The Federal Reserve paused interest rates at 4.25–4.50% for the fourth straight meeting. Its dot plot still shows two cuts in 2025, though seven officials now expect no cuts this year, up from four in March, a sign of caution. UAE borrowers tied to EIBOR will see no immediate change in loan costs. UAE banks, benefiting from wider net interest margins, should maintain steady pricing amid stable funding conditions.
Gold dips
Gold fell 0.6% after the Fed cited upside inflation risk from US tariffs. Prices hover at $3,35, near their 61.8% Fibonacci retracement, with immediate support around $3,31 and resistance at $3,37–3,40. Despite geopolitical risk and central bank demand, elevated US rates and a firmer dollar weighed on prices.
Oil spikes on Iran‑Israel conflict
Brent and WTI prices surged by over 4% following the Iran-Israel strikes, then steadied. Brent fetched $77.58, while WTI was $76.25, both up on the day. Reuters noted that traders are pricing in an additional $10 risk premium, although physical flow remains intact. European diesel prices gained 15%, pressuring refiners and motorists.
Market outlook
According to Vijay Valecha, CIO of Century Financial, traders are now placing a 66% probability on the Fed’s first cut by September, with nearly certainty of two cuts by year-end. However, actual easing hinges on whether tariff-driven inflation proves to be fleeting.
Oil volatility and Middle East tensions add layers to the Fed’s flat forecasting. Goldman Sachs estimates that Brent holds a $10 risk premium; if supply disruptions intensify, prices could exceed $90, but return to $60 by late 2025 if calm persists.
The Fed’s hold limits near-term policy moves, keeping pressure off UAE loans. Gold faces pressure from the dollar, though support levels offer a floor. Oil remains volatile on Middle East developments—with diesel at highs and supply-risk talk still debated. Traders await clarity on tariffs and regional tensions before betting on rate cuts or sustained commodity trends.
