Key Points

• USDJPY trades near 159.45, with the yen weakening for a third straight session.
• Rising oil prices are pressuring Japan’s economy and weighing on the currency.
• Ongoing Middle East tensions keep safe-haven demand tilted toward the dollar.

The Japanese yen weakened further on Thursday, slipping toward the 159.5 level against the dollar, marking its third consecutive session of losses.

USDJPY is currently trading near 159.45, reflecting renewed demand for the U.S. dollar as geopolitical uncertainty persists.

The move comes as markets react to mixed signals around diplomatic efforts in the Middle East, with little clarity on whether tensions will ease.

Continued uncertainty may keep USDJPY elevated, especially if oil prices remain firm.

Oil Rebound Weighs on Japan’s Economic Outlook

A key driver behind the yen’s weakness is the rebound in oil prices.

Japan’s heavy reliance on imported energy means higher oil prices directly impact its economy, raising costs and increasing inflationary pressure.

This dynamic weakens the yen by worsening Japan’s trade balance and reducing growth expectations.

Even as Japan received two oil tankers that bypassed the Strait of Hormuz, offering temporary relief, the broader supply situation remains uncertain.

If oil prices continue to rise, the yen may face further downside pressure.

Geopolitical Tensions Limit Risk Recovery

The geopolitical backdrop remains a central factor in currency markets.

While the U.S. has indicated that negotiations are ongoing, Iran has rejected direct talks and proposed its own terms, including control over the Strait of Hormuz.

This has reduced expectations of a near-term resolution and kept market sentiment cautious.

In this environment, investors continue to favour the U.S. dollar as a safe-haven asset, limiting any meaningful recovery in the yen.

Policy and Security Considerations Add Complexity

Japan is also weighing broader strategic responses to the crisis.

There have been discussions about potentially deploying warships to secure key shipping routes, highlighting the seriousness of the situation for energy-importing nations.

Such measures reflect the growing link between geopolitical risk and economic stability.

At the same time, currency markets remain sensitive to any signs of intervention, particularly as USDJPY approaches the 160 level, a zone that has previously triggered official action.

Intervention risks may increase if the pair moves closer to or above 160.

Technical Analysis

USDJPY is trading near 159.45, holding steady just below recent highs as the pair continues to press against the upper end of its range. Price action suggests sustained bullish pressure, with the market testing levels last seen near the 159.90–160.00 zone.

From a technical standpoint, the trend remains firmly bullish. Price is trading above all key moving averages, with the 5-day (159.05) and 10-day (159.06) tightly clustered just below current levels, providing immediate support. The 20-day (158.40) and 30-day (157.18) continue to slope upward, reinforcing the strength of the underlying uptrend.

Key levels to watch:

• Support:159.00 → 158.40 → 157.20
• Resistance:159.90 → 160.50 → 161.00+

The pair is currently consolidating just below 159.90, a level that has capped recent upside attempts. A clean break above this resistance could trigger a move toward 160.50, with further upside potential if momentum accelerates.

On the downside, 159.00 is acting as immediate support. A break below this level could lead to a deeper pullback toward 158.40, though such a move would likely be corrective unless broader momentum shifts.

Overall, USDJPY remains in a strong uptrend with shallow pullbacks, indicating continued demand for the dollar against the yen. However, with price nearing the 160 level, traders should remain cautious of potential volatility or intervention risks, as this area has historically attracted heightened attention.

What Traders Should Watch Next

USDJPY remains driven by a mix of macro and geopolitical factors. Key drivers include:

• Oil price movements and energy supply developments.
• Progress or setbacks in Middle East diplomacy.
• Potential intervention signals from Japanese authorities.
• Broader U.S. dollar strength.

For now, the yen remains under pressure, with energy costs and geopolitical uncertainty continuing to shape its direction.

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FAQs

What is Driving the Recent Weakness in USDJPY?

USDJPY is rising due to strong dollar demand and higher oil prices, which weigh on Japan’s import-heavy economy.

Why Do Higher Oil Prices Weaken the Japanese Yen?

Japan relies heavily on imported energy. Rising oil prices increase costs, worsen the trade balance, and pressure the yen.

Why is the U.S. Dollar Strengthening in This Environment?

The dollar is benefiting from safe-haven demand and the U.S.’s status as a net energy exporter during supply shocks.

What is the Significance of the 160 Level in USDJPY?

