Global markets swung sharply on Monday after Donald Trump said the United States and Iran had held “productive” discussions on ending hostilities, offering the first hint of a possible de-escalation in a conflict that has roiled energy markets for weeks.
Oil prices reacted immediately. U.S. West Texas Intermediate crude fell about 8% to near $90 a barrel, while Brent crude dropped a similar margin to around $102, reversing part of the surge that had pushed prices above $100 amid supply disruptions. Equities followed, with investors moving back into risk assets as the prospect of easing tensions reduced fears of prolonged energy shocks.
At the opening bell, the S&P 500 rose 1.48% to 6,602.60, the Dow Jones Industrial Average climbed 1.78% to 46,386.97, and the Nasdaq Composite gained 1.66% to 22,005.85. Bond markets also steadied, with the 10-year U.S. Treasury yield easing slightly to 4.37% after weeks of upward pressure driven by inflation fears linked to higher energy costs.
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The rally marked a break in sentiment after nearly a month of sustained volatility. In his post, Trump said the discussions were aimed at a “complete and total resolution of our hostilities in the Middle East,” adding that he had ordered a five-day pause on planned strikes against Iranian energy infrastructure, contingent on the outcome of ongoing talks.
The announcement, however, was quickly met with skepticism. Tehran has not confirmed that any such talks took place. State broadcaster Islamic Republic of Iran Broadcasting said: “Trump, fearing Iran’s response, backed down from his 48-hour ultimatum,” casting the development as a unilateral retreat rather than a negotiated step.
Markets appeared to share that caution. Oil prices partially rebounded later in the session, with Brent climbing back toward $105 a barrel. Chris Beauchamp of IG said the recovery suggested investors remain unconvinced that a durable breakthrough is imminent, pointing to unresolved risks around the Strait of Hormuz and the possibility of further strikes.
The waterway remains central to the crisis. With shipping effectively disrupted through the strait, which handles about 20% of global oil and liquefied natural gas flows, analysts estimate that between 7 million and 10 million barrels per day of Middle Eastern supply has been knocked offline. Fatih Birol described the situation as more severe than the oil shocks of the 1970s.
Even the hint of diplomatic movement was enough to trigger a sharp repositioning across markets. Lower crude prices ease inflation concerns, which in turn reduces pressure on central banks to tighten policy. That dynamic has been a key driver of volatility in recent weeks, with investors oscillating between fears of energy-driven inflation and hopes for policy support.
Marko Kolanovic, JPMorgan’s former quant chief, said Trump’s post is “net negative for markets.”
“Manipulation will cause liquidity to disappear and real problems will stay,” he wrote on X.
The conflict has already forced the U.S. to relax sanctions on Iranian and Russian oil to ease supply constraints, while major importers in Asia, including India and China, are exploring ways to secure additional crude. China Petroleum & Chemical Corp has reportedly sought permission to tap state reserves rather than re-enter the Iranian market directly.
Disruptions elsewhere have compounded the strain. In Russia, loadings at the Ust-Luga port resumed after a drone alert, but nearby Primorsk remains shut following airstrikes. In Libya, the El Feel oilfield has been offline due to pipeline issues, further tightening supply in an already constrained market.
Central banks are now navigating an increasingly uncertain outlook. Federal Reserve Governor Stephen Miran said it was too early to assess the full inflationary impact of the energy shock, but maintained that rate cuts may still be needed to support the labor market. In contrast, the Bank of Japan is weighing potential policy adjustments as rising import costs and a weaker yen add to inflationary pressure.
The divergence highlights the uneven global impact of the crisis. While lower oil prices on Monday offered temporary relief, the underlying drivers of volatility, geopolitical risk, disrupted supply chains, and uncertain policy responses remain unresolved.
For investors, the reaction to Trump’s comments underscores how sensitive markets have become to any signal of de-escalation. Yet the quick rebound in oil prices and conflicting narratives from Washington and Tehran point to a deeper uncertainty.
The prospect of an off-ramp has lifted sentiment, but without confirmation from both sides or a clear framework for negotiations, markets are likely to remain reactive rather than convinced.