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The fragile ceasefire in the Iran war is fraying as the US actively tries to break Iran's blockade while maintaining its own.
While the shaky Iran war ceasefire is holding, for now, the near-complete blockade of the Strait of Hormuz is still in force from both sides, and there is little sign that peace talks are making progress, or even taking place.
Trump's optimistic announcements on Friday regarding a possible agreement with Iran and the reopening of the Strait of Hormuz were greeted with a severe fall in oil prices and a sharp move higher in risk assets. The former proved to be short-lived.
The rally in risk assets on ceasefire optimism came to a halt over the weekend. The ceasefire talks between the US and Iran collapsed in Pakistan and the US announced that the Strait of Hormuz will be blockaded to ships going to or from Iranian ports.
A feeling of deja vu is wafting over markets as the Iran war continues without a clear resolution in sight.
The war in Iran is now entering its second month without any clear prospects for either a ceasefire or the reopening of the Strait of Hormuz.
Risk appetite rebounded on Monday morning after some upbeat comments from President Trump suggested that an end to the Iran war may not be as far off as previously feared.
The war in Iran rages on without a clear end in sight, and as US and Israeli strikes continue, and Iran digs its heels in by continuing to block the Strait of Hormuz, markets are bracing for a conflict that could drag on for a number of months, rather than merely weeks.
Any doubts about whether the dollar still retained its safe haven status in times of geopolitical turmoil have been dispelled.
The Iran war is now in its second week, and markets are bracing for the possibility that it will last a while.
The US dollar confirmed last week that it remains a safe-haven currency of choice for investors during times of global conflict.
The New Year has begun with a bang following the shock ousting and capture of Venezuela President Nicolás Maduro by US forces over the weekend, but the early reaction in currency and futures markets has been calm.