The 160 level is a key psychological and policy threshold where Japanese authorities have previously intervened.

Could Japan Intervene to Support the Yen?

Yes, intervention becomes more likely if USDJPY approaches or exceeds 160, especially during rapid or disorderly moves.

How Does the Middle East Conflict Affect USDJPY?

Escalation pushes oil prices higher and increases global uncertainty, supporting the dollar while weakening the yen.

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Key Points

• WTI trades near 89.27, up +0.902 (+1.02%), holding elevated levels after recent volatility.
• Prolonged high oil prices may push central banks toward tighter policy, despite slowing growth risks.
• Markets face a growing trade-off between inflation control and financial stability.

Oil prices are holding firm near elevated levels, with WTI crude trading around 89.27, up +1.02%, as markets continue to absorb the impact of persistent supply disruptions.

The recent price action suggests that oil is entering a consolidation phase after its sharp rally, but the broader structure remains supported by ongoing geopolitical risks and constrained supply.

Crucially, it is not just the level of oil prices that matters, but how long they remain elevated.

Sustained prices near current levels could keep upward pressure on inflation expectations and limit downside in oil.

High Oil Prices Complicate Central Bank Policy

The persistence of high energy prices is creating a complex environment for central banks.

According to market strategists, the longer oil remains elevated, the more policymakers may feel compelled to maintain a hawkish stance, even if economic growth begins to slow.

This dynamic is driven by the inflationary impact of energy costs. Higher oil prices feed directly into consumer prices, making it harder for central banks to justify easing policy.

However, tightening policy in response to supply-driven inflation carries risks.

Unlike demand-driven inflation, where tighter policy can effectively cool activity, supply shocks can lead to higher prices alongside weaker growth, creating a difficult policy trade-off.

Central banks may remain cautious, but a prolonged energy shock could delay rate cuts and tighten financial conditions further.

Growing Tension Between Price Stability and Growth

Markets are increasingly focused on the trade-off between controlling inflation and preserving financial stability.

Efforts to combat inflation through tighter monetary policy can increase borrowing costs, reduce liquidity, and amplify stress across financial markets.

This creates a feedback loop where geopolitical tensions drive oil prices higher, which in turn forces central banks into a more restrictive stance, adding pressure to the broader financial system.

The result is a more fragile market environment, where both inflation and growth risks are elevated.

Financial Stress Risks Begin to Surface

Historical patterns suggest that policy tightening in response to supply shocks can lead to greater financial stress than tightening driven by strong demand.

Higher rates in this context do little to resolve the underlying supply issue, while still tightening financial conditions.

This raises the risk of volatility across asset classes, including equities, bonds, and currencies, as markets adjust to a less supportive policy backdrop.

If oil prices remain elevated, financial conditions could tighten further, increasing the risk of broader market stress.

Technical Analysis

Crude Oil (CL-OIL) is trading near $89.27, up around 1.02%, showing a modest bounce after drifting lower from the recent spike toward $119.43. The move suggests buyers are attempting to defend the lower end of the current consolidation range, though momentum remains fragile.

Technically, oil is now sitting between key moving averages, signalling a transition phase. The 5-day MA (91.80) and 10-day MA (93.99) are positioned above price and trending lower, acting as near-term resistance. Meanwhile, the 20-day MA (86.21) and 30-day MA (79.04) remain upward sloping below price, indicating that the broader uptrend structure is still intact despite the pullback.

Key levels to watch:

• Support:88–89 → 85 → 79
• Resistance:91.80 → 94 → 100+

The $88–89 zone is proving to be an important support area. Holding this level keeps the market within a consolidation range rather than signalling a deeper reversal. A break below it could accelerate downside toward $85, where the 20-day average offers stronger structural support.

On the upside, price needs to reclaim $91.80–94 to regain short-term bullish momentum. A move back above this region would likely shift sentiment toward a retest of $100, though the $105–119 zone remains a major resistance band after the previous spike.

Overall, oil appears to be cooling after a sharp rally, with price action evolving into a range-bound consolidation. The broader trend remains constructive above $85, but short-term direction will hinge on whether buyers can push back above $92–94 or lose the $88 support floor.

What Traders Should Watch Next

Markets are now navigating a delicate balance between inflation and growth risks. Key factors to monitor include:

• Duration of elevated oil prices
• Central bank communication and policy outlook
• Signs of financial stress across asset classes
• Developments in global energy supply

For now, oil remains a central driver of macro conditions, with its sustained strength likely to shape both monetary policy and market behaviour in the near term.

