Markets on edge as fresh U.S.-Iran attacks dent optimism over a peace deal
Veiled pro-government supporters line up under a banner depicting portraits of the late Supreme Leader of Iran Ayatollah Ali Khamenei and Ayatollah Mojtaba Khamenei as they wait to receive donated meals during a state-organized religious rally in downtown Tehran, Iran, on April 29, 2026.
Nurfoto | Nurfoto | Getty Images
By the end of the week, global markets were betting that the fragile ceasefire between the United States and Iran would turn into a longer-term peace deal.
But escalatory rhetoric, actions over the Strait of Hormuz and new Iranian attacks on the United Arab Emirates in the past 48 hours have led experts to warn that war could return.
Market analysts said the latest developments could be a turning point in the war and mark a critical moment for financial markets and global energy supplies, which are dwindling as the Strait of Hormuz remains largely closed.
“This is an incredibly sensitive moment,” Ben Powell, BlackRock’s chief APAC investment strategist, told CNBC on Tuesday.
“It is very disturbing to have our first missile warnings in several weeks here in Abu Dhabi. We were all hoping this was behind us,” the UAE-based strategist said. he said.
“Looking ahead, I think there’s a real complexity as to whether this escalation yesterday is just part of the negotiation – Iran is showing that they still have cards to play, perhaps signaling to the UAE that the UAE can leave OPEC, but the departure of energy from the region is still dependent on Iran’s well-being – or this could be the beginning of a more difficult moment,” he told CNBC’s Access Middle East.
Energy and other key parts of the global economy are not flowing, he said, adding that we now feel we are approaching a “critical moment” when stocks are depleted and the delayed impact of the energy shock begins to emerge more clearly.
war and peace
Global markets were on edge Tuesday morning following the latest developments over the weekend in the Middle East, where the US is trying to end the stalemate over the blockaded Strait of Hormuz by launching “Project Freedom”, essentially an attempt to “free” ships stuck in the strait and escort them safely out of the waterway blockaded by both Iran and the US.
These initiatives were met with resistance from Iran; While the US said it sank many Iranian boats as a result of clashes in the canal, Iran denied sinking any boats.
Iran then attacked oil infrastructure in the UAE with missiles and drones, seemingly restarting its strategy of pressuring the US to end the war on its neighbors in the Middle East.
Women look at the Dubai skyline, including the Burj Khalifa, the world’s tallest building, as seen from Creek Harbor on April 3, 2026.
Fadil Senna | AFP | Getty Images
Financial markets were in a mixed mood on Tuesday. Stocks were down in Asia and mixed in Europe, while US stock futures rose ahead of the next session on Wall Street.
This apparent recovery in the US comes after major averages fell on Monday and oil prices rose on growing concerns that the conflict in the Middle East could continue with a vengeance.
Markets are likely to remain on edge as they wait to see what happens next, with geopolitical observers warning that a complete collapse of the currently temporary US-Iran ceasefire looks increasingly likely.
“The question of the week is whether geopolitical risks will remain diffuse but contained, or will they continue to weigh on markets and corporate earnings,” Tina Fordham, founder of Fordham Global Foresight, said in her analysis on Tuesday. he commented.
“I’m currently leaning towards the latter, given that Iran’s attacks on targets in the UAE and on ships attempting to pass through the Strait of Hormuz have clearly resumed today.”
Describing Iran’s resumption of drone and missile attacks on the UAE as “the biggest escalation in several weeks”, he said Tehran showed the US that it still had a fight left, with or without a peace deal.
“Iran is signaling that it still has the capacity to inflict pain and will not be forced to surrender. The United States increasingly faces a choice between a long war it does not want to fight or a bad, embarrassing deal,” Fordham noted in emailed comments.
‘Project Deadlock’
The latest turn of events in the Iran war appears to have been accelerated by the ‘Project Freedom’ strategy announced by the US on Sunday, which aims to force the reopening of the Strait of Hormuz. The move comes after the White House became frustrated with the impasse over a peace deal with Iran. Negotiations brokered by Pakistan have stalled in recent weeks, with both sides we disagreed on an agreement.
US President Donald Trump said Fox News He said on Monday that Iran would “fly off the ground” if it targeted US ships protecting commercial ships passing through the strait.
Drivers pass by an anti-US billboard referencing President Donald Trump and the Strait of Hormuz, installed on a building in Valiasr Square in Tehran on May 2, 2026. A senior Iranian military officer said on May 2 that renewed conflict between the United States and Iran was “likely” just hours after President Donald Trump said he was “not happy” with Iran’s offer of new talks.
– | Afp | Getty Images
Tehran signaled overnight that it was still interested in US-Pakistan-mediated peace talks and warned that a political solution was the only way to break the impasse over the deal.
Iranian Foreign Minister Abbas Araghchi said, “While the negotiations are making progress with Pakistan’s kind efforts, the United States should avoid being dragged into the quagmire by malicious people. So is the UAE. Project Freedom is a Project Stalemate.” commented on X overnight.
He said recent developments in the war “make it clear that there is no military solution to the political crisis.”
