Oil prices dipped and stocks mostly edged higher on Tuesday as investors remained hopeful for a deal to end the Middle East war and reopen the Strait of Hormuz to oil and gas shipments, despite ongoing tensions.
Iran had not yet sent a delegation to neighbouring Pakistan for a new round of peace talks with the United States, with the two-week ceasefire set to expire by Wednesday.
Brent North Sea crude, the international benchmark, remained largely flat after surging the previous day when Iran reclosed the Strait of Hormuz.
Wall Street’s main stock indices rose as trading began in New York, supported by better-than-expected March retail sales data, even as energy prices began affecting consumers.
In afternoon European trading, London and Paris declined while Frankfurt remained flat. Asian markets closed higher.
“There is a reluctance for investors to price in the worst-case scenario for the Middle East conflict, and there is optimism within the market that the US-Iran ceasefire will be extended,” said Kathleen Brooks, research director at trading group XTB.
President Donald Trump expressed confidence on Tuesday in an interview with CNBC, highlighting the strong negotiating position of the United States as his envoys prepared for talks with Iran in Pakistan.
The White House said Vice President JD Vance was ready to return to Pakistan for new negotiations to end a conflict that has sent crude prices soaring and revived inflation concerns.
However, Iran’s position remained uncertain as it accused Washington of violating their fragile truce through its blockade of the country’s ports and the seizure of a ship.
Trump has similarly accused Tehran of violating the ceasefire by harassing vessels in the Strait of Hormuz, the transit passage for about one-fifth of global oil.
Despite the uncertainty, analysts said investors remained largely optimistic that the two sides would eventually reach a deal to reopen the strategic strait.
“Oil prices remained below $100 a barrel, which suggests cautious optimism that the Middle East conflict will not intensify,” said Russ Mould, investment director at AJ Bell.
“However, the longer oil remains in the 90s dollar-per-barrel range, the higher the chance of an inflationary shock and a decline in global economic activity,” he said.
While the spike in fuel prices has raised concerns about consumer spending, a key component of US economic growth, data showed that March retail sales still rose 0.6% month-on-month when excluding petrol sales.
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Bret Kenwell, US investment analyst at eToro, said the data “echoes what we heard from the big banks last week, with management teams largely pointing to a resilient consumer despite soaring petrol prices and ongoing geopolitical tensions”.
With US stocks having recovered from pre-war losses and sitting near record highs, Kenwell said this might not only reflect hopes for further de-escalation in the Middle East, “but it may also signal growing optimism around earnings”.
If US companies continue to post solid first-quarter earnings, “it could reinforce investors’ confidence that this rally still has room to run”, he added.
Investors are also following the confirmation hearings for Kevin Warsh, Trump’s choice to lead the Federal Reserve.
His testimony could provide insight into the direction of US interest rates in the coming months, as the world’s largest economy faces inflation risks and growth challenges.
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