America-Iran peace talks stalled. What’s next for global markets?

Global markets enter the week balancing flexible risk appetite against new geopolitical tensions as prospects for US-Iran talks took a hit over the weekend.

US President Donald Trump on Saturday canceled plans to send envoys Steve Witkoff and Jared Kushner to Islamabad for talks with Iran, citing “tremendous infighting and confusion” within Tehran’s leadership.

Iranian Foreign Minister Abbas Araghchi returned to Islamabad briefly on Sunday as Pakistan’s leaders pushed to revive ceasefire talks between Tehran and Washington, although Trump said the discussions could take place over the phone. near Araghchi Reportedly departed for Moscow from Islamabad.

Iran has Gave a new proposal to America to reopen the Strait of Hormuz and end the war, while postponing nuclear talks to a later date, Axios reported, citing a US official and two sources with knowledge of the matter.

Oil prices rose on Monday amid uncertainty over the vital energy waterway and the Iran war, adding to persistent risk premiums in energy markets.

International benchmark Brent oil futures rose nearly 1% to $106.55 a barrel, while U.S. crude rose 0.88% to $95.23 a barrel.

Goldman Sachs now expects oil prices to remain high for longer, raising its Brent forecast to $90 a barrel by the end of 2026 from $80 previously, as disruptions in the Persian Gulf prove more persistent than previously thought.

The bank wrote in a note published on Monday that normalization in Gulf exports, which is now only expected to occur by the end of June, is being delayed due to a slow production recovery as well as a sharp decline in supply, with global inventories forecast to fall from 11 million barrels per day in April to a record pace of 12 mbd.

Other market observers also agree with the bank’s view. “I would argue that the fat tail is still ahead of us, not behind,” said Billy Leung, investment strategist at Global X ETFs. Fat tail refers to the probability of extreme events.

Even if flows through the Strait of Hormuz eventually resume, delays in restoring supplies, combined with decreased inventories, suggest continued tightness. Global investment management firm Invesco estimates that $80 a barrel is likely to be a floor for Brent this year in the absence of full normalization of flows.

Experts warned that the longer the strait remains blocked, the more intense the economic impact will be, with rising prices eventually forcing demand to collapse, especially in energy-importing regions.

Stock: Flexible for now

Equities have shown surprising resilience so far, with global markets having recovered losses suffered at the initial outbreak of the war, and reaching near record highs despite the ongoing energy shock.

Analysts say this reflects the tug-of-war between geopolitical risks and strong structural drivers, particularly artificial intelligence.

“Equity is essentially balancing two opposing forces: the geopolitical left end on one side, the AI ​​commercialization right end on the other, and right now the right end is winning solidly,” Leung said.

Still, some caution that the sentiment is becoming stretched.

“The primary trend is up and I would respect that, but I also wouldn’t chase here. Sentiment is hot, positions are crowded, and elevated readings have historically preceded soft forward returns,” Leung said.

Others see volatility as a buying opportunity. Rajat Bhattacharya, senior investment strategist at Standard Chartered, said the market is likely to remain volatile in the near term, but hopes for an agreement within a few weeks that could restore inflows.

“Any near-term volatility provides investors with an opportunity to add risk assets within a diversified allocation,” he said.

Historical precedent also shows that markets can recover quickly from supply shocks. Ed Yardeni, economist and president of Yardeni Research, said oil prices doubled and stocks declined during the 1956 Suez crisis, but later reached new highs after the canal reopened.

Asia-Pacific stocks rose on Monday, along with Japan. Nikkei 225 and South Korea Kospi New record highs were reached, while US stock futures were largely flat, indicating limited spillovers from the weekend’s developments.

Government bond markets remain stable 10 year yield US Treasuries rose 1 basis point at 4.322%. While the yield on Japan government bonds of the same duration was up 2 basis points at 2.463%.

Objects, food and second order effects

Beyond oil, the broader commodity complex is beginning to reflect deeper and more persistent disruptions: particularly in natural gas and food supply chains.

“LNG is a hot topic here,” Leung said. “European benchmarks are running about a third above pre-war levels and about a fifth of global LNG supply has been shut down.”

Higher gas prices directly impact fertilizer production and agricultural costs, increasing the risk of a delayed but sustained increase in food prices.

“Food chain pressures increase with lag, so the headline CPI printed from this will not be visible immediately,” he said. “Farm input and shipping insurance is where I would see second-order effects developing over the next quarter.”

Invesco also noted that the disruption extended beyond oil, affecting commodities such as helium, aluminum and sulfur.

This has broadened the impact of inflation on industrial supply chains, potentially complicating policy responses, even if central banks are still inclined to look ahead to the shock, Benjamin Jones, global head of research at Invesco, wrote in a note on Monday.

As Leung said: “The bull market remains intact … but the tape is balancing the real technical upside against an energy shock that has not fully unfolded.”