Markets ease as investors ponder US-Iran peace talks; yen tumbles

Global shares dipped on Friday after ‌US and Iranian negotiators called off peace talks, while the risk of official Japanese intervention simmered as the yen traded on ​the brink of a 40-year low.

The dollar headed towards its strongest weekly gain in a month, mostly at the ‌expense of the yen, which has ‌fallen for five out of the last six weeks to trade close to its weakest since late 1986, prompting a volley of warnings from officials in Tokyo that intervention is an option.

The MSCI All-World index was down 0.15%, having retreated after US Vice President JD Vance pulled ‌out of a planned trip to meet Iranian negotiators in Switzerland on Friday.

European stocks fell 0.12%, paring earlier gains, while US stock futures fell between 0.1% and 0.2%. The US stock market was closed on Friday for the Juneteenth holiday.

Oil prices edged below $80 a barrel after Israel and Hezbollah agreed to a ceasefire in Lebanon on Friday, according to a US official, after an escalation in fighting there jeopardised the chances of an interim agreement on ending the war in Iran turning into a lasting Middle East peace deal.

Tankers have started sailing through the Strait of Hormuz, which the war effectively closed, after the US lifted its blockade on Iran on Thursday.

“We concede that ​there will be a number of ships eager to leave the Gulf’s warm waters, and we think crude will ‌struggle to find its footing amid a flurry of ‘open for business’ headlines, and yet we question the durability of the deal,” said analysts at RBC Capital Markets in a note to clients.

“In the event that the deal holds ... the Hormuz reopening trajectory could resemble something similar to the Red Sea, where shipping traffic remains over 50% below pre-crisis levels despite the Houthis signing a deal in May 2025 to end hostilities.”

The dollar index traded around 13-month highs, fuelled by a firm pledge from new Federal Reserve Chair Kevin Warsh to tackle inflation and ensure price ​stability. That has ‌prompted traders to assume there will be at least one rate hike this year, compared with a negligible possibility a couple ‌of weeks ago.

The shift in tone from the Fed has hit Treasuries hard. Two-year yields are nearly 10 basis points higher than they were this time last week, while benchmark 10-year yields have fallen 3 basis points to 4.451%.

That reflects investors pricing in the chances of near-term rate rises, ‌while gaining some ‌confidence that these could prove short-lived given the drop in the oil price.

The cash US bonds market was also closed on Friday.

With the dollar in ‌the ascendant, the yen stayed on the back-foot to trade around 161.3, leaving the US currency at its strongest since last July, and well beyond the 160-threshold that most see as a trigger for Japanese intervention.

The pound was up 0.1% at $1.321, after a 0.7% drop the previous day as the Bank of England kept interest rates on hold in ​a 7-2 vote. Labour mayor Andy Burnham won a parliamentaryelection in the north of England on Friday, removing a key obstacle to a leadership challenge against Prime Minister Keir Starmer.

Multiple British cabinet members will tell Starmer on Friday to set out a timetable for his departure, the Times reported.

Futures tracking Canada’s main stock index fell on Friday, as U.S.-Iran negotiations aimed at ending the Middle East conflict were ‌called off, fueling fresh uncertainty at the end of a ​choppy week.

Futures on the S&P/TSX index fell 0.35% ‌to 2,046.8 at ET 07:26 ‌a.m. ET.

Brent crude prices were flat at near $80 per barrel, after Switzerland said US talks with Iranian negotiators would ‌not take place on Friday, as Vice President JD Vance dropped his travel plans.

Expectations of a peace deal and a gradual reopening of the Strait of Hormuz, a vital artery for global energy supplies, supported global risk appetite this week.

Gold prices fell more than 1%, putting the ​yellow metal on track for a third straight weekly decline, ‌pressured by a firmer US dollar and a hawkish Federal Reserve.

Commodity prices tend to impact Canadian stocks due to the presence of large energy and mining companies in the index.

The main TSX index touched a series of record highs this ​week ‌before retreating in the past two sessions. Friday’s early declines ‌threaten to wipe out the TSX’s slim weekly gains.

Investors will keep a close eye on Canada’s April retail sales data, set ‌to be ‌published at 8:30 a.m. ET.

The Bank of Canada last week left ‌its key interest rate unchanged as expected and said it was seeing limited evidence that higher energy prices were fueling broad-based inflation. FOR TSX market report Canadian dollar and bonds report Reuters global stocks poll for Canada Canadian markets directory.

As geopolitical tensions intertwine with shifting monetary policies, global markets remain precariously balanced between hope and hesitation. While a ceasefire offers temporary relief, the durability of peace and the trajectory of interest rates will dictate the next moves. Investors now brace for a week of critical economic data, acutely aware that today’s fragile calm could easily be shattered by tomorrow’s headline, keeping volatility firmly on the radar.

Agencies