U.S.-Iran Talks Enter “Final Stage,” Easing Market Risk Sentiment

[Chart 1: Illustration of Trump]

U.S. President Donald Trump said Tuesday that negotiations between the United States and Iran have entered the “final stage,” triggering a sharp improvement in market risk sentiment. Brent crude briefly plunged more than 7% intraday, despite the U.S. EIA reporting a record-scale 17.8 million-barrel draw in crude inventories and U.S. crude exports reaching all-time highs.

Market sentiment was further pressured by reports that some oil tankers had resumed transit through the Strait of Hormuz, easing concerns over supply disruptions.

[Chart 2: Crude Oil Price Chart]

Trump also stated that he is “in no rush to end the conflict with Iran,” while emphasizing that Israeli Prime Minister Benjamin Netanyahu is aligned with his approach on Iran. Israeli media reported that the two leaders discussed regional developments and possible next steps during a phone call Tuesday.

Iran, meanwhile, continues negotiations despite what it described as “deep distrust” toward Washington. According to Saudi sources, another round of talks is expected to take place in Islamabad, Pakistan, after the Islamic pilgrimage season at the end of May. Irans Foreign Ministry also said it is working with Oman on a long-term security framework for the Strait of Hormuz.

At the same time, Iran‘s Revolutionary Guard warned that any future attacks could trigger retaliation beyond the Middle East, while U.S. military refueling aircraft were reportedly seen at Israel’s Ben Gurion International Airport, signaling continued high military readiness.

Key Market ImplicationsOil Prices See Sharp Repricing

Normally, the massive EIA inventory draw would have supported crude prices. However, optimism surrounding U.S.-Iran negotiations and limited recovery in Strait of Hormuz shipping activity dominated market sentiment. Brent crudes steep decline reflected a rapid unwinding of geopolitical risk premiums.

Negotiations Still Face Major Obstacles

Although both sides appear to be nearing a critical phase, disagreements remain significant on nuclear policy, sanctions relief, regional security, and control of the Strait of Hormuz. The upcoming Islamabad talks are expected to become a key market focus.

Trump Maintains Pressure Strategy

Trump continues to balance diplomatic messaging with military leverage. While signaling progress to calm markets and allies, he is also preserving strategic flexibility and maintaining pressure on Tehran.

Federal Reserve Turns More Hawkish

Recent Federal Reserve meeting minutes showed that policymakers remain concerned about persistent inflation, with some officials even discussing the possibility of further rate hikes instead of cuts. Rising geopolitical risks and energy price volatility are reinforcing the Feds cautious stance.

Market Outlook

The latest oil price volatility once again highlights the importance of the Strait of Hormuz to global energy markets. While temporary supply concerns have eased, continued military tensions between Iran, Israel, and the United States mean that any breakdown in negotiations could quickly trigger another spike in crude prices.

U.S. equities, which had recently faced pressure from rising Treasury yields and bond market weakness, gained some short-term relief following the decline in oil prices. However, institutions including Goldman Sachs warn that if negotiations fail, elevated oil prices could continue feeding inflation and limit the Federal Reserves ability to ease policy, creating further pressure on stock valuations.

Overall, Trumps “final stage” comments have temporarily reduced geopolitical anxiety, but underlying tensions remain fragile. The upcoming Islamabad negotiations may determine whether the conflict moves toward de-escalation or returns to a more confrontational path.

In the near term, oil prices are likely to remain highly volatile, while inflation expectations and Federal Reserve policy pricing continue to be driven by geopolitical developments.