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Refresher Questions

Why Are Oil Prices Still Elevated?
Oil remains high due to ongoing supply disruptions and geopolitical tensions, particularly around key routes like the Strait of Hormuz.

Where is Oil Trading Right Now? WTI crude is trading near 89.27, up +1.02%, holding elevated levels after recent volatility.

Why Do High Oil Prices Matter for Central Banks?
Higher oil prices increase inflation, which can force central banks to keep interest rates elevated or delay rate cuts.

What is the Link Between Oil and Inflation?
Oil directly affects energy and transport costs, which feed into broader consumer prices, making it a key driver of inflation.

Why is Supply-Driven Inflation More Difficult to Manage?
Supply-driven inflation is caused by shortages rather than demand, so raising interest rates does not fix the root issue and can slow growth.

What is the Risk of Central Banks Staying Hawkish?
Prolonged tight policy can increase borrowing costs, reduce liquidity, and create stress in financial markets, especially if growth weakens.

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Key Points

• Nikkei 225 rises 2.93% to 53,784.43, with Topix up 2.5% to 3,648.78.
• Oil price pullback boosts sentiment in energy-dependent Japan.
• Gains led by Tokio Marine (+9.8%), SoftBank (+8%), and AI-linked stocks.

Japan’s Nikkei 225 rallied strongly on Wednesday, advancing 2.93% to 53,784.43, as markets responded to a drop in oil prices and signs that geopolitical tensions may ease.

The broader Topix index also climbed 2.5% to 3,648.78, reflecting widespread buying across sectors.

The move marks a sharp rebound after recent volatility, as traders reacted to improved sentiment following a decline in crude prices.

The rally may continue if oil prices remain contained, though geopolitical uncertainty could cap gains.

Oil Prices Drive Market Direction

The Nikkei’s rebound is closely tied to movements in oil. As an economy heavily reliant on imported energy, Japan is particularly sensitive to changes in crude prices.

The recent drop in oil prices provided relief, easing concerns around inflation and corporate cost pressures.

Strategists point to this as a key trigger for the rally, as lower energy costs improve earnings outlooks and support broader market sentiment.

However, the situation remains fluid. Any renewed spike in oil prices could quickly reverse gains.

Sustained declines in oil would support equities, while renewed supply disruptions may pressure the index again.

Geopolitical Signals Offer Tentative Relief

Market optimism was also supported by comments suggesting progress toward a potential resolution in the Middle East conflict.

While no concrete agreement has been reached, even the perception of a possible de-escalation has been enough to lift risk sentiment.

At the same time, traders remain aware that tensions are ongoing, with conflicting signals continuing to drive volatility.

This creates a fragile environment where markets can shift quickly based on headlines.

Broad-Based Gains Across The Market

The rally in the Nikkei was broad, with 211 stocks advancing compared to just 14 decliners, highlighting strong participation.

Leading the gains was Tokio Marine Holdings, which surged 9.8% after Berkshire Hathaway disclosed a stake, boosting confidence in the insurer.

Furukawa Electric rose 8.7%, while SoftBank Group gained 8%, both benefiting from continued momentum in artificial intelligence investment themes.

These sectors have become key drivers of market performance, reflecting global demand for AI infrastructure.

Technical Analysis

Nikkei 225 is trading near 53,481, up around 0.32%, showing a tentative rebound after the sharp sell-off from the 60,077 peak. The recent price action suggests the index is attempting to stabilise, but the broader structure still reflects short-term bearish pressure.

Technically, the index remains below key moving averages, which continue to cap upside attempts. The 5-day MA (52,918) is now turning higher and offering near-term support, while the 10-day (53,385) sits just above current price and is acting as immediate resistance. Further overhead, the 20-day (54,622) and 30-day (55,569) remain downward sloping, reinforcing the corrective phase.

Key levels to watch:

• Support:52,500 → 50,000 → 48,000
• Resistance:53,800 → 54,600 → 55,500

The index has formed a short-term higher low, which is constructive for a potential bounce. However, price is still trading within a broader lower high structure, meaning the recovery remains fragile unless resistance levels are reclaimed.

A break above 53,800 could open a move toward 54,600, where the 20-day average sits. Reclaiming that level would be the first sign of improving momentum. On the downside, failure to hold above 52,500 could reintroduce selling pressure and expose the 50,000 region.

