Markets steady as investors remain cautious into Trump’s Iran deadline, with little sign a deal is close. Oil prices remained supported with the US striking Kharg Island though energy infrastructure was not targeted. FX markets stable overall

Global markets are broadly stable overall as investors remain cautious ahead of President Trump’s 12pm NZT deadline for an Iran truce, with little indication a deal is close. Trump intensified his rhetoric overnight, warning he would erase Iran’s civilization if Tehran fails to meet US demands. Iran has halted direct communications with Washington, though cease-fire mediator channels remain active. U.S. equities are softer — the S&P is modestly lower but off the session lows — while FX and rates markets have been relatively contained.

Oil prices remained supported with Brent crude trading near US$110 per barrel. The US has struck military targets on Kharg Island, a key Iranian oil export hub, though avoided energy infrastructure. OPEC output has suffered its steepest drop in at least four decades in March according to a Bloomberg survey, as the Middle East conflict curtailed exports for several members. Production from the group fell 7.56 million barrels a day to about 22 million, led by declines in Iraq, Saudi Arabia and the UAE.

New York Fed President John Williams said his view on underlying US inflation hasn’t materially changed, even as he expects higher energy prices to lift headline inflation. Williams said he’s trimmed his 2026 US growth outlook and now expects higher headline inflation but sees no case for changing the Fed’s benchmark rate. He also struck an upbeat tone on the labour market after a strong March jobs report and said Jerome Powell will stay on as FOMC chair until the Senate confirms a new Fed chair.

Treasuries sold off modestly and the curve bear-steepened, with the long end leading. The move came despite a muted response to higher New York Fed one-year inflation expectations and firmer-than-forecast core durable goods orders. Fed pricing was little changed and front-end yields were steady as demand held up at the 3-year auction. The 10-year yield rose 2bp to 4.35%, with bigger increases further out the curve.

FX trading was choppy, with the US dollar index edging lower since the NZ close. Major currencies were mixed: the yen was little changed against the greenback while the euro advanced. ECB Governing Council member Wunch, a noted hawk, told the Wall Street Journal the ECB may need to raise rates several times if the Iran war drags on. The NZD held to a tight range around 0.5700 overnight and was little changed on the key crosses, though NZD/AUD stayed soft and slipped below 0.8220.

NZ swap rates edged lower yesterday, with a modest curve steepening bias largely tracking offshore moves. Domestic catalysts were limited in the absence of data, with the market looking ahead to the RBNZ decision. The 2-year swap closed 2bp lower at 3.41%, while the 10-year was flat at 4.34%. NZGBs outperformed at the margin: 10-year yields declined 1bp to 4.72%, as matched maturity swap spreads stabilised near the top end of the well-established +30 to +40bp range.

The RBNZ is unanimously expected to leave the Official Cash Rate unchanged at today’s Monetary Policy Review. With no updated forecasts published at a review, the tone of the statement should lean heavily on Governor Breman’s 24 March speech. The Bank has emphasised it is focused on medium-term inflation and will look through an expected near-term lift in prices. Markets price little risk of an OCR move today.

In Japan, wage growth likely eased after bonus season, but underlying momentum looks intact. Negotiations point to firmer base-pay gains, keeping the Bank of Japan on track for a rate hike. Minutes from the March FOMC meeting should show a committee inclined to stay on hold, with uncertainty elevated amid the Iran war. Alongside higher inflation forecasts and a dot plot shifting toward fewer cuts, the minutes should reinforce the view that the Fed is keep rates steady for longer aligning with market pricing.

Stuart Ritson is a Markets Strategist at BNZ Markets.