Markets Cautious as Middle East Tensions, Fed Speakers Dominate

Traders kept risk appetite in check on Tuesday. Geopolitical headlines out of the Middle East and a packed calendar of Federal Reserve speakers gave the session a defensive tone. No major US economic data was due until later in the week, so price action leaned on headlines and central-bank commentary.

The dollar edged higher against most major peers, with the EUR/USD pair slipping below 1.0850 and GBP/USD testing support near 1.2700. Crude oil held near recent highs as supply-disruption fears persisted. Treasury yields were little changed, with the 10-year note hovering around 4.25% as traders waited for Fed speakers to offer clues on the rate path.

The yen remained under pressure despite fresh verbal warnings from Japanese officials. USD/JPY traded above 159.50, keeping intervention risk alive. Gold found support above $2,320, reflecting steady safe-haven demand.

Equities in Asia and Europe traded mixed. US futures pointed to a flat open, suggesting the cautious mood would carry into the New York session. The S&P 500 and Nasdaq both drifted lower in pre-market trading, with tech stocks giving back some of last week's gains.

The next scheduled catalysts are Thursday's revised US GDP print and Friday's personal consumption expenditures (PCE) inflation data. Until those releases, markets are likely to take direction from Fed rhetoric and any escalation in the Middle East. A hotter-than-expected PCE reading would reinforce the case for rates to stay higher for longer, while a cooler number could revive bets on a September cut. For now, traders are positioned for the range to hold.