US stock futures fell early Tuesday after a sharp rise on Monday, while oil prices continued to soar as Iran's state media rejected claims that no direct negotiations had taken place with the US.
Iran's response comes after US President Donald Trump said he will postpone striking Iranian energy infrastructure for five days, citing 'very good and productive' discussions with Iran to end the war. The short-lived optimism buoyed stocks on Monday, but equity indexes lost momentum following Iran's stance on the situation.
Iranian Deputy Speaker of Parliament Ali Nikzad reportedly said the Strait of Hormuz would not be returned to its earlier state, and there would be no negotiations with Washington.
'It is unclear how far back-channel talks have progressed or if the IRGC is in any mood to settle at this stage when they remain in firm control of the Strait of Hormuz,' said RBC Capital Markets analysts. 'Ships, not sound bites, will likely be what ultimately matters for physical markets.'
Oil prices declined steeply on Monday but rebounded in early Tuesday hours on concerns that the Middle East conflict could escalate as Israel kept up attacks, further fueling fears of oil shipment disruption in the Strait of Hormuz.
Brent crude has surged by 40% in March amid the conflict, squeezing consumers and rattling governments worldwide.
'A negotiated outcome may be the best of a series of bad options that President Trump has,' said Will Todman, senior fellow in the Middle East Programme at the Centre for Strategic and International Studies. However, Iran will 'go into these talks with great scepticism, fearing that President Trump is simply running down the clock until more military assets arrive.'
Trump also suggested the US and Iran could jointly control Hormuz. The waterway was used to ship 20 million barrels of oil per day in 2025. Trump's dynamic messaging, shifting from ultimatums to negotiations, has left investors perplexed, evident from falling volumes as traders parsed contradictory headlines.
Global Fuel Price Hikes Incoming
The fallout of the Middle East conflict is spreading across the globe, with Chile preparing to raise fuel prices as much as 50%. Meanwhile, Japan commissioned an assessment of its oil-related product supply chain. Thailand also hiked diesel prices, while China's biggest oil refiner said it would prioritise local supplies. The Philippines is now warning it could ground planes, citing that a jet-fuel shortage was a 'distinct possibility.'
'If this shock lasts longer, this extreme tightness that's now concentrated in the Middle East and Asia would spread,' said Goldman Sachs' Daan Struyven, adding that demand destruction would be needed to rebalance supply.
Elsewhere, Saudi Arabia and the United Arab Emirates have hardened their stances against Tehran, given the bombardment of their territories by Iran. Saudi Arabia reportedly told the US it was prepared to strike Iran if its own power and water plants were targeted, as US allies move much closer to joining the war.
'If Gulf states were to join the conflict, it would represent a significant escalation,' said Linh Tran, a market analyst at XS.com. 'The market remains highly sensitive to incoming headlines.'
Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.
