European shares and US stock futures steadied on Monday while oil prices declined after signs of progress in US-Iran peace talks eased concerns that efforts to end the conflict could collapse.
Markets had been unsettled after Tehran announced another closure of the Strait of Hormuz, a key global energy shipping route, prompting US President Donald Trump to threaten further military action.
However, officials from Qatar and Pakistan said progress had been made toward a roadmap for a potential agreement within 60 days. The development was reinforced by US Vice President JD Vance, who said Iran had agreed to allow nuclear inspections.
The easing of tensions pushed Brent crude futures down 1.8 percent to US$79.07 a barrel, well below their May peak of US$126.41.
“Progress appears to be being made during talks in Switzerland towards a lasting settlement, and oil prices have dipped again,” said Susannah Streeter, chief investment strategist at Wealth Club.
She cautioned that significant challenges remained before any long-term agreement could be reached.
European markets showed limited movement, with the STOXX Europe 600 up 0.15%, while US S&P 500 futures trimmed earlier losses to trade 0.1% lower.
Asian markets gained overnight on optimism over the diplomatic developments. Japan’s Nikkei 225 rose 1.6%, while South Korea’s market added 0.7 percent after a strong rally the previous week driven by demand for semiconductor stocks.
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Starmer Resignation Adds UK Market Uncertainty
The British pound and UK government bonds strengthened after Prime Minister Keir Starmer announced his resignation, opening the way for the country’s seventh leader in a decade.
Sterling recovered from earlier losses to trade broadly flat at US$1.324, while government bonds, known as gilts, rose.
Former Manchester mayor Andy Burnham emerged as the favourite to succeed Starmer, but investors remain focused on who will take control of Britain’s finance ministry.
“A new leader does not fundamentally alter the difficult fiscal situation they’re going to inherit,” said Nick Rees, head of macro research at Monex Europe.
The euro slipped 0.15 percent to US$1.146 after hitting a three-month low on Friday.
Fed Hawkish Stance Supports Dollar
US Treasury markets remained under pressure following a more hawkish tone from the Federal Reserve last week, which increased expectations of possible interest rate increases.
Markets are pricing in a 75 percen chance of a rate hike as early as September, with futures implying around 38 basis points of tightening by the end of the year.
Yields on two-year US Treasury notes rose as much as four basis points to 4.230%, their highest level since early 2025.
Fabio Bassi, head of cross-asset strategy at JPMorgan, said the baseline expectation remained for patience from policymakers but warned that inflation risks could force earlier action.
The Federal Reserve’s stance helped lift the dollar 0.3 perfect against the Japanese yen to 161.71, approaching levels that could prompt intervention from Japanese authorities.
The yen remains close to its 2024 peak of 161.96, a level not seen in four decades.
