U.S.-Iran peace talks stall. What’s next for global markets

Global markets enter the week balancing resilient risk appetite against renewed geopolitical tensions, as expectations for US-Iran negotiations took a hit over the weekend.

US President Donald Trump on Saturday abandoned plans to send envoys Steve Witkoff and Jared Kushner to Islamabad for talks with Iran, citing “tremendous infighting and confusion” within the Tehran administration.

Iranian foreign minister Abbas Araghchi made a brief return to Islamabad on Sunday as Pakistani leaders pressed to revive ceasefire talks between Tehran and Washington, but Trump said talks could be held by phone instead. Araghchi has reportedly headed to Moscow from Islamabad.

There is Iran A new offer was made to the USA In its news, based on a US official and two sources with knowledge of the subject, Axios reported that in addition to the reopening of the Strait of Hormuz and ending the war, nuclear talks were postponed to a later date.

Amid ongoing uncertainty about the critical energy waterway and the Iran war, oil prices rose slightly on Monday, reinforcing the persistent risk premium in energy markets.

International benchmark Brent oil futures rose nearly 1% to $106.55 per barrel, while US crude oil rose 0.88% to $95.23 per barrel.

Goldman Sachs now expects oil prices to remain higher for longer, raising its Brent forecast from $80 a barrel to $90 a barrel by the end of 2026 as disruptions in the Persian Gulf prove more persistent than previously assumed.

A postponement of the normalization of Gulf exports is now expected only by the end of June, the bank wrote in a note published on Monday, as a slower production recovery has squeezed supply sharply and global stocks are forecast to shrink from a record 11 million barrels per day to 12 barrels per day in April.

The bank’s view is supported by other market observers. “I think the fat tail is still ahead of us, not behind us,” said Billy Leung, chief investment strategist at Global X ETFs. The fat tail represents the probability of extreme events.

Even if flows resume via Hormuz, the delay in restoring supply, combined with depleted stocks, indicates continued congestion. Global investment management company Invesco estimates that $80 per barrel will likely be the floor level for Brent this year if flows fully normalise.

Experts warned that the longer the strait is interrupted, the more severe the economic impact will be, and rising prices will lead to the destruction of demand, especially in energy-importing regions.

Stocks: durable for now

Stocks have shown surprising resilience so far; global markets have recovered losses from the initial outbreak of the war and remain near record levels despite the ongoing energy shock.

Analysts say this reflects the tug of war between geopolitical risks and powerful structural factors, especially artificial intelligence.

“Stocks are essentially balancing two opposing forces: the geopolitical left tail on the one hand, the commercialization of artificial intelligence right tail on the other, and right now the right tail is convincingly winning,” Leung said.

Still, there are some warnings that sentiment is getting tense.

“The main trend is up, and I respect that, but I wouldn’t follow it here either. Sentiment is hot, positioning is intense, and higher readings have historically preceded softer forward reversals,” Leung said.

Others see volatility as a buying opportunity. Rajat Bhattacharya, senior investment strategist at Standard Chartered, said market volatility was likely in the short term but a deal that could revive flows was expected within weeks.

“Any near-term volatility presents investors with an opportunity to add to risk assets within a diversified allocation,” he said.

Historical precedent also shows that markets can recover quickly from supply shocks. Ed Yardeni, economist and president of Yardeni Research, noted that during the 1956 Suez crisis, oil prices doubled and stocks fell, but later rebounded to high levels with the reopening of the canal.

Asia-Pacific stock markets gained value on Monday due to the influence of Japan Nikkei 225 and South Korea kospi While US stock futures were broadly stable, new records were set, suggesting that the impact of the weekend’s developments was limited.

Government bond markets remain stable 10 year return U.S. Treasuries rose 1 basis point to 4.322%. The same maturity yield of Japanese government bonds increased by 2 basis points to 2.463%.

Commodities, foods and secondary effects

Beyond oil, the broader commodity complex is beginning to reflect deeper and more persistent disruptions, particularly in natural gas and food supply chains.

“LNG is the leg that is not discussed enough here,” Leung said. “Indicators in Europe are running about a third above pre-war levels, and roughly a fifth of global LNG supplies are blocked.”

High gas prices directly affect fertilizer production and agricultural costs, increasing the risk of a delayed but sustained increase in food prices.

“Food chain pressure builds with a lag, so the CPI headlines coming out of this will not appear immediately,” he added. “Agricultural inputs and transportation insurance are where I will watch second-order impacts develop over the next quarter.”

Invesco also said the outages go beyond oil, affecting products such as helium, aluminum and sulfur.

This widens the inflationary impact on industrial supply chains and potentially complicates policy responses, although central banks are inclined to review the shock for now, Benjamin Jones, head of global research at Invesco, wrote in a note Monday.

As Leung puts it: “The bull market is solid… but the tape is balancing the real technological upswing against an energy shock that has not yet fully materialized.”