Markets ended the week with a clear change in mood. Early optimism around tech and diplomacy gave way to renewed inflation anxiety, as rising oil prices pushed Treasury yields to one year highs and pulled investors back toward the US dollar. Reuters reported on Friday that Asian shares fell sharply, the 10 year US Treasury yield rose to around 4.53%, and the market moved back to pricing a meaningful chance of another Federal Reserve rate increase this year.
Oil was again the central driver. Brent rose to about $107.49 a barrel on Friday and WTI to about $103.30, leaving them up nearly 6% and more than 7% respectively for the week. Reuters said the move was driven by continued uncertainty around the fragile Iran ceasefire, ship attacks and seizures near the Strait of Hormuz, and the lack of any real breakthrough from the Trump Xi summit on reopening the shipping lane. Iran said about 30 vessels had crossed Hormuz since Wednesday evening, but Reuters noted that is still far below the roughly 140 crossings per day that were typical before the war.
In currencies, the dollar regained control. Reuters reported that the dollar index rose to 99.203, its highest in more than a month, and was on track for a 1.35% weekly gain, the strongest since early March. The euro dropped to a one month low near $1.1635, while the yen stayed on the weak side of 158 per dollar. The main reason was simple: higher energy prices fed inflation fears, US yields climbed, and traders sharply raised expectations that the Fed may need to tighten again. Reuters said markets moved from pricing less than a 20% chance of a December hike a week ago to close to a 50% chance by Friday.
Gold moved the other way. Spot gold fell to about $4,579.19 an ounce on Friday, its lowest level in a week, and was down nearly 3% for the week. Reuters tied that decline to the same combination that supported the dollar: higher oil, higher yields, and fading hopes for near term rate cuts. Gold has now dropped more than 13% since the US Iran conflict began on 28 February, showing that in this environment the inflation and rates channel is outweighing the usual safe haven narrative.
For crypto, the weekend of 16 to 17 May now matters because it is the major market that keeps trading while traditional markets pause. Bitcoin is around $80,792 and Ether around $2,264.79 at the time of writing. Alongside the macro backdrop, the sector also got a policy development this week after the US Senate Banking Committee advanced a long awaited crypto market structure bill on 14 May, sending it on to the full Senate. That does not remove the bigger macro pressure, but it does give crypto traders an additional story to watch beyond oil and rates.
The most reasonable weekend base case is that crypto remains highly headline sensitive rather than directionally clean. That is an inference, but it is grounded in this week’s pattern: oil stayed elevated, the dollar strengthened, yields surged, and markets treated every Iran and Hormuz headline as immediately tradable. The crypto market also now has a supportive regulatory headline in the background, which could cushion sentiment if weekend geopolitical news stays quiet. If tensions worsen, however, crypto could easily trade as a broader risk asset and come under pressure alongside other speculative positions.
Looking ahead to next week, forex traders are likely to stay focused on the same pressure points: US yields, Fed expectations, and any sign of progress or renewed deadlock around Iran. Oil remains sensitive to physical shipping conditions through Hormuz, and gold may continue to struggle if the market keeps pushing rate cut hopes further out. In other words, this week ended with the inflation shock back in charge, and next week’s tone for FX, oil and gold will likely depend on whether that pressure eases or intensifies.
