- Iranian officials in Doha for talks on a possible deal with the US.
- US stock futures pare gains, European stock futures mixed.
- Bonds stable after last week’s route on inflation, fear of interest rate hikes.
Oil prices rose on Tuesday and stocks were mixed as investor optimism over an imminent peace deal between the United States and Iran was dampened by new US strikes in the Middle East.
Iran’s top negotiator and its foreign minister were in Doha for talks with Qatar’s prime minister about a potential deal with the United States to end the war, an official briefed on the visit said, after Washington and Tehran played down hopes of an imminent breakthrough.
The Nikkei newspaper separately reported that both sides discussed a plan to open the Strait of Hormuz about 30 days after reaching an agreement to end hostilities.
But even as the talks continued, US forces carried out strikes in southern Iran on Monday against targets, including boats trying to lay mines and missile launch sites, in what they described as defensive actions.
The development sent Brent futures up more than 1% in early Asian trade to $97.32 a barrel. barrel. US West Texas Intermediate crude was up slightly from Monday’s last trade, but down 5.5% from Friday’s close. There was no settlement on Monday due to the US Memorial Day holiday.
“I’m a bit skeptical… We keep being told there’s a deal that’s close, but what does the deal look like? That’s what’s really important. When will the Strait of Hormuz open… There’s a lot we don’t know,” said Joseph Capurso, strategist at the Commonwealth Bank of Australia.
Equity markets were mixed, with MSCI’s broadest index of Asia-Pacific shares outside Japan rising 0.8%, while Japan’s Nikkei fell 0.2%.
Nasdaq futures trimmed earlier gains to trade 0.9% higher, while S&P 500 futures rose 0.68%.
Eurostoxx 50 futures fell 0.36%, while FTSE futures rose 0.4% and DAX futures lost 0.43%.
“The market wants to believe that this will all end soon because the war that doesn’t end is pretty bad for the world economy. The world economy has had these buffers of running down inventories, but you can’t keep running down,” Capurso said.
Dollar stabilizes
In currencies, the dollar steadied on Tuesday on renewed safe-haven demand, although it remained some distance from a six-week peak hit last week.
The euro fell 0.06% to $1.1636, while the pound fell to $1.3498.
Against the yen, the dollar was flat at 158.95.
Bonds were broadly steady after falling last week on concerns that prolonged higher energy prices would prompt a resurgence of inflation and rapid rate hikes across both developed and emerging markets.
The yield on the two-year US Treasury note was last little changed at 4.0612%, while the 10-year yield fell to 4.5024%.
“We are likely to see periodic rate adjustments on occasions when geopolitical risks recede, but inflation and fiscal risks are likely to be more persistent,” said Eric Robertsen, Standard Chartered’s head of global research and chief strategist.
“Commodity supply dislocations will take months to resolve and fiscal stimulus measures are likely to drive a sustained deterioration in government balance sheets – which will also require increased borrowing in a higher funding cost environment.”
Elsewhere, spot gold fell 0.5% to $4,545.90 a barrel. ounces.
