Geopolitical tensions in the Middle East have once again captured global market attention. Between October 8–9, 2025, several major media outlets — including Reuters, Associated Press, and Al Jazeera — reported that Israel and Hamas had reached an initial or first-phase ceasefire agreement. The deal includes prisoner exchanges and troop withdrawals to specific lines, with implementation steps — such as the release of hostages — to be discussed within 72 hours after the announcement.
This marks the first potential pause in a conflict that, for weeks, has fueled geopolitical uncertainty and driven global investors to seek refuge in safe-haven assets such as gold, the Japanese yen, and the Swiss franc.
Market Reaction: From Tension to Risk Rotation
Financial markets responded swiftly to the news in a familiar geopolitical pattern — shifting from risk-off to risk-on mode. When conflict intensifies, investors typically pile into safe assets, with gold (XAUUSD) being one of the most sought-after instruments due to its role as a hedge against uncertainty. However, once signs of peace emerge, demand for safe-havens tends to fade as funds rotate toward equities, commodity currencies, and other risk assets.
Following reports of the ceasefire, gold prices saw an intraday correction, while global stock indices briefly rallied. Risk-friendly currencies such as the Australian dollar (AUD) and New Zealand dollar (NZD) also strengthened. Nonetheless, many traders remained cautious, awaiting clarity on implementation before taking more aggressive positions.
The Role of the Dollar and Safe-Haven Dynamics
In this context, the U.S. dollar (USD) plays a dual role. During periods of turmoil, the greenback often strengthens as global capital seeks liquidity. However, as tensions subside, USD tends to face pressure due to a shift toward risk assets and renewed appetite for carry trades. Thus, the latest ceasefire news could weaken the dollar against risk-on currencies like the AUD or NZD.
Moreover, a stabilization in oil prices due to reduced regional risks could further ease global inflation pressures — another factor that may dampen gold demand and support risk-on sentiment in the markets.
Two Market Scenarios Ahead
Scenario 1: Ceasefire Holds (Risk-On)
If prisoner exchanges and troop withdrawals proceed as planned, markets will likely continue rotating toward risk assets.
Implications: Gold (XAUUSD) may decline further from its previous highs. The U.S. dollar could weaken against AUD, NZD, and several emerging market currencies.
Market Strategy: Investors may consider short positions on gold near resistance levels while capitalizing on potential strength in pro-risk currencies — with disciplined risk management.
Scenario 2: Ceasefire Falters (Risk-Off Persists)
If the implementation stalls or the truce collapses, markets will likely revert to a defensive stance.
Implications: Demand for safe-havens would rise again, with gold, yen, and the Swiss franc regaining strength.
Market Strategy: Traders could look for buy-on-dip opportunities in gold with stop-loss levels below key technical supports, while also considering long positions in JPY or CHF against the USD.
Market Focus in the Next 72 Hours
Investors are now closely watching for confirmation of the agreement’s execution — including prisoner releases, official statements from both sides, and the role of regional mediators. In addition to political developments, markets will be monitoring:
- U.S. Treasury yields (UST) as a gauge of risk sentiment.
- Global indices such as the S&P 500 and Nikkei, reflecting risk appetite.
- Technical behavior of XAUUSD, especially if prices break key support levels (signaling a risk-on shift) or remain above resistance (indicating continued caution).
- Oil prices, which could reignite volatility should tensions flare up again.
Conclusion
Overall, the Israel–Hamas ceasefire brings a breath of relief to global sentiment, temporarily weakening safe-haven assets such as gold and the U.S. dollar. However, the sustainability of this effect will hinge entirely on how credible and lasting the implementation proves to be on the ground.
If the exchange and withdrawal process unfolds smoothly, the rotation toward risk assets is likely to persist. Conversely, if the truce proves fragile, markets could quickly revert to a risk-off stance — reaffirming that in geopolitics, temporary peace does not always mean lasting stability.
Ade Yunus
Global Market Strategies