Mid-week review: Iran war deepens while oil swings

• Unease grips markets as war rages on
• Oil displays wild swings amid conflicting messages
• Gold remains trapped within a range ahead of CPI
• Traders pricing in 50% chance of two Fed cuts in 2026

A heavy sense of unease shrouded global markets on Wednesday as the US-Israeli war on Iran entered its 12th day.

Equity markets remain shaky as conflicting signals from the White House about the timeline and outlook for the war leave investors on edge.

In the commodity space, oil has been thrown on a chaotic rollercoaster ride as traders struggle to make sense of the mixed messages around the Iran war. After skyrocketing to almost $120 early on Monday, Brent tumbled as much as 32% from this peak, hitting a low of $81.16 on Tuesday before rebounding back toward $90.

Oil benchmarks are expected to remain volatile amid heightened geopolitical risk. Market reports around the IEA proposing a record release of reserves to counter sky-high prices may fuel the wild price swings.

In the FX space, the Aussie climbed to its highest in almost four years as expectations rose over the RBA raising rates this month. Appetite for the dollar remains supported by safe-haven demand while the Canadian Dollar is still holding ground against other G10 currencies despite the heavy sell-off in oil prices.

Traders are pricing a 50% chance that the Fed cuts rates twice in 2026.

The February CPI and January PCE index, which is the Fed’s preferred inflation gauge - may offer crucial insight into the path of price pressures.

Should the incoming inflation data further reduce Fed cut bets, equity markets could take a hit while the dollar appreciates.