Major US equity indices fell at Monday’s open after Iran re-closed the Strait of Hormuz over the weekend, dampening the positive sentiment that had driven the S&P 500 and NASDAQ 100 to record highs last Friday. The move came after US forces boarded an Iranian oil tanker bound for China, escalating tensions just days before scheduled peace talks.
Markets are now focused on whether a US-Iran ceasefire can be extended beyond Wednesday’s deadline. Peace talks are scheduled for Tuesday in Pakistan, but Iran announced it would not attend following the weekend’s developments.
The strait closure followed a brief reopening that had boosted market optimism earlier. In response to the closure, the United States enforced a blockade of Iranian ports and attacked the Tousa, an oil tanker carrying Iranian cargo to China. The incident has led traders to reassess the likelihood of a diplomatic breakthrough.
Prediction markets like Polymarket continue to show implied probabilities favoring a ceasefire extension, with traders betting that a US-Iran peace deal will be agreed by the end of May. The markets also suggest Iran will agree to surrender its enriched uranium by the end of 2026, though analysts remain skeptical about whether Iran will follow through on