Global markets opened the week on an uneasy footing, as geopolitical tensions in the Middle East and surging oil prices created a complex outlook for investors, with implications for oil-dependent economies like Nigeria.

Oil benchmarks are on course for their strongest monthly rally in decades, driven by mounting fears of supply disruptions after the Strait of Hormuz remained effectively closed amid the ongoing Iran conflict. Prices have surged into triple digits, reinforcing bullish sentiment across energy markets.

According to Head of Market Research at FXTM, Lukman Otunuga, the outlook for crude remains firmly supported by current conditions.

“Oil prices remain fundamentally bullish with $100 a key psychological level for both Brent and Crude,” he said, pointing to the continued uncertainty surrounding supply routes in the Middle East.

For Nigeria, a major oil exporter, the rally presents a potential economic boost. Higher crude prices typically support government revenues and strengthen the naira. However, the broader global environment may dilute these gains.
Otunuga noted that while rising oil prices are “good news for Nigeria,” global risk aversion linked to the Iran conflict could “offset some upside” for the currency.

The geopolitical backdrop remains fluid. The week began with heightened anxiety after Iran accused the United States of preparing for a possible ground offensive, even as former President Donald Trump reportedly explored diplomatic options to end the conflict.

The war, now in its fifth week, has entered what analysts describe as a dangerous phase, marked by shifting signals and uncertainty.

“Repeated mixed messages and the ongoing closure of the Strait of Hormuz could lead to more volatility as investors scramble to price the uncertainty,” Otunuga added.

Elsewhere, gold has moved expectations, falling nearly 14 per cent this month despite the risk-off environment typically favourable to safe-haven assets. The decline has been attributed to a stronger US dollar and reduced expectations of interest rate cuts by the Federal Reserve.

Attention is now turning to the United States’ March Non-Farm Payrolls (NFP) report, due Friday, which is expected to provide fresh insight into the health of the world’s largest economy. Markets are forecasting a modest rebound in job creation, with 65,000 new jobs expected after a contraction of 92,000 in February.

Otunuga emphasised the importance of the data, noting that the outcome “could shape expectations around the Fed at a time when surging energy prices are already complicating the outlook.”

Currency markets have also reflected the growing uncertainty. The Japanese yen has come under pressure, with the USD/JPY pair rising above 160 for the first time since July 2024. Historically, this level has triggered intervention by Japanese authorities.

“If history repeats itself and an intervention becomes reality, this could trigger an aggressive selloff on the USDJPY pair,” Otunuga said, adding that heightened risk aversion and oil price swings could further influence the yen, given Japan’s heavy reliance on Middle Eastern crude imports.

As the week unfolds, investors are likely to remain cautious, balancing geopolitical risks, economic data, and volatile commodity prices in an increasingly uncertain global landscape.