Key Drivers for the Next Two Weeks
The financial markets are entering a period of heightened sensitivity to geopolitical and macroeconomic developments. The US-China tariff agreement, US-Iran nuclear negotiations, and shifting oil supply dynamics will dominate price action across equities, commodities, and currencies. Below, we break down the key factors and their likely market impacts, supported by recent data and reports.
1. US-China Tariff Reduction: A Boost for Global Trade
The Deal
On May 10, the US and China agreed to a 90-day reduction in tariffs:
- US tariffs on most Chinese imports will drop from 145% to 30%.
- China’s tariffs on US goods will decrease from 125% to 10%.
Market Implications
- Equities (Bullish):
- S&P 500, Hang Seng, and China A-shares should benefit from improved trade sentiment.
- Tech and industrial sectors may lead gains.
- Chinese Yuan (CNH) Strengthening:
- Reduced trade friction supports CNH appreciation – watch for USD/CNH testing 6.80.
- Commodity Demand (Copper, Oil):
- Increased industrial activity could lift demand for oil and base metals.
2. US-Iran Nuclear Talks: A Threat to Oil Prices?
Latest Developments
- The US described recent talks as “encouraging,” while Iran called them “difficult but useful.”
- A potential deal could allow more Iranian oil exports, adding ~1 million barrels per day (bpd) to the market.
Market Reactions
- Short-Term Oil Pressure (Bearish Risk):
- If a deal appears imminent, Brent crude could test $80 – 81.
- But… US Sanctions Are Still Enforced
- The US Treasury sanctioned Chinese refiners and port operators for buying Iranian oil.
- This could limit immediate supply surges, preventing a crash.
Key Price Levels for Brent Crude:
- Resistance: $85 – 86 (if risk-on sentiment holds).
- Support: $80 – 81 (if Iran deal progress accelerates).
3. Oil Supply: Diverging Signals
Bullish Factors
- US Rig Count Falls to January Lows
- Baker Hughes reported 6 fewer active rigs, dropping to 578 – the lowest since January.
- Suggests future production cuts, supporting prices later in May.
- Russian Exports Recover, But Not Beyond December 2024 Levels
- No major oversupply risk yet (Vortexa Tanker Data, May 2025).
Bearish Factors
- Kazakhstan Keeps Output Steady
- No additional OPEC+ cuts expected in May.
- Iranian Supply Threat Looms
Strategy for Oil Traders:
- Short-Term (May 12 – 19): Wait for a dip near $80 – 81 Brent before buying.
- Mid-Term (May 20 – 26): If US production data weakens, expect a rebound toward $84 – 85.
4. Equities: Risk-On Rally Ahead?
Key Trades
- S&P 500: Could test 5,500 – 5,600 if tariff relief boosts earnings optimism.
- China Stocks (Hang Seng, CSI 300): Likely to outperform as trade tensions ease.
5. Forex & Gold Outlook
USD Weakness on Risk-On Flows
- EUR/USD may break 1.10 if Fed rate cuts remain on the table.
- CNH (Yuan) Strength: Likely to continue toward 6.80.
Gold (Short-Term Weakness)
- Support at $2,250 – 2,300 if safe-haven demand fades.
Final Trading Strategy Summary
| Asset | Trend | Key Levels | Strategy |
| Brent Crude | Neutral → Bullish | 80 (Support), 85 (Resist) | Buy dips near 80, target 84 – 85 |
| S&P 500 | Bullish | 5,500 – 5,600 | Buy on pullbacks |
| USD/CNH | Bearish | 6.80 Support | Short rallies |
| Gold | Neutral | $2,250 – 2,300 | Wait for deeper pullback |
Risks to Watch:
- Iran deal breakthrough → Oil sell-off.
- US-China tensions resurface → Equity volatility.
Conclusion
The next two weeks will be defined by trade optimism, oil supply shifts, and geopolitical risks. Traders should:
- Buy oil near $80 Brent for a rebound.
- Go long equities (US/China) on tariff relief.
- Short USD/CNH as yuan strengthens.
Stay adaptive – any Iran deal news could disrupt oil, while Fed rhetoric may shift FX markets.
Sources: Reuters, Bloomberg, Financial Times, Goldman Sachs