Global financial markets were largely rangebound on Tuesday as investors exercised caution ahead of a U.S.-imposed deadline for a deal on the conflict in the Middle East and monitored supply risks to oil markets. The prospect that the confrontation could intensify has kept traders on the sidelines, with energy benchmarks trading at elevated levels and the dollar retaining recent gains.
Brent crude futures were trading up 0.4% at $110.19 per barrel, while U.S. West Texas Intermediate futures rose 0.8% to $113.31 per barrel. Markets have been sensitive to developments since the outbreak of the U.S.-Israel conflict with Iran at the end of February, when Tehran effectively closed the Strait of Hormuz - a strategic choke point that handles about a fifth of the world’s oil and natural gas flows. That disruption has amplified inflation concerns among market participants.
In equities, the response was muted. MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.4% higher, supported in part by corporate news that provided a momentary lift to sentiment. Japan’s Nikkei index moved erratically through the session, sliding from early gains to trade 0.2% lower. In the futures markets, U.S. stock futures were down about 0.55%, and European futures indicated a likely higher open following recent holiday closures on Friday and Monday.
Investor focus was drawn to an externally imposed timeline from Washington. U.S. President Donald Trump set a firm deadline of Tuesday at 8 p.m. Eastern Time (0000 GMT Wednesday) for a deal to be reached, a timetable that has left markets waiting for clarity on whether negotiations will produce a resolution. The uncertainty has kept positioning cautious and reduced appetite for directional bets.
“We are back on a Trump imposed countdown clock and there’s no way to predict with any confidence what will happen,” said Kyle Rodda, senior markets analyst at Capital.com. “The more intrepid traders might make a bet one way or the other. Others will look to hedge risk or stay out entirely. But there’s not much market participants can really do but wait and see.”
Tehran has pushed back against outside pressure to reopen the waterway and said it wants a lasting end to the war rather than a temporary ceasefire, complicating the prospect of a quick resolution. President Trump warned Iran could be “taken out” if it failed to meet his deadline, saying he would destroy Iranian power plants and bridges and rejecting concerns that such moves could amount to war crimes.
Market strategists warned that any follow-through on threats to target Iran’s power infrastructure would represent a marked escalation with the potential to prompt retaliatory measures and additional disruption to Gulf energy facilities. “Any follow‑through on threats to target Iran’s power infrastructure would mark a significant escalation, raising the risk of retaliatory action that could further disrupt Gulf energy facilities,” said Vasu Menon, managing director of investment strategy at OCBC in Singapore.
The confrontation and the associated risk premium have fed into broader macro concerns. Traders have revised their views on the global interest rate outlook, with markets no longer pricing in any rate cuts from the Federal Reserve this year. The conflict has raised worries about stagflation - a combination of higher inflation and weak or slow growth - which would complicate monetary policy and growth prospects concurrently.
Supporting the inflation narrative, recent U.S. data released on Monday showed that growth in the services sector slowed in March while the prices paid component - a gauge of input cost pressures for businesses - rose by the most in over 13 years. Those readings were cited as early indications that the prolonged conflict with Iran was adding upward pressure to prices, influencing market expectations ahead of U.S. inflation data due later this week.
In the currency markets, the euro was steady at $1.1538. The dollar index, which measures the U.S. currency against six major counterparts, stood at 100.06, close to recent highs as the greenback continued to serve as the primary safe-haven asset during market turbulence. The Japanese yen was trading at 159.91 per U.S. dollar in early dealings, hovering near the 160 level that market watchers have flagged as key in assessing whether Tokyo might intervene following strong comments from officials.
Precious metals saw modest movement as investors repositioned. Gold eased 0.17% to $4,640 per ounce in early trading.
Corporate news provided a limited positive note for sentiment when chipmaker Samsung Electronics issued a record-breaking quarterly profit forecast, which briefly supported risk appetite among investors. The company’s outlook was one of the few bright spots in an otherwise cautious market environment.
For now, market participants remain largely in a holding pattern awaiting the outcome of the talks and the U.S. deadline. With oil prices elevated, input costs rising and geopolitical risk heightened, investors are parsing every data release and headline for signals that could shift the balance between risk-on and risk-off positioning.
Summary
Global markets were tentative as traders awaited a U.S. deadline for a deal on the Iran conflict. Crude oil hovered near $110 a barrel amid supply concerns after the Strait of Hormuz was effectively closed, while the dollar held firm and risk assets showed limited direction. Rising input costs in the U.S. services sector and comments threatening strikes on Iranian infrastructure added to concerns about inflation and the potential for further escalation.