- Iranian officials in Doha for talks on possible deal with the United States.
- US stock futures pare gains, European stock futures mixed.
- Bonds are stabilizing after last week’s rout over inflation and fears of rising rates.
Oil prices rose Tuesday and stocks were mixed as investor optimism about an imminent U.S.-Iran peace deal was tempered by new U.S. strikes in the Middle East.
Iran’s top negotiator and its foreign minister were in Doha to discuss a possible deal with the United States to end the war with the Qatari prime minister, an official briefed on the visit said, after Washington and Tehran downplayed hopes of an imminent breakthrough.
The Nikkei newspaper separately reported that the two sides were discussing a plan to open the Strait of Hormuz about 30 days after reaching a deal to end hostilities.
But even as negotiations progressed, U.S. forces on Monday carried out strikes in southern Iran against targets including boats attempting to lay mines and missile launch sites, in what they called defensive actions.
These developments sent Brent futures up more than 1% in early Asian trading, to $97.32 a barrel. U.S. West Texas Intermediate crude was up slightly from Monday’s last traded price, but down 5.5% from Friday’s close. There was no settlement on Monday due to the Memorial Day holiday in the United States.
“I’m a little skeptical… We keep hearing that a deal is close, but what will that deal look like? That’s what’s really important. When is the Strait of Hormuz going to open… There’s a lot we don’t know,” said Joseph Capurso, a strategist at the Commonwealth Bank of Australia.
Stock markets were mixed, with MSCI’s broadest index of Asia-Pacific shares outside Japan rising 0.8%, while Japan’s Nikkei lost 0.2%.
Nasdaq futures pared earlier gains to trade 0.9% higher, while S&P 500 futures rose 0.68%.
Eurostoxx 50 futures fell 0.36%, while FTSE futures added 0.4% and DAX futures lost 0.43%.
“The market wants to believe that everything is going to end soon, because the fact that the war is not ending is very bad for the world economy. The world economy has had buffers to reduce inventories, but you cannot continue to reduce inventories,” Capurso said.
The dollar is stable
In currencies, the dollar stabilized on Tuesday on renewed safe-haven demand, although it remained some distance from last week’s six-week peak.
The euro fell 0.06% to $1.1636, while the British pound fell to $1.3498.
Against the yen, the dollar remained stable at 158.95.
Bonds remained broadly stable after a rout last week on concerns that prolonged rises in energy prices could fuel a resurgence in inflation and lead to rate hikes in developed and emerging markets.
The two-year U.S. Treasury yield was last little changed at 4.0612%, while the 10-year yield fell to 4.5024%.
“We will likely see periodic retracements in yields as geopolitical risks ease, but inflationary and fiscal risks are likely to be more sustained,” said Eric Robertsen, head of global research and chief strategist at Standard Chartered.
“It will take months to resolve disruptions in commodity supplies, and fiscal support measures are likely to lead to a lasting deterioration in sovereign balance sheets – which will also require increased borrowing in an environment of higher financing costs.”
Elsewhere, spot gold fell 0.5% to $4,545.90 an ounce.
