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(Bloomberg) — Oil dropped in early Asia trading after President Donald Trump said he was holding off on fresh military strikes, boosting hopes for a deal that could end the war and revive energy flows through the Strait of Hormuz.
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West Texas Intermediate crude fell 1.4% after Trump said plans for a strike on Iran were called off following appeals from Persian Gulf allies, adding that “serious negotiations are now taking place.” Contracts for the S&P 500 were steady after the benchmark index nearly wiped out its losses in a choppy session. Equity futures signaled gains for benchmarks in Japan and Australia, with contracts for Hong Kong pointing lower.
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While bond moves on Monday were subdued compared with the rout that swept markets Friday, global yields hovered near multi-year highs as still elevated energy prices stoked inflation worries.
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Developments around a potential breakthrough in the standoff over the Strait of Hormuz have driven sharp swings in energy markets. With the waterway still effectively closed to commercial shipping and tanker traffic reduced to a trickle, investors are bracing for continued turbulence across oil and global equities.
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“The volatility will clearly continue until the Iran situation is resolved,” said veteran Wall Street strategist Louis Navellier. “If in a month from now, flows haven’t resumed through the Strait of Hormuz, energy prices will almost certainly be higher, fueling higher inflation and higher interest rates.”
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Earlier Monday, both the US and Iran said they’d rejected fresh offers as insufficient to secure a deal. The White House said a proposal delivered by Tehran through mediators Sunday lacked meaningful improvement, Axios reported. Iran, meanwhile, indicated US demands are unacceptable.
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Elsewhere, the US on Monday issued a new waiver allowing the sale of Russian crude oil and petroleum products that are already loaded on tankers, days after the previous one lapsed. Treasury Secretary Scott Bessent said in a post on X that the new general license “will help stabilize the physical crude market.”
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Monday’s decline marked the first back-to-back drop for the S&P 500 this month, with rising government bond yields, hotter-than-expected inflation readings and elevated oil prices all combining to dent investors’ appetite.
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Lagging software giant Microsoft Corp. was the top gainer among Bloomberg Magnificent Seven members on Monday, with a 0.4% climb. Earlier, a jury rejected Elon Musk’s claims that OpenAI under Sam Altman’s leadership betrayed its mission to benefit the public, finding that he waited too long to sue the company. The stock is still down 12% so far this year.
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“Strong equity markets (outside of Friday’s sell-off), upside inflation surprises, and resilient growth likely cannot coexist indefinitely,” Wolfe Chief Economist Stephanie Roth wrote in a Monday note. Roth’s view is that “rates likely continue repricing higher until either growth weakens, equities begin to crack more materially, or Trump reaches his pain threshold and takes a deal with Iran.”
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