Oil jumps, stocks drop on uncertainty over US-Iran talks

Oil prices jumped and equities slid Thursday as hopes for a peace deal between the US and Iran wavered after Tehran rejected Washington’s bid to wind down the nearly four-week war.

Markets had been buoyed this week by US President Donald Trump’s announcement that strikes targeting Iran’s energy infrastructure would be postponed, adding that the two sides were in peace talks.

But uncertainty over the talks and the virtual closure of the Strait of Hormuz − through which around 20 per cent of oil and liquefied natural gas normally passes − have cast a shadow over market sentiment.

“The market rollercoaster continues,” said Joshua Mahony, chief market analyst at Scope Markets. Crude prices rallied more than nearly four per cent on Thursday, with Brent crude above $101 per barrel and WTI around $94.

The dollar rose against its main rivals.

Wall Street opened lower, with Europe’s main markets down in afternoon trading, while there were losses across Asia. “When the oil price surges, the market playbook stays the same: stocks and bonds sell off,” said Kathleen Brooks, research director at XTB.

The yield on government bonds rose across the board.

Conflicting messages from the US and Iran are “raising questions about whether there is really an off-ramp to the conflict in the days ahead,” said Deutsche Bank’s Jim Reid.

Washington was said to have presented a 15-point plan to end the war, while Tehran’s state-run TV reported officials had put forward their own five conditions for hostilities to end.

Trump on Wednesday threatened to “unleash hell” if Iran did not strike a deal, but Foreign Minister Abbas Araghchi said his country does not intend to negotiate with the administration in Washington.

“This is quite the shift in rhetoric from the President, and highlights how complex it will be” to reach a peace deal, said XTB’s Brooks.

She added that “the prospect of troops on the ground suggest a prolonged war and not one final blow at Iran.” Pakistan’s Foreign Minister Ishaq Dar confirmed Thursday that indirect negotiations between the US and Iran were being held, using Islamabad as an intermediary.

“The tone taken by Iran may simply be posturing, but... there is a high likeliness they continue this conflict until energy prices reach uncomfortable levels,” Mahony said.

The OECD on Thursday cut its eurozone growth outlook and forecast higher inflation for 2026 as energy prices have skyrocketed.

The conflict has also weighed on German consumer sentiment heading into April, a survey showed Thursday, adding to the woes facing Europe’s top economy.

France, which holds the G7 Presidency, will on Monday host a meeting bringing together the group’s finance ministers, energy ministers and central bank governors.

“Pressure on energy prices, shipping flows and broader financial conditions remains one of the few meaningful sources of leverage (Iran) retains,” said Saxo Markets’ Charu Chanana.

“There is therefore little incentive to relinquish that leverage prematurely, particularly if market stress strengthens its negotiating position,” she added.

The World Trade organisation chief Ngozi Okonjo-Iweala warned the global trading system is experiencing the “worst disruptions in the past 80 years”.

Wall Street stocks opened lower on Thursday as oil spiked, with investors losing faith in the immediate prospects for peace in the US-Israel war on Iran.

International benchmark Brent North Sea crude jumped 4.4 per cent to $106.67 per barrel on Thursday morning, while the main US oil contract, West Texas Intermediate, rose 3.9 per cent to $93.81.

US President Donald Trump warned Tehran to engage in talks “before it is too late,” but Iran has publicly rejected US overtures. Both sides have kept up their attacks, with Israel claiming it killed the commander of the Iranian Revolutionary Guards’ navy.

About five minutes into trading, all three major US indices were in the red.

The tech-rich Nasdaq Composite was down 1.1 per cent to 21,687.19, the Dow Jones Industrial Average lost 0.4 per cent to 46,233.83 while the broad-based S&P 500 dropped 0.8 per cent to 6,542.41.

Peter Cardillo, chief market economist at Spartan Capital, told AFP that oil prices were the main “driving forces” of the market at the moment.

Agencies