Overall, the Nikkei appears to be in a corrective consolidation after a strong rally, with early signs of stabilisation but no confirmed trend reversal yet. The next directional move will likely depend on whether the index can push back above the 54,000–55,000 zone or loses support and resumes its decline.

What Traders Should Watch Next

The Nikkei’s direction will remain closely linked to external factors. Key areas to monitor include:

• Oil price trends and their impact on inflation
• Developments in the Middle East conflict
• Performance of AI-related stocks
• Global risk sentiment and currency movements

For now, the rally reflects relief rather than resolution, with markets still highly sensitive to changes in the geopolitical landscape.

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The $5,000 Reset: Is Gold’s 2026 Rally Just Getting Started?

Gold‘s price action in 2026 has been somewhat erratic and left many confused. While the macro environment of geopolitical tensions and slowing global growth suggests further upside, gold has unexpectedly dipped during risk-off moments. Understanding this requires looking past short-term noise to the structural reset currently in progress.

Why Gold Falls in Risk-Off Moments

Traditionally, gold thrives when fear and uncertainty enter the markets. However, in recent months, sharp selloffs in risk assets have not always translated into immediate gold strength. This comes from liquidity dynamics rather than a breakdown in gold’s safe-haven role.

When markets turn risk-off abruptly, institutions often look for liquidity. This means selling what they can, not necessarily what they want to. Gold is one of the most liquid global assets and one that is easy to liquidate and therefore becomes a source of quick cash. In these moments, it becomes more of a funding tool than a hedge or store of value.

Additionally, the threat of margin calls across equities and derivatives increase and this means larger players need to unwind positions across the board. Gold gets caught in this cross-asset liquidation cycle which results in short-term downside pressure, even if the environment is fundamentally bullish for gold.

For retail investors, this creates confusion as it deviates from the norms as to what they are told to expect. But the reality is that the first phase of fear is often liquidation, not accumulation.

The USD and the Fiscal Time Bomb

The USD remains a dominant short-term variable, as global demand for safety often flows into dollar-denominated assets first, tightening liquidity and suppressing gold prices. However, this strength is often temporary. Once the initial liquidity squeeze passes, institutions often rotate back into gold as a strategic hedge against monetary instability and currency debasement.

While the USD offers immediate safety, the long-term fiscal pressures across major economies limit the ability of policymakers to maintain tight monetary conditions indefinitely. This creates a fiscal environment where gold eventually outperforms fiat currencies as a core strategic asset.

Institutional Targets vs Retail Fears

One of the clearest divides in the gold market now is between institutional positioning and retail sentiment.

Retail investors react emotionally to price volatility. Sharp pullbacks create fear, leading many to exit positions prematurely as they feel that the rally is over.

Institutions, on the other hand, operate with longer time horizons and allocation strategies. They see dips as opportunities to accumulate at better levels rather than a signal of failure. They take a view on the wider macro-outlook, taking into consideration real interest rates, central bank policy, and long-term inflation expectations.

Institutions do not see volatility as a threat but just part of the market cycle.

Oil as a Leading Inflation Indicator

Whilst oil and gold are both commodities, the main drivers of each are significantly different.

Oil is closely tied to economic activity and supply-demand dynamics, whereas gold is driven by monetary conditions and investor psychology.

Where there is some correlation is through inflation. Rising oil prices can contribute to higher inflation expectations, which in turn supports gold. When energy costs surge, central banks face increased pressure, often leading to policy shifts that favour gold over time.

Before the conflict in the Middle East, periods of declining oil prices had signalled weakening global demand, triggering risk-off sentiment, which, as mentioned, can initially weigh on gold due to liquidity-driven selling.

Sustained higher prices in oil, which we have seen since the War started, can reintroduce the inflation issue for Central Banks, which in the long-term could support gold.

So, whilst oil does not drive gold directly, it does significantly influence the macro backdrop, which impacts gold prices.

Is 2026 Still the Year of the Bull?

Is 2026 still the year of the bull? Despite volatility, the case for a $5,000 reset is supported by central banks shifting away from fiat reliance and the persistent erosion of real returns. Current dips appear to be part of a liquidation cycle and a reset that allows the market to build a stronger foundation.

