Middle East tensions keep markets on edge as Fed minutes come into focus

Investor sentiment turned cautious on Wednesday as markets assessed the latest developments surrounding the conflict in the Middle East, while attention shifted to the upcoming release of the minutes from the US Federal Reserve's June Federal Open Market Committee meeting.

Market participants remained focused on geopolitical developments during the European session, with concerns over escalating tensions supporting higher crude oil prices and influencing broader market sentiment.

US dollar steadies as investors await Fed minutes

The US Dollar Index remained largely stable near the 101.00 mark after rising roughly 0.3% during Tuesday's session.

Meanwhile, US stock index futures traded about 0.2% lower during the European morning, suggesting investors adopted a cautious stance ahead of the release of the Federal Reserve's June FOMC meeting minutes later in the day.

The minutes are expected to provide additional insight into policymakers' assessment of economic conditions and the future direction of monetary policy.

The New Zealand dollar strengthened following the policy decision.

NZD/USD gained more than 0.5% on the day and traded above the 0.5700 level during the European session.

Major currency pairs trade cautiously

The euro remained relatively stable against the US dollar after Tuesday's losses.

EUR/USD held above the 1.1400 level during Wednesday's European trading session after declining about 0.3% a day earlier.

The British pound also traded with limited momentum.

GBP/USD had fallen more than 0.2% on Tuesday, ending a nine-day winning streak.

The pair attempted to stabilise early Wednesday while holding above the 1.3350 mark.

Elsewhere, USD/JPY continued to move within a narrow range.

The pair closed Tuesday's session largely unchanged and extended its sideways trading pattern above the 162.00 level at the start of European trading on Wednesday.

The Indian rupee posted modest gains against the US dollar during Wednesday's opening session.

The USD/INR pair eased towards the 95.00 level despite renewed geopolitical concerns following US strikes on Iran, which contributed to higher oil prices.

Oil extends gains amid Middle East developments

Crude oil prices surged on Tuesday after reports said Iran fired at three commercial vessels attempting to cross the Strait of Hormuz.

In response, the United States launched retaliatory strikes targeting Iranian air defence systems and drone launch sites.

Following a gain of nearly 5% on Tuesday, West Texas Intermediate (WTI) crude continued its upward move on Wednesday.

The benchmark was last seen trading near $72.60 per barrel, up about 0.8% on the day.

The renewed rise in oil prices reflected growing concerns that escalating geopolitical tensions could disrupt energy supplies and increase market volatility.

Currency markets remained focused on both geopolitical developments and the upcoming Federal Reserve meeting minutes, with investors looking for fresh signals that could shape near-term market direction.

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