Markets jolt as US-Iran talks stall, oil jumps

U.S.-Iran diplomatic talks failed to produce a second round over the weekend, and President Trump declared the current ceasefire will end on Wednesday and that the Strait of Hormuz will remain closed until a comprehensive deal is signed. Both West Texas Intermediate and Brent crude rose about 5.8% after markets reopened with a gap higher.

Traders repriced the risk of renewed hostilities after Iranian officials expressed doubts about the negotiation framework and warned they could withdraw. Energy contracts finished the session up roughly 5.8% following volatile trading. The Strait of Hormuz is a major transit route for global oil shipments, and reports that it would remain closed pushed buyers into the market.

Equity markets opened lower on the oil spike but recovered much of their losses later in the day. Automated buying helped blunt the morning sell-off and major indexes ended the session near flat. Sector performance shifted during the day: healthcare and energy stocks weakened while technology and non-energy consumer durable names provided offsetting gains.

Currency markets showed limited reaction to the oil rally. The U.S. dollar failed to gain sustained ground and the dollar index remained range-bound. The Australian dollar continued to outperform several peers. Market participants said foreign-exchange trading was narrow as investors awaited clearer signals from the diplomatic talks and upcoming economic releases.

Attention now shifts to a packed economic calendar. Kevin Warsh, nominee for Federal Reserve chair, is scheduled to appear before the Senate at 10:00 a.m. Eastern for his confirmation hearing; sources say he intends to stress Fed independence. U.S. retail sales data is due at 8:30 a.m. Eastern. Overseas releases include New Zealand inflation tonight, which may affect rates expectations at the Reserve Bank of New Zealand, and U.K. employment figures overnight.

President Trump issued a direct timeline on the ceasefire, stating: “The ceasefire will end this Wednesday and the Strait of Hormuz will remain firmly closed until a comprehensive deal is officially signed.” Traders will monitor diplomatic developments alongside the economic and policy news expected this week.