Stocks waver, oil falls as traders weigh Iran talks
European stocks and US futures fell slightly and oil prices also fell after Iranian negotiators said progress was being made in peace talks with the US; This helped calm fears that the fragile process to end the Iran war was collapsing.
Britain’s assets held steady after Prime Minister Sir Keir Starmer announced his resignation on Monday, paving the way for Britain’s seventh leader in 10 years.
War talks with Iran had previously been overshadowed by Tehran’s announcement that it was re-closing the Strait of Hormuz; Shipping slowed after US Central Command said 55 ships passed through on Saturday, prompting US President Donald Trump to threaten new attacks.
However, Qatar and Pakistani officials issued a statement saying the first negotiation session had been completed and progress was being made on the roadmap to reach a final agreement within 60 days.
The apparent progress in the discussions caused Brent crude futures to shed early gains, falling 0.7 percent to $80.07 per barrel. That’s well below the May peak of $126.41.
Europe’s STOXX 600 index fluctuated and was last down 0.1 percent, while U.S. S&P 500 futures pared initial losses to trade 0.1 percent lower.
“There appears to be further progress being made in talks towards a permanent solution in Switzerland, and oil prices have fallen again,” said Susannah Streeter, chief investment strategist at Wealth Club.
“It is clear that there is still a long way to go and further obstacles may arise before a long-term agreement is signed.”
Asian shares rose overnight, boosted by progress in peace talks.
Japan’s Nikkei index rose 1.6 percent, while South Korea’s hot market rose 0.7 percent after rising more than 11 percent last week, driven by demand for semiconductor stocks.
Sterling fell 0.1 per cent to $1.322 on Monday after Starmer announced his resignation, which was widely rumored over the weekend.
Former Manchester Mayor Andy Burnham is the favorite to succeed Starmer and analysts have said the key question for nervous UK bond markets will be who becomes finance minister.
“A new leader would not fundamentally change the difficult financial situation they would inherit,” said Nick Rees, head of European macro research at Monex.
“This is what happened to Starmer and we have yet to see a credible plan for how to address it.”
The euro fell 0.1 percent to $1.146, after hitting a three-month low of $1.1418 on Friday.
Treasuries remained under pressure following last week’s hawkish stance by the Federal Reserve, which led markets to price a 75 percent chance of a rate hike in early September.
While futures pointed to a tightening of approximately 38 basis points by the end of the year, two-year bond yields rose by four basis points to 4,230 percent, reaching their highest level since the beginning of 2025.
“Our core call is for patience and the first rate hike in the second half of 2027, but we believe the margin of error and tolerance for further inflation is limited, with real risks of earlier increases,” said Fabio Bassi, head of cross-asset strategy at JPMorgan.
The Fed’s hawkish outlook helped the dollar rise 0.3 percent to 161.71 yen; Only the threat of Japanese intervention prevented the currency from rising to a 40-year high of 161.96 in 2024.
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