The 2026 Investor Playbook

1. Ignore the Liquidation Noise: Recognise that initial price drops during crises often force sales, not a loss of value.
2. Watch Real Rates: Inflation expectations continue to erode real returns, making gold’s lack of yield irrelevant compared to the loss of purchasing power in fiat.
3. Follow the Institutions: Treat sharp pullbacks as strategic accumulation points, mirroring the behaviour of central banks and professional allocators.

Gold is no longer just a defensive asset; it is becoming increasingly strategic in an unpredictable world. Beneath the surface of 2026 volatility, the structural drivers for gold’s performance remain firmly in place.

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Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

The Federal Reserve is trying to hold together a narrative that is becoming harder for markets to accept.

At the March 2026 FOMC meeting, officials voted 11–1 to keep the benchmark rate unchanged at 3.50% to 3.75%. On the surface, that looked like a steady and measured outcome. The median dot still points to one rate cut in 2026.

But the details told a more cautious story.

Chair Jerome Powell acknowledged two immediate problems. Inflation data had already been running firmer than expected before the Iran conflict intensified, and the geopolitical backdrop now makes the path forward

even less predictable. The Fed lifted its 2026 PCE inflation forecast to 2.7%, up from 2.4% in December, while also signalling that it is too early to fully measure the economic damage from the war and the associated supply risks around the Strait of Hormuz.

That leaves markets with an uneasy question: if inflation is moving higher and geopolitical risk is rising, why is the Fed still trying to keep rate cuts alive?

A Dot Plot That Looks Stable but Feels Less Dovish

Federal Reserve ‘dot plot’ (Courtesy: Federal Reserve)

The median projection still suggests one cut, but the internal shift was more important than the headline.

Powell said that four or five members moved their projections from two cuts to one, showing that the centre of the committee has shifted toward more caution. In other words, the dot plot did not collapse, but it did become less dovish.

That matters because markets tend to react first to the headline, then slowly catch up with the distribution underneath it.

The Fed is effectively telling markets that inflation remains sticky, oil risk is real, and uncertainty is elevated, yet some degree of policy easing is still possible later in the year. That only works if the energy shock fades and broader price pressures cool again.

For now, that looks more like an assumption than a conclusion.

Contradiction in The Growth Forecast

The latest Fed message not only suggests an inflation upgrade, it appears officials also lifted their 2026 GDP growth forecast to 2.4%. That creates a tension at the heart of the macro outlook.

If the Iran conflict is serious enough to raise inflation expectations and threaten energy markets, then forecasting stronger growth at the same time implies a very benign view of how temporary the shock will be.

The Fed appears to be betting that US demand can absorb higher energy costs without a meaningful hit to momentum. That may prove right, but it is a narrow path.

If oil remains elevated, the economy could slide toward a more stagflationary setup where inflation stays firm while growth deteriorates. In that environment, the projected rate cut would become even harder to justify.

Higher for Longer Quietly Becomes the Base Case

The market may still focus on the headline of “one cut,” but the deeper signal from the meeting is that higher for longer remains the dominant policy bias.

The Fed does not want to sound overly hawkish while markets are already dealing with war risk and fragile sentiment. But its own projections are moving in that direction. If inflation remains sticky and oil does not retreat, that single projected cut may disappear altogether.

That is why this week’s cross-asset price action matters so much. Markets are now testing whether the Fed’s optimistic balance between growth, inflation and easing can still hold.

Leadership Transition Adds Another Risk Layer

The macro picture is further complicated by leadership uncertainty inside the Fed.

The upcoming arrival of Kevin Warsh in June introduces a political and policy dimension that markets cannot ignore. Warsh is widely perceived as more supportive of lower rates, but he may be stepping into an environment where the inflation backdrop leaves very little room for early easing.

Political friction surrounding DOJ subpoenas and Senate confirmation dynamics could keep Powell in place longer than expected, delaying a clean leadership transition. That uncertainty could matter for market psychology, especially if traders begin to price not just the next move in rates but also the next policy-making regime.

In practice, Warsh may inherit a Fed that remains trapped in a higher-for-longer framework, regardless of his personal policy preferences.

Is the Fed Losing the Plot?

Under standard macro logic, when growth forecasts rise and inflation projections rise, the case for cutting rates becomes weaker, not stronger. Holding steady makes sense. Signalling that even one cut becomes much more debatable.

The Fed has acknowledged uncertainty from the Iran conflict, admitted inflation pressures have already intensified and still kept alive the idea of future easing. That combination is what makes the latest outlook feel unstable and even frivolous.

