European stocks and U.S. futures fell slightly while oil prices dipped on Monday after Iranian negotiators said progress had been made in peace talks with the United States, helping calm fears the fragile process to end the Iran war was breaking down. Officials from Qatar and Pakistan also released a statement saying the first session of talks had concluded and progress was made on a roadmap to reach a final deal in 60 days. The Reuters Power Up newsletter provides everything you need to know about the global energy industry.
The talks had earlier been overshadowed by Tehran's announcement it had again closed the Strait of Hormuz, with shipping having slowed after U.S. Central Command said 55 vessels passed on Saturday, prompting U.S. President Donald Trump to threaten fresh attacks. The apparent progress in discussions saw Brent crude futures shed early gains to ease 0.7% to $80.07 a barrel, far below its May peak of $126.41.
There does appear to be further progress being made during talks in Switzerland towards a lasting settlement, and oil prices have dipped again," said Susannah Streeter, chief investment strategist at Wealth Club.
Asian stocks climbed overnight, supported by the apparent progress in peace talks. Japan's Nikkei (.N225), opens new tab rose 1.6%, while South Korea's red-hot market added 0.7% (.KS11), opens new tab, after surging more than 11% last week on demand for semiconductor stocks. A visitor stands next to an electronic screen displaying Japan's Nikkei stock prices quotation board inside a conference hall in Tokyo A visitor stands next to an electronic screen displaying Japan's Nikkei stock prices quotation board inside a conference hall in Tokyo, Japan Treasuries remained under pressure following a hawkish turn by the Federal Reserve last week that led markets to price in a 75% chance of a rate hike as early as September. Futures imply around 38 basis points of tightening by year-end, while yields on 2-year notes rose as much as 4 basis points to the highest since early 2025 at 4.230%. "Our baseline call is for patience and a first hike in the second half of 2027, but (we) believe the margin for error and the tolerance for further inflation is limited, with genuine risks of earlier hikes," said Fabio Bassi, head of cross-asset strategy at JPMorgan.
The Fed's hawkish outlook helped push the dollar up 0.3% to 161.77 yen , with only the threat of Japanese intervention preventing the currency rising to 2024's 40-year high of 161.96. Meanwhile, political uncertainty combined with a rising dollar to push sterling down 0.37% to $1.319 .
Reports said Prime Minister Keir Starmer was considering his political future after rival Andy Burnham's decisive election victory to parliament prompted more ministers in the governing Labour Party to call for him to go. "Amid the uncertainty around a potential challenge against the UK PM and what that means for the fiscal outlook, the likelihood is that gilts will remain under selling pressure to start the week," said Skye Masters, head of market research at NAB. The euro eased 0.3% to $1.144 , after hitting a three-month low on Friday at $1.1418.
