Having started in late February, the U.S.-Iran conflict has drawn the attention of market participants worldwide. Attacks in the region and further closure of the Strait of Hormuz have greatly impacted the global economies, driving up oil prices and heightening the inflation fears.
In April, a temporary ceasefire was reached and later extended in an effort to ease tensions. The reopening of the Strait of Hormuz was largely anticipated to help normalize oil flows and stabilize prices.
While markets initially responded positively to the ceasefire announcement, a growing risk of renewed escalation is now being priced in.
The ceasefire remains fragile, with both the U.S. and Iran reportedly exchanging fire in the Strait of Hormuz. The U.S. is pursuing “Project Freedom,” an initiative aimed at securing safe passage through the strait. On Sunday, in a post on Truth Social, Donald Trump stated that the effort was undertaken on behalf of Iran in particular.
However, Iran continues to assert full control over the strait and requires coordination with its authorities for transit. Any foreign armed forces — and those of the U.S. especially — risk being attacked.
Moreover, the United Arab Emirates — a U.S. ally — reported missile and drone attacks, attributed to Iran, on an oil port. Amid these developments, U.S. President Donald Trump warned of retaliation if Iran targets American vessels.
The negotiations still have not translated into tangible results. Both sides continue to exchange proposals, including a recent 14-point peace plan put forward by Iran aimed at ending the conflict. However, over the weekend, Donald Trump shared that he is likely to reject this plan. According to Iranian authorities, there is no military solution to the current crisis.
Renewed tensions have influenced the market outlook, dividing participants into two camps. While some participants remain concerned about the geopolitical risks and believe that the full impact has yet to be realized, others take a more positive view, pointing to the strength of U.S. earnings.
On Tuesday, Dow Jones futures grew over 0.25%, S&P 500 futures rose by more than 0.30%, and Nasdaq 100 futures climbed over 0.50%, with oil prices easing slightly following reports that a U.S.-flagged vessel was escorted out of the strait.
In this context, markets are closely watching the next moves in the U.S.-Iran conflict. The war may either remain at its current level of impact or escalate further, putting pressure on earnings.
This article was written in cooperation with Tradingview