Global stocks stall as US-Iran nuclear talks face early setback
Global stocks are ending a strong week on a cautious note as relief over an interim peace deal between the US and Iran gave way to a focus on the challenges of securing a lasting agreement.
With US cash markets closed for the Juneteenth holiday, S&P 500 futures declined after the benchmark posted its best week since the end of May. Europe’s Stoxx 600 dipped 0.2%, while Asian stocks retreated 0.3% from an all-time high. Markets in China, Hong Kong and Taiwan were shut as well.
Talks on a permanent deal that were scheduled for Friday in Switzerland have been delayed. Israel and Iran-backed Hezbollah militants clashed overnight in Lebanon, a development that was behind the meeting’s postponement, according to people familiar with the matter.
Israel and Hezbollah have now agreed to a ceasefire as of 4pm local time, according to a US official. Iran has made a truce in Lebanon a condition of its preliminary deal with the US.
Brent crude rose 0.9% to above US$80 a barrel, paring a 7.7% drop for the week through Thursday. Traffic through the Strait of Hormuz appeared to thin on Friday, just a day after a burst in flows through the waterway. Meanwhile, Tehran said ships that cross the strait need its permission.
The developments are a test to the optimism that has seen a technology-led rally in stocks gain further momentum after the US and Iran lifted a months-long dual blockade of the Strait of Hormuz. Friday’s talks were meant to kick off a 60-day negotiating window for a permanent deal on Iran’s nuclear activities.
“Of course, with Trump there can always be some derailment along the way, but we believe that we’re set into a new phase of de-escalation,” said Alexandre Drabowicz at Indosuez Wealth Management. He advised investors not to rush to conclusions about a permanent deal.
UK gilts led a broad advance in European bond yields after Greater Manchester mayor Andy Burnham won a seat in Parliament, handing him a pathway to challenge Prime Minister Keir Starmer for his job. Investors are debating whether a Burnham premiership might shift to a looser fiscal policy.
The pound outperformed most major currencies, while the dollar held at its highest level since March. Bitcoin snapped a three-day losing streak. Gold headed for a third straight weekly loss, trading around US$4,150 an ounce.
Global markets are wrapping up a pivotal week marked by the landmark US-Iran interim agreement, Federal Reserve chair Kevin Warsh’s first policy meeting and SpaceX’s early days as a public company. Stocks have shown resilience, buoyed in part by the frenzy around artificial intelligence.
Strategists surveyed by Bloomberg have raised their S&P 500 year-end targets from a month ago as disruptions from the Iran war eased and the earnings outlook improved.
The average target climbed to 7,716 from 7,612 in May. That’s almost 3% higher than the last close and implies a near 13% gain for the year. Earnings estimates also increased for this year and next.
“Markets seem to be entering a rare couple of weeks with no major catalysts ahead,” said Roberto Scholtes, head of strategy at Singular Bank. “Hopefully, this is a chance to take a breather after a hectic year, and possibly also a period of sector rotation.”
