000 points – its lowest level in two months. The massive sell-off was triggered by the jump in WTI oil prices above $100 per barrel (briefly reaching $119) amid the escalation of the war involving the US, Israel, and Iran. For the tech-oriented Japanese market, this served as a “fire siren,” as investors began pricing in the inevitable rise in production costs and the risk of global stagflation. Japan finds itself in a critical situation due to its unprecedented energy dependency: the country receives about 95% of its oil from the Middle East, with 70% of those supplies physically passing through the now-blocked Strait of Hormuz.

The New Zealand dollar (NZD) fell to $0.587, ending the week in the red amid the escalation in the Middle East and a flight to safe-haven assets. The energy shock and the blockade of supply routes make the New Zealand economy extremely vulnerable, as the country is totally dependent on imported oil. A conflict of expectations is brewing in the market: traders estimate the probability of an RBNZ rate hike in September at 80%, predicting a 40-basis-point tightening, while the regulator itself maintains a much softer rhetoric.