Economic and technical analysis: Escalating geopolitical tensions reshape global markets

Economic and technical analysis: Escalating geopolitical tensions reshape global markets

Global financial markets have experienced sharp and sudden volatility in recent days, driven primarily by escalating geopolitical tensions in the Middle East, notably the intensifying conflict between Israel and Iran. These developments have triggered a significant shift in asset price dynamics, with safe-haven assets such as gold and crude oil rallying strongly, while major equity indices like the S&P 500 and Nasdaq endured steep declines, breaking a multi-month bullish streak.

Gold– Strong rally amid rising Middle East risks

Detailed technical background

Gold continues to record fresh highs above $3,400, aiming toward the $3,500 mark amid robust buying fueled by geopolitical concerns. Since early May, gold has traded within a clearly defined ascending channel, repeatedly finding support near $3,285, with a gradual rally peaking around $3,403. This channel outlines a reliable technical framework supporting the uptrend, further validated by elevated trading volumes in key demand zones.

On June 9, gold rebounded sharply from a demand zone between $3,298 and $3,300, signaling renewed buyer control after a consolidation phase lasting three months. Subsequently, gold decisively broke through the supply zone between $3,381 and $3,403 during June 13-14 sessions, accompanied by significant volume increases, confirming strong upward momentum.

Key support and resistance levels

• Strong Supports: Around $3,385 (channel support) and $3,381 (3-month Point of Control - POC).
• Major Resistances: $3,456 (April supply rejection zone), $3,476 (upper channel boundary), and the psychological $3,500 level.
• Potential Extension: Should momentum persist, gold could test $3,535 to $3,540 levels.

Economic factors and market sentiment

Rising tensions in the Middle East have propelled gold’s appeal as a safe haven, particularly amid weakening major equity indices and declining risk appetite. Furthermore, U.S. monetary policy expectations—pointing toward a pause or slowdown in rate hikes—ease pressure on real bond yields, bolstering gold's attractiveness.

Outlook

The technical outlook remains bullish as long as gold sustains above the $3,381 support. Retesting support zones between $3,403 and $3,417 offers attractive buying opportunities targeting resistance at $3,456 and beyond. Conversely, a break below key support may lead to corrections toward the $3,350–$3,360 range.

Crude Oil (WTI) – Steady recovery amid supply concerns

Technical and historical analysis

Since April, WTI crude formed a solid double bottom at $54.70, establishing a strong launchpad. Trading concentrated between $61.88 (Value Area Low - VAL) and $64.10 (POC) throughout May, reflecting a robust accumulation phase, notably by institutional investors.

In June, geopolitical concerns pushed WTI to test the Value Area High (VAH) near $67 before breaking above the $64.10 barrier and surging toward $77.62 on June 13, followed by a modest correction and close near $73.

Critical technical levels

• Supports: Between $73.50 and $69.50, acting as first-line defense, with further supports at $67 and $64.10.
• Resistances: $76.66 (uptrend channel line from May-June), psychological levels at $80 and $82, and a supply zone near $85–$86.

Economic drivers

Oil prices have been heavily influenced by potential supply disruptions in the Middle East amid escalating military tensions. On the supply side, OPEC+ continues production discipline, supporting prices against seasonal global demand, especially from the U.S. and China. Additionally, larger-than-expected draws on U.S. inventories have fueled market optimism.

Outlook

In the short term, oil remains in a bullish zone as long as it holds above $69.50, with potential to extend gains toward $76.66 and higher. A break below support levels could trigger a correction back toward $64.10.

Equities – Collapse of the rally amid rising tensions

SPDR S&P 500 ETF (SPY) – Breakdown of ascending wedge

SPY has faced a sharp decline after trading within an ascending wedge since April to mid-June, testing $527.80 as a lower support and $602.30 as the wedge peak. Geopolitical tensions drove the index to break below $598.78, closing at $596.93 on June 14, intensifying downside pressure.

Key technical levels

• Resistances: $598.78 and $602.30.
• Supports: $594.43 (initial POC), $587.40 (3-month POC), with downside targets at $581, $576, and $568.98, representing strategic support zones.

Economic assessment

This decline coincides with investors fleeing equities for safer assets amid heightened military escalation fears and mixed U.S. economic data. Low seasonal liquidity exacerbates market volatility.

Outlook

Watch $594.43 support closely; breaching $587.40 may trigger a new leg down targeting $568.98. Conversely, surpassing $605.82 could signal a recovery in risk appetite.

Nasdaq 100 futures (NQU25) – Harsh correction for tech sector

Geopolitical worries have unsettled tech investor confidence, pushing Nasdaq 100 futures to break an ascending wedge between resistance at 22,200 and support at 20,576 established since March. The index decisively fell below 22,000, breaching multiple key supports.

Critical technical levels

• Resistances: 22,000 and 22,088 (VAH), alongside an upward channel line.
• Supports: 21,909 (POC), 21,748 (demand base), with further decline possible to 20,576 (wedge base).

Influencing factors

Tech stocks are highly sensitive to geopolitical risk and changing monetary policy outlooks. Additionally, profit-taking ahead of quarterly earnings has intensified pressure on this sector.

Outlook

Confirming support at 21,748 is crucial to avoid deeper declines toward 20,576. Surpassing 21,909 would reinstate bullish momentum.

Conclusion

The geopolitical developments in the Middle East represent a pivotal turning point for financial markets. While gold and oil have cemented their roles as safe-haven assets and are rallying strongly, equities  especially in the technology sector—face significant downward pressure amid shrinking risk appetite. Our technical analysis clearly reflects these dynamics, emphasizing critical support and resistance levels that will shape market direction in the days and weeks ahead.

(This article was written by the author with assistance from language generation tools to support structure and clarity. All insights and opinions are entirely the author’s own.)