Summary
U.S. President Donald Trump said he had called off new strikes that had been planned against Iran, commenting there was a "very good chance" of reaching an agreement to limit Iran's nuclear programme after Tehran transmitted a fresh peace proposal to Washington via Pakistan. The comments helped ease recent tensions in energy and financial markets, though oil prices stayed high and risk sentiment remained fragile.
Market reaction and immediate effects
On the headlines, global oil benchmarks, equity indexes and sovereign yields broadly steadied as markets reacted to the diplomatic development. Brent crude gave up some of the gains it logged the previous day but stayed comfortably above $110 per barrel. The broader market response was muted, reflecting investor fatigue with the repeated swings in the geopolitical narrative.
In Asia, trading was uneven. South Korea's KOSPI fell more than 3% while U.S. stock futures were slightly lower before the opening bell. European equities, by contrast, were trading higher in early session activity. Bond markets, which had seen sharper moves in recent sessions, became somewhat calmer overnight, a change that market participants linked in part to the retreat in oil prices.
Energy supply concerns and inventory warnings
Despite the diplomatic hiccup easing, energy market fundamentals remain strained. International Energy Agency chief Fatih Birol warned that commercial oil inventories are being drawn down rapidly, leaving only a few weeks of supply available amid the Iran conflict and the closure of the Strait of Hormuz. The IEA also estimated that overall global oil supply will fall by around 3.9 million barrels per day over 2026 as a result of the war. At the pump in the United States, the average regular gasoline price had risen to $4.53 per gallon, with some states experiencing larger increases over the past month.
Fixed income, the United Kingdom and policy signals
Gilt yields pulled back in recent trade, though analysts noted that this move owed more to developments in Britain's domestic politics than to oil alone. Andy Burnham, the mayor of Manchester and the leading challenger in the contest to lead the Labour Party, said he supported the government's existing self-imposed fiscal rules - a stance that helped ease some investor concerns about a potential fiscal swing. The International Monetary Fund also urged the Bank of England to pause on further rate rises for now, provided that energy prices decline, a comment that supported gilts.
Corporate news: a major U.S. energy takeover bid
In the corporate arena, NextEra Energy announced it was seeking to buy Dominion Energy in a transaction valued at $66.8 billion. The proposal would price Dominion shares at a 23% premium to the prevailing market level and, if completed, would create the third-largest U.S. energy company. Dominion shares reacted sharply to the bid, jumping about 10% on the announcement.
Technology and market focus ahead
Investors also remained focused on the ongoing structural drivers of demand, including the surge in energy consumption tied to large-scale AI investment. Market participants were giving particular attention to Nvidia, which was scheduled to report results the following day; the chipmaker's performance is widely watched for indications of AI-related demand trends.
Chart of the day and outlook
Data highlighted by the IEA shows a rapid depletion of commercial oil inventories, raising the prospect of tighter markets in the near term if supply disruptions persist. While the immediate diplomatic steps reduced the risk of an imminent escalation, the underlying squeeze in supplies and persistent high prices mean markets remain vulnerable to renewed volatility.
Events to monitor
- Canada's April consumer price index release (8:30 a.m. EDT)
- Remarks by Cheryl Venable, interim president of the Atlanta Fed
- Final day of the G7 finance ministers and central bankers meeting in Paris
- Russian President Vladimir Putin's visit to China
Conclusion
Markets are treading carefully as diplomatic signals and persistent energy market pressure interact. A pause in planned U.S. strikes and a new Iranian proposal offered through Pakistan reduced the immediate risk premium, but stark inventory warnings from the IEA and high pump prices in the United States underline how fragile the supply situation remains. Meanwhile, significant corporate moves and political developments in the United Kingdom are adding further layers of complexity for investors across equities, bonds and energy markets.