Trump Trade War Enters a New Phase with Iran Conflict: Oil, US Dollar, S&P 500 Analysis

The tariffs imposed by President Trump have taken on new dimensions as geopolitical tensions escalate in the Middle East. Following the US airstrikes on Iran’s nuclear sites, uncertainty has deepened across global markets. These tariffs were introduced as a tool to protect US industries; however, they are now intersecting with the consequences of military action. Investors are now watching the potential for Iranian retaliation, oil supply disruptions, and political escalations that could ripple through financial systems. The convergence of economic protectionism and geopolitical risk has left markets on edge.

Trump’s Tariffs Meet Middle East Crisis: US-Iran Tensions Are Shaking Global Markets

The US bombing of Iranian nuclear sites has escalated tensions in the Middle East. Iran responded with threats of broader retaliation. While missile exchanges with Israel have continued, Iran has not yet targeted US assets or disrupted key oil shipping lanes. However, the risk remains high.

This uncertainty has introduced strong volatility in the US Dollar. Investors are torn between rising inflation risks from oil and signs of a weakening economy. Treasury yields remain volatile as markets await Powell’s upcoming testimony and digest data showing softer consumer spending. The Fed’s cautious tone has failed to anchor expectations.

Crude oil prices surged, with WTI oil (CL) rising above $77 and Brent oil (BCO) surpassing $80. A prolonged conflict could trigger further energy shocks. Morgan Stanley warned that higher oil prices may strain household spending and reduce GDP growth. Energy-driven inflation could leave the Fed in a difficult position, balancing policy risks against weakening demand.

The chart below shows that consumer inflation expectations for the five-year outlook dropped to 4.1% in June. However, the latest geopolitical developments and risks in energy markets may introduce further uncertainty into the global financial system.

Moreover, the US equities responded cautiously. The Dow Jones Industrial Average and the S&P 500 exhibit significant volatility. The rising geopolitical risks and policy uncertainty are straining market sentiment. If Iran escalates or oil prices continue to rise, pressure on corporate margins and consumer confidence may intensify. The S&P 500 and Dow could face short-term headwinds unless there is greater clarity on inflation and the Fed’s policy direction.

US Dollar Analysis: Volatility Persists Amid Oil Shock and Fed Uncertainty

The monthly chart for the USD Index shows a rebound from strong support around the 98 level, aiming toward a resistance near 100.50. As long as the index stays below 100.50, the downward trend is likely to continue. A break below 96 could open the door for a move toward the 90 area.

WTI Crude Oil Analysis: Iran Conflict Raises Risk of $110 Breakout

The US strikes on Iran have triggered significant uncertainty in the energy market. WTI crude oil reacted strongly following the Israeli attacks on Iran. The monthly candle for June shows that the oil market is trending upward. Strong resistance for WTI crude remains around the $90 level.

A break above $90 could trigger a sharp move toward the $110 area, which marks a major long-term resistance indicated by the black trendline. The threat of closure of the Strait of Hormuz and the Red Sea may lead to heightened volatility in WTI crude, potentially driving a strong surge in oil prices.

S&P 500 Analysis: Market Faces Pressure as Geopolitical Tensions Rise

The weekly chart for the S&P 500 indicates that it is trading within a broadening wedge pattern. S&P 500 is experiencing increased volatility as global uncertainty rises. If Iran retaliates after the US strikes, this could trigger further volatility in the S&P 500 and help define its next move. As long as the index stays above the 4,600 zone, the broader direction may remain upward. Additionally, any strong decline during this conflict may attract renewed buying interest in the index.

Dow Jones Analysis: Volatile Pattern Emerges Amid US-Iran-Israel Crisis

The Dow Jones Industrial Average remains within a broadening wedge pattern and continues to follow a bullish formation. However, the appearance of this wedge after an inverted head-and-shoulders pattern signals increased volatility. The escalating conflict between the US, Iran, and Israel may add further volatility within the 37,000–47,000 range. Meanwhile, the RSI has rebounded from the oversold region and remains above the mid-level, suggesting that the Dow Jones may continue to rise.