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What are the key factors impacting global markets now?
The dirham’s peg of 3.6725 to the US dollar means the UAE benefits directly from dollar strength. As the greenback rises, the dirham gains against weaker currencies
- PUBLISHED: Thu 2 Apr 2026, 9:36 PM
Global markets are being pulled in three directions at once: a strong US dollar, oil prices hovering near $100 a barrel, and continued disruption in the Strait of Hormuz. Analysts say these forces are no longer just shaping energy markets. They are spreading through global supply chains, keeping inflation pressures alive and influencing how central banks set interest rates.
For the UAE, the impact is especially pronounced. The dirham’s peg of 3.6725 to the US dollar means the country benefits directly from dollar strength. As the greenback rises, the dirham gains against weaker currencies such as the euro and the pound, easing import costs and supporting purchasing power. High oil prices are also strengthening government revenues, reinforcing fiscal stability at a time of global uncertainty.
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But there is a trade-off. Because the Central Bank of the UAE broadly mirrors US monetary policy, it has limited room to cut rates. With supply disruptions still feeding inflation, analysts say rates are likely to stay higher for longer, and could even turn more restrictive if pressures persist.
That reality is beginning to show at home. Sectors that depend heavily on borrowing are starting to feel strain, while equity markets are holding up but with caution. Investors are weighing solid fundamentals against rising geopolitical and financing risks.
The MSCI UAE ETF captures this balancing act. Trading near $17.20, it is around 22 per cent below its recent peak. The $17 level is seen as a key floor. A drop below it could open the way toward $16, particularly if regional tensions escalate. At the same time, lower valuations and rising dividend yields are quietly improving the long-term case for UAE equities, even as short-term movements remain tied to geopolitics.
Globally, investor mood remains fragile. Markets are caught between cautious optimism and deeper structural concerns. Currency markets reflect this hesitation. Supported by geopolitical tensions, inflation worries and high oil prices, the dollar remains resilient, putting pressure on major currencies. Sterling is trading below 1.34, while the yen is hovering near important levels.
“A market caught between fragile optimism and structural risk is one where discipline matters more than direction,” said Razan Hilal, Market Analyst, CMT at forex.com. “Technical levels are holding for now, but the broader narrative – spanning geopolitics, inflation, and policy divergence – continues to shape sentiment across asset classes,” she added.
Even traditional safe havens have struggled. Gold and silver have fallen despite brief optimism around ceasefire talks. Bearish technical signals remain in place, and the sharp sell-off seen in February 2026, driven by margin hikes and forced liquidations, is still a reminder of how quickly low liquidity can amplify market swings.
Many analysts say markets are being driven as much by investor positioning and liquidity as by economic fundamentals. The US Dollar Index, for example, remains in an upward trend that began in late January and is now testing an important support level.
“A break below this could see further downside toward the next support at 98.88,” said Vijay Valecha, Chief Investment Officer at Century Financial. “On the upside, immediate resistance is seen at 100.64, followed by 100.86. EUR/USD has immediate support at its 9 Day SMA at 1.15545 and resistance at 1.1642.”
For the UAE, the key trigger remains geopolitics. A credible ceasefire could quickly ease pressure across oil, regional stocks, insurance and logistics. Until then, markets remain resilient but vulnerable, making careful strategy essential.
“Short of having a crystal ball, investors’ best defence is a well-diversified asset allocation, along with a robust portfolio construction,” said Yves Bonzon, Group Chief Investment Officer at Julius Baer.
Associate Editor Somshankar Bandyopadhyay brings more than three decades of experience to the KT newsroom. Currently, he manages the news production of the business section, ensuring that the top economic and business news of the day reaches its readers.