World markets wary amid high energy prices, US-Iran impasse

Global markets are navigating cautiously on Tuesday amid high energy prices and a diplomatic stalemate between Tehran and Washington following Donald Trump’s comments on the fragile ceasefire in the Middle East.

“President Trump has cast doubt on the ceasefire between the United States and Iran in the markets,” explained Jim Reid, an economist at Deutsche Bank.

The American president stated on Monday that the ceasefire was “on life support” after criticizing Iran’s response to the US plan to end the war, with Tehran vowing to retaliate in case of aggression.

Trump declared that Iran’s response to last week’s US proposal required lifting the American blockade, easing sanctions, and allowing Iran to maintain control over the strategic Strait of Hormuz, through which about 20% of the global oil supply flows.

During a phone call with a Fox News journalist, Trump also mentioned considering reinitiating the operation to protect ships crossing the Strait of Hormuz, which has been blocked by Iran since the joint Israeli-American offensive on February 28.

After over a month of ceasefire efforts, diplomatic channels between Washington and Tehran have stalled, with proposals from both sides via the Pakistani mediator failing to yield conclusive results.

The ceasefire uncertainty is driving up oil prices on Tuesday, with Brent crude rising to $106 a barrel (+1.72%) and US WTI at $100.17 (+2.14%).

The head of Saudi oil giant Aramco warned that the Middle East conflict triggered the “largest energy shock” ever witnessed globally.

“Even if the Strait of Hormuz were to reopen today, it would take months for the market to rebalance,” said Amin Nasser, suggesting that markets may not return to normal operation until 2027.

– Global stock markets in the red –

On the stock markets, “optimists (…) are starting to run out of arguments,” observed Andreas Lipkow of CMC Markets.

“Energy prices remain high, and the semiconductor sector’s rally is at an advanced stage,” he added.

In Asia, sharp profit-taking has been seen, with Seoul’s Kospi index closing sharply down by 2.29% at 7,643 points.

In European early trading, Paris, Frankfurt, London, and Milan stock exchanges were all down, with energy price sensitivity impacting Old Continent markets.

– US inflation in focus –

New data on US price rises, including the Consumer Price Index (CPI) on Tuesday and Producer Price Inflation (PPI) on Wednesday, will be closely watched, with inflation expected to rise due to surging energy prices.

“A higher-than-expected publication could reignite expectations of more restrictive monetary policy from the Federal Reserve, push bond yields higher, and weigh on stock valuations,” said Ipek Ozkardeskaya, an analyst at Swissquote.

Meanwhile, the US dollar gained against the euro, trading at $1.1750 per euro at 07:20 GMT.

In the bond market, the yield on the 10-year US bond was at 4.43% compared to 4.41% at the previous close.

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