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18.06.2025 10:27 AMOn Tuesday, the U.S. President began threatening Iran with the possibility of U.S. involvement in the conflict between Iran and Israel on the latter's side—a move seen by the markets as another step in the escalation of the crisis.
Donald Trump unexpectedly shifted his tone from a peacemaker to an unequivocal supporter of Tel Aviv in the Middle East crisis. While it was already understood that the U.S. would support its proxy in the region—possibly even participate via air defense systems—direct threats and blackmail had not occurred before. After a meeting in the Situation Room on Tuesday, the President declared that he wanted unconditional surrender from Tehran and even threatened to assassinate Iran's Supreme Leader, Ali Khamenei.
Trump's unexpected actions indicate that the Middle East conflict is already entering a prolonged war phase, one that Israel cannot win alone. As the U.S., acting as Tel Aviv's patron, attempts to use Israel to neutralize Tehran, the conflict is starting to resemble a real full-scale war with unpredictable consequences—viewed by investors as a global negative.
This may be due to the personality of the U.S. President himself, who, being emotional by nature, tends to speak first and think later. Investors seem to believe that, despite the strength of the powerful nation, America is currently not capable of sustaining a prolonged conflict with Iran and has no basis for a nuclear strike yet. They see Trump's words as empty threats—an attempt to intimidate Iran's leaders into accepting unfavorable terms. However, Iran is showing firmness and caution, avoiding actions that could provoke the U.S.
If Trump's rhetoric is not followed by serious actions, we can expect a recovery in market demand. A good indicator of market sentiment is the price of gold, a classic safe-haven asset, which has shown virtually no change—even after Trump's latest statements.
It is quite possible that following the threats, there will be an attempt to hold negotiations to resolve the conflict, which would be seen as a positive by the market.
According to Fed funds futures dynamics, there is a 99.9% probability that interest rates will be held steady. The key interest rate is expected to remain in the range of 4.25%–4.50%.
How will markets react to the Fed's decision?
As I've mentioned before—likely not at all. By keeping its monetary policy unchanged, the Fed signals that it continues to view the current economic situation as uncertain. A significant factor here is the renewed upward trend in consumer inflation. Therefore, the most important part of today's meeting won't be the rate decision itself but Fed Chair Jerome Powell's speech, where markets will search for clues about the timing of potential future rate cuts.
Considering everything currently happening in the markets and the Middle East, I believe overall market dynamics will remain unchanged.
The pair remains under pressure amid the escalation of the Middle East crisis, falling inflation in the UK, and expectations that the Fed will hold rates steady. A drop below the 1.3410 level could lead to a decline toward 1.3265. A potential entry point for selling the pair is 1.3396.
The pair is also under pressure due to the Middle East crisis and the anticipated Fed rate decision, which suggests rates will remain unchanged. Failure to rise above 1.1515 could push the pair down toward 1.1400. A potential entry point for selling the pair is 1.1498.