The more charitable interpretation is that policymakers are trying to avoid overreacting to what they still view as a temporary geopolitical shock. The harsher interpretation is that the Fed is trying to preserve market calm while the internal logic of its projections is becoming increasingly difficult to defend.

Either way, traders should pay less attention to the median dot alone and more attention to the committee’s direction. The broader message is that officials are drifting toward fewer cuts, more caution and less conviction in the disinflation story.

Upcoming Events

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Key Symbols to Watch

USDX | EURUSD | CL-OIL | USOUSD | SP500 |

USDX

Watch this week

• Resistance focus near 100.00.
• Rejection there may trigger consolidation.
• Acceptance above it would strengthen the higher-for-longer narrative.

EURUSD

Watch this week

• Near-term downside focus at 1.1475.
• Weak price action there keeps pressure on the pair.
• A firm hold could slow the dollar move.

US Oil

Watch this week

• Break and hold above 99.284.
• Upside extension toward 112.20.
• Any de-escalation headlines could trigger sharp retracement risk.

XAUUSD

Watch this week

• Current support reaction after the break of 4402.73.
• A break below 4169 would open another lower leg.
• Stabilisation could produce a temporary consolidation phase.

SP500

Watch this week

• Breakdown below 6517.
• Bearish rebound zones at 6600 and 6750.
• A weak recovery structure would fit the Fed/oil risk narrative.

BTCUSD

Watch this week

• Rebound focus toward 70550.
• Rejection there would keep the structure fragile.
• Strong acceptance would suggest broader risk appetite is stabilising.

Bottom Line

For this week, the key market theme is simple: the dot plot may still look orderly on the surface, but the logic underneath it is starting to crack.

The March 2026 FOMC was not a clear dovish pause. It was a pause carrying a more hawkish internal shift.

The dot plot still shows one cut, but the market is beginning to question whether that guidance can withstand higher inflation, war-driven energy risk, and a still-optimistic growth forecast. That tension is what matters most this week.

If the charts continue to confirm stronger oil, a firmer dollar, and weaker risk appetite, the market may conclude that the Fed’s latest roadmap is already losing credibility.

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Key Points

• TSLA trades near 381.56, up +14.34 (+3.91%), after the Terafab announcement.
• Tesla plans $20 billion in equipment spending for 2026, on top of a separate Terafab investment.
• Production is targeted for late 2027, with volume output expected in 2028.

Tesla shares moved higher after Elon Musk unveiled plans for Terafab, a semiconductor manufacturing facility positioned as a cornerstone of a broader AI ecosystem.

TSLA is trading near 381.56, gaining +3.91%, as investors reacted positively to the scale and ambition of the project.

The announcement adds a new dimension to Tesla’s story, shifting part of the narrative from electric vehicles toward infrastructure for artificial intelligence.

The rally reflects optimism around long-term growth, but near-term price action may remain volatile as execution risks are assessed.

$20 Billion Spend Signals Aggressive Expansion

Tesla plans to allocate approximately $20 billion toward new equipment in 2026, a sharp increase from less than $9 billion in 2025. Importantly, Terafab spending sits on top of this figure, implying an even larger capital commitment.

This level of investment highlights Tesla’s intent to secure control over critical components in the AI supply chain, particularly semiconductors.

However, the scale also raises questions around funding, capital allocation, and potential pressure on margins.

Continued investor support will likely depend on clarity around financing and return on investment.

Terafab Targets Unprecedented Scale

The concept behind Terafab centres on extreme scale. Musk aims to produce chips capable of supporting one terawatt of computing demand, equivalent to roughly one billion Nvidia Blackwell chips per year.

A terawatt equals one trillion watts, underscoring how far the project extends beyond current semiconductor manufacturing capabilities.

Initial production is targeted for late 2027, with full-scale output in 2028. This timeline is ambitious, given that typical semiconductor facilities require around three years from construction to production.

Delays are a key risk. Any slippage in the timeline could weigh on sentiment and valuation.

AI Integration Expands Tesla’s Strategic Scope

Terafab is not a standalone project. It forms part of a broader ecosystem involving Tesla, xAI, and SpaceX, following their closer integration earlier this year.

The structure suggests a vertically integrated model where one group designs AI systems, manufactures the chips, deploys them in vehicles and robotics, and processes data via satellite infrastructure.

