A series of developments surrounding US-Iran diplomacy and the Strait of Hormuz, combined with anticipation of major central bank policy decisions, drove significant volatility across global markets on Monday. Iran reportedly presented a new proposal to the United States via Pakistani mediators, aiming to reopen the Strait of Hormuz and extend the ceasefire, with the goal of working toward a permanent end to the conflict. However, US President Donald Trump called off a planned delegation to Pakistan, stating that Iran's offer was 'much better, but still not good enough,' and clarified that Washington remains available for talks but will not pursue unproductive negotiations [2][5][6][8]. Iranian President Masoud Pezeshkian responded that Iran would not enter 'imposed negotiations under threats or blockade' [6][8].
The uncertainty over the Strait of Hormuz, a critical passage for nearly 20% of global energy supply, kept WTI crude oil prices elevated, with the benchmark trading around $93.65 during Asian hours. The risk of supply shocks due to restricted transit and stalled peace talks contributed to the bullish momentum in oil markets [5][8]. This, in turn, weighed on currencies of oil-importing nations such as the Indian Rupee, with USD/INR holding firm near 94.30 as high oil prices and increased demand for US Dollars by importers persisted. Foreign Institutional Investors (FIIs) extended their selling in Indian equities, offloading Rs. 8,827.87 crore on Friday, surpassing the combined selling of the previous four days [5].
In the forex market, the Japanese Yen remained in focus ahead of the Bank of Japan's (BOJ) monetary policy statement scheduled for April 24, 2026. Most analysts expect the BOJ to keep its key interest rates unchanged at 0.75%, but traders are alert to any shifts in rhetoric regarding yield curve control, asset purchases, or inflation targets, as even subtle changes could trigger sharp moves in JPY pairs. Technical analysis highlighted key resistance and support levels for USD/JPY (155.00 and 153.00, respectively), with implied volatility elevated in the options market. USD/JPY traded around 159.20, testing a breakout region, and maintained a bullish bias as long as it stayed above the 20-day EMA at 159.14. A break above 160.00 could open the path to the March 30 high at 160.46, while a drop below 159.14 would expose support at 157.60 [1][2][3].
Other major currency pairs also reflected the broader risk sentiment. GBP/USD climbed above 1.3500, supported by optimism over potential US-Iran progress and sliding oil prices, which eased inflation concerns and tempered hawkish Federal Reserve expectations. The pair was poised to target 1.3600, with technical indicators showing buyers in control [7]. USD/CHF traded near 0.7840, subdued despite safe-haven demand, as the US Dollar weakened on the back of diplomatic uncertainty. Swiss National Bank Chairman Martin Schlegel reiterated the SNB's openness to policy adjustments and FX intervention, citing a more uncertain outlook for Switzerland with rising inflation risks [6].
Meanwhile, AUD/JPY strengthened above 114.00, buoyed by improved risk sentiment from Iran's truce proposal and anticipation of both the BOJ decision and Australian inflation data later in the week. The BOJ is widely expected to keep rates steady, still assessing inflation pressures from higher energy costs, after Japan's government reported an acceleration in consumer inflation for the first time in five months in March [3].
Market participants are bracing for further volatility as they await key central bank meetings, including the BOJ, Federal Reserve, and Bank of Canada, as well as the American Petroleum Institute's oil inventory report, which could further influence WTI prices [1][4][8].
CONCLUSION
Markets are highly sensitive to ongoing US-Iran diplomatic developments and the new Hormuz proposal, with oil prices and major currency pairs reflecting heightened volatility. Central bank policy decisions this week, especially from the BOJ and Fed, are expected to further shape market direction. Traders remain cautious, positioning for potential rapid moves as geopolitical and monetary policy uncertainties persist.