Policy Uncertainty Drives Market Volatility
Global markets are entering a phase of heightened volatility, driven by a combination of uncertainty surrounding US trade policy, Middle Eastern geopolitical dynamics, and shifting interest rate expectations that are highly sensitive to the latest economic data. Under these conditions, market participants tend to reduce risk exposure and shorten position horizons, as policy direction can shift rapidly following political developments, diplomacy, and data releases.
From a trade perspective, tariff issues have again become a major source of uncertainty. Following the US Supreme Court's ruling nullifying some import duties, the market initially saw the potential for reduced inflationary pressures stemming from tariffs. However, the subsequent policy response triggered a new phase: the US government prepared a different tariff scheme and opened up room for tariff escalation. The perception that the policy framework could shift rapidly increased policy risk and ultimately widened risk premiums across various asset classes.
At the same time, geopolitical factors remain a driver of reactive price movements. The ongoing US-Iran nuclear talks have the market considering two opposing scenarios: de-escalation, which suppresses risk premiums, or escalating tensions, which boost demand for defensive assets and increase energy risk premiums. This situation places the market in a "headline-driven" situation, where a change in the tone of a statement or a diplomatic development can trigger sharp movements in a short period of time.
Beyond geopolitical factors and tariffs, risk sentiment is also affected by the resurgent narrative of technological disruption. Concerns that the adoption of AI could change the competitive landscape and business models in the technology and related services sectors are driving rotation and repricing in certain stocks. The impact is not only on individual issuers but also on risk appetite in general, as structural uncertainty makes investors adjust their portfolios more quickly when volatility increases.
From Asia, China's decision to hold its benchmark interest rate (LPR) reinforces the signal that policy support remains selective. This helps maintain stability but also emphasizes that the stimulus push is not aggressive, so the market remains cautious in assessing the demand and growth outlook. As a result, assets in the region tend to move in the direction of global sentiment rather than being the primary driver.
On the US monetary front, market attention is focused on how labor data will shape the direction of the Fed's policy. Statements by Fed officials emphasizing data-dependence have increased market sensitivity to the February jobs release. When interest rate expectations shift rapidly between "hold on longer" and the possibility of a cut, movements in the US dollar and bond yields become important determinants of the direction of global assets.
In the context of market correlation, the combination of the above factors places gold, oil, and the US dollar in a dynamic of mutual attraction. Gold tends to find support when tariff uncertainty and geopolitical risk increase, but is vulnerable to corrections when the US dollar and yields strengthen due to expectations of tighter Fed policy. Oil is more responsive to geopolitical headlines: signals of de-escalation can suppress risk premiums, while escalation has the potential to drive price spikes, although the demand outlook could be depressed if tariff concerns worsen. The USD, meanwhile, can strengthen when risk-off increases, but its room for appreciation is potentially limited if the market perceives trade policy uncertainty as depressing growth prospects. The USD's direction is highly dependent on a combination of labor data, the Fed's response, and geopolitical escalations. (asd)
Source: Newsmaker.id