Musk has indicated that around 80% of Terafab’s chip output could be used in space, where SpaceX would handle AI computation.

This vision extends beyond traditional semiconductor strategies and into a fully integrated AI infrastructure model.

While the concept is expansive, execution across multiple industries introduces complexity that may take years to resolve.

Technical Analysis

Tesla (TSLA) is trading near 381.56, up around 3.91% on the session, showing a short-term bounce after an extended downtrend that has been in place since the 498.75 peak. Despite the recovery, the broader structure still reflects sustained bearish pressure.

From a technical standpoint, Tesla remains below all key moving averages, reinforcing the dominant downward trend. The 5-day MA (384.52) sits just above current price and is flattening, while the 10-day (391.35), 20-day (397.45), and 30-day (403.18) are all trending lower and stacked above price. This alignment suggests that rallies may continue to face selling pressure unless the structure shifts.

Key levels to watch:

• Support:375 → 360 → 340
• Resistance:385 → 390–400 → 430

The current bounce is approaching immediate resistance around 384–390, where the short-term moving averages cluster. A failure to break and hold above this zone would likely reinforce the ongoing downtrend. On the downside, 375 is acting as near-term support, with a break potentially exposing further weakness toward 360.

Volume has remained relatively steady, without a strong surge in buying interest, which suggests this move may be more of a technical rebound rather than a trend reversal.

Overall, Tesla appears to be attempting to stabilise after a prolonged decline, but the trend remains bearish unless price can reclaim the 390–400 region. A sustained move above that zone would be the first signal of a potential shift in momentum, while rejection could lead to continued downside pressure in the sessions ahead.

What Traders Should Watch Next

Tesla’s next phase will depend on both execution and communication. Key factors include:

• Details on Terafab funding and timelines
• Updates on integration with xAI and SpaceX
• Broader AI infrastructure demand trends
• Tesla’s core EV performance and margins

For now, the market is reacting to vision and scale, but sustained upside will likely require clearer evidence that execution can match ambition.

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FAQs

Why Did Tesla Stock Rise After the Terafab Announcement?
Tesla gained as investors reacted positively to the Terafab chip factory plan, viewing it as a long-term growth driver in AI and semiconductor infrastructure.

What is Terafab?
Terafab is a proposed semiconductor manufacturing facility backed by Tesla, xAI, and SpaceX, aimed at producing chips at an unprecedented scale for AI applications.

How Much is Tesla Planning to Invest?
Tesla plans to spend around $20 billion on equipment in 2026, up from less than $9 billion in 2025, with Terafab costs on top of that.

When Will Terafab Start Producing Chips?
Initial production is targeted for late 2027, with full-scale output expected in 2028, although this timeline is considered ambitious.

What Makes Terafab Different From Other Chip Projects?
The project aims to support one terawatt of computing demand, equivalent to roughly one billion Nvidia Blackwell chips per year, far exceeding current industry norms.

How Does SpaceX Fit Into the Terafab Plan?
SpaceX is expected to use around 80% of Terafab’s chip output, potentially running AI computations in space rather than traditional data centres.

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Key Points

• WTI trades near 91.23, up +2.382 (+2.68%), while Brent rebounds above $100 per barrel.
• Risk sentiment remains fragile as Strait of Hormuz disruptions persist and conflict escalates.
• Governments respond with stockpile releases and demand cuts, highlighting supply stress.

Oil prices pushed higher again after a brief pullback, reinforcing how sensitive markets remain to developments in the Middle East.

WTI crude is trading near 91.23, up +2.68%, while Brent crude has climbed back above $100 per barrel, reversing earlier losses. The rebound follows a short-lived relief rally that faded quickly as geopolitical tensions intensified.

The market reaction shows that any dip in oil prices is being treated as temporary, with traders continuing to price in supply risks.

Oil may remain volatile, with upward pressure persisting as long as supply disruptions are unresolved.

Strait of Hormuz Remains the Core Risk

The situation around the Strait of Hormuz continues to dominate the oil narrative. Despite diplomatic signals, there is little evidence of de-escalation.

The strait remains effectively constrained, limiting the flow of crude and LNG through one of the world’s most critical energy corridors.

Iran’s continued missile activity and the lack of confirmed negotiations have kept markets on edge. Even with a short extension to diplomatic timelines, traders are not pricing in a quick resolution.

This sustained uncertainty is preventing oil from correcting meaningfully lower.

