U.S. Indexes were mixed on Monday as renewed geopolitical tensions weighed on sentiment, after Iran re-closed the Strait of Hormuz. The move pushed oil prices higher at the reopen, while Equity and Treasury Futures sold off, although these moves pared through the session. Crude ultimately settled firmly higher, albeit off overnight peaks. Focus remains on the outlook for US/Iran talks, with conflicting reports around timing and participation. US media suggest Vice President Vance, Witkoff and Kushner could meet with the Iranian delegation as soon as Tuesday or Wednesday, while Iranian reports indicate no decision has yet been made. President Trump also signalled he is unlikely to extend the ceasefire or remove the US blockade without a deal, while Iran has pushed for the blockade to be lifted before negotiations resume, underscoring the fluid nature of the situation. The move in oil drove cross-asset price action, with the Treasury curve flattening as higher crude prices lifted inflation expectations. However, the initial gap lower in T-note futures largely reversed as the session progressed. In FX, price action was mixed, with oil-linked currencies such as the Canadian Dollar outperforming, while the U.S Dollar and Japanese Yen lagged. In Equities, sector performance was mixed, with Materials outperforming and Communication Services lagging. Precious metals weakened as higher oil prices boosted inflation expectations and reduced the likelihood of near-term Fed easing, while Bitcoin posted gains. Overall, markets are reintroducing a geopolitical risk premium, with oil driving cross-asset moves, although the paring of initial reactions highlights a degree of caution as participants await clearer signals on the path of US/Iran negotiations. Focus remains on the outlook for US/Iran negotiations, with mixed reporting around the likelihood of upcoming talks. There was no US macro data on Monday, and the Fed is now in its blackout period. Attention turns to the hearing for Fed Chair nominee Warsh, whose opening remarks emphasise the importance of Fed independence. Elsewhere, Oil closed higher by 5.5% while Gold closed 0.35% lower.
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