2 hours ago
The failure of marathon talks between the United States and Iran is set to ripple across global financial markets, with oil prices likely to react first as trading resumes in the coming hours, while equities may face bouts of volatility as uncertainty returns around the Strait of Hormuz.
Negotiations in Islamabad ended without a deal after nearly 21 hours, with US Vice President JD Vance telling reporters that Washington had made its “best and final offer,” while Iran signalled that further discussions may be required.
The outcome has cast doubt over the durability of the two-week ceasefire and raised fresh concerns about the trajectory of the conflict.
Oil markets brace for volatility; crude may spike towards $100
With oil markets set to open shortly, the absence of a breakthrough has already shifted sentiment decisively.
Peter McGuire, CEO at XM Australia, told CNBC-TV18 expects an immediate upside in crude when markets reopen: “Expect oil prices to tick up a couple of dollars. Prices will be volatile in the first trading day.”
He pointed to conflicting narratives from Washington and Tehran as a key source of uncertainty, saying, “Trump is saying everything is rosy, Iranians are disputing that causing confusion. The uncertainty isn’t good for the market. It seems like this is far from over.”
McGuire said the risk premium in crude is likely to return quickly. “Market is going to be bullish on oil after hearing this,” he said. “Market was looking at sub-90, but it is a very different tone now.”
He added that “oil might take $100 out over the next 24-48 hours,” pointing to the potential for a sharp spike if geopolitical tensions intensify or supply disruptions deepen.
Bloomberg reported that the breakdown in talks is likely to “jolt oil and gas markets,” reversing the cautious optimism that had begun to build after the ceasefire announcement.
“Hope had been cautiously rising last week but this could set us back to levels that we were trading at prior to the ceasefire announcement,” Nick Twidale, chief market analyst at AT Global Markets in Sydney, told Bloomberg, adding, “I would think we will see oil open higher alongside the dollar.”
The Strait of Hormuz remains central to this risk, handling roughly a fifth of global oil flows. Any disruption — or even the perception of restricted access — tends to have an outsized impact on prices, and the lack of clarity on whether the ceasefire will hold keeps that risk premium elevated.
Global markets may stay volatile, but equities seen resilient
While oil appears set for an upward move, the outlook for equities is more nuanced. Market participants suggest that while volatility is inevitable, a sustained or deep sell-off is unlikely at this stage.
Sanjay Parekh, Founder and CIO at Sohum Asset Managers, told CNBC-TV18, “It is a fluid situation but markets think the pressure to resolve is very high for US.” This expectation of continued diplomatic engagement is helping anchor sentiment despite the setback. “See this as a WIP and expect market will be neutral, not too bearish,” he said.
Parekh said that any correction could be contained and may offer opportunities. “We should appreciate that there can be a 3-5% dip and that should be used to increase equity allocation,” he said, while cautioning that “Could have volatile drawdowns, so would recommend investors invest gradually.”
For Indian markets, the impact is likely to be sector-specific rather than broad-based.
Higher oil prices typically weigh on oil marketing companies, aviation and paint stocks, while upstream producers and energy firms tend to benefit.
Any sustained spike in crude could also have implications for inflation and the rupee, adding to near-term volatility in domestic equities.
More talks likely, but uncertainty keeps markets on edge
From a geopolitical standpoint, the failure to reach an agreement has not closed the door on diplomacy but has extended the timeline for resolution.
Former ambassador to the United States Meera Shankar told CNBC-TV18, “Don’t think anyone expected an agreement in one round of talks,” adding, “It appears this will not be the last of the talks.”
She underscored that uncertainty remains elevated. “Neither side has been very clear how they wish to pursue this in future, so all options are open,” she said, a lack of clarity that is likely to keep markets on edge as key sticking points remain unresolved.
Shankar also flagged longer-term risks to energy markets, warning that she feels there will be energy shortages going into the future and that “countries need to prepare themselves for prolonged period of stress in supplies.”