If the strait remains restricted, oil prices could reprice higher as global inventories tighten.

Global Response Highlights Supply Stress

Governments are already taking steps to manage the shock.

Japan has announced plans to release oil from joint stockpiles by the end of March, while South Korea is pushing for nationwide energy-saving measures. These actions reflect growing concern over prolonged supply constraints.

Meanwhile, reports that Iranian oil is being offered to Indian refiners at a premium to ICE Brent suggest that even sanctioned supply is being reintroduced under strained conditions.

These developments underline how tight the global energy market has become.

Risk Sentiment Turns Choppy Across Markets

The oil rebound has weighed on broader market sentiment.

Asian equities saw only a modest recovery, while U.S. and European futures declined, reflecting uncertainty over growth and inflation.

At the same time, the U.S. dollar regained strength, and Treasury yields resumed their climb, signalling a shift back toward defensive positioning.

Higher oil prices raise inflation risks, which in turn complicate central bank policy and pressure risk assets.

Continued energy price strength could weigh on equities and support the dollar in the near term.

Technical Analysis

Crude Oil (CL-OIL) is trading near $91.23, up around 2.68% on the session, showing a short-term rebound after the recent pullback from the $119.43 spike high. The move suggests buyers are stepping back in around key support, though the broader structure is still in a cooling phase after the earlier surge.

From a technical perspective, oil remains in an overall uptrend, but momentum has clearly softened. Price is now sitting just below the 5-day MA (94.31) and 10-day MA (94.18), both of which are turning lower and acting as immediate resistance. Meanwhile, the 20-day MA (85.17) and 30-day MA (78.32) remain well below price and continue to slope upward, indicating that the broader bullish structure is still intact.

Key levels to watch:

• Support:$90 → $85 → $78
• Resistance:$94–95 → $100 → $105+

The $90 region is proving to be an important near-term support zone. Holding above this level keeps the structure constructive and supports the idea of consolidation rather than reversal. A break below it, however, could trigger a deeper retracement toward the $85 region, where the 20-day average aligns.

On the upside, price needs to reclaim $94–95 to regain momentum. A sustained move above this area would likely open the path back toward $100, followed by the $105–110 zone, though the $119 high remains a distant and strong resistance level for now.

Overall, oil appears to be transitioning from a parabolic rally into a consolidation phase, with buyers defending key support but struggling to reclaim short-term control. The next move will likely depend on whether price can decisively break back above $95 or lose the $90 floor, which would define the next directional leg.

Macro Data and Central Banks in Focus

Beyond geopolitics, markets are also watching incoming economic data.

Upcoming flash PMI readings for the Eurozone, UK, and U.S. will provide insight into how the energy shock is impacting economic activity.

At the same time, Japan’s core inflation slowing below the 2% target adds another layer of complexity for central banks trying to balance growth and inflation risks.

These macro factors will play a key role in shaping expectations for monetary policy in the coming weeks.

What Traders Should Watch Next

Markets remain driven by a mix of geopolitical and macro forces. Key areas to monitor include:

• Developments around the Strait of Hormuz
• Oil price behaviour above the $100 Brent level
• Government responses to energy shortages
• Central bank reactions to inflation risks
• Upcoming PMI data releases

For now, oil’s rebound highlights a market that remains tightly linked to geopolitical developments, with volatility likely to persist as supply risks evolve.

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FAQs

Why Did Oil Prices Rise Again Today?
Oil prices rebounded because geopolitical tensions remain high and supply disruptions through the Strait of Hormuz continue to restrict global energy flows.

Where Are Oil Prices Trading Now?
WTI crude is trading near 91.23, up +2.68%, while Brent crude has climbed back above $100 per barrel.

Why is the Strait of Hormuz So Important for Oil?
The Strait of Hormuz handles roughly 20% of global oil shipments, making it one of the most critical chokepoints for global energy supply.

Is the Oil Rally Likely to Continue?
Oil could remain supported if supply disruptions persist. However, short-term pullbacks may occur as markets react to news and policy responses.

How Are Governments Responding to the Oil Shock?
Countries are releasing strategic reserves and implementing energy-saving measures. Japan plans to release oil from stockpiles, while South Korea is reducing energy usage.

Why Are Markets So Volatile Right Now?
Volatility is driven by uncertainty around the Middle East conflict, fluctuating oil prices, and concerns about inflation and economic growth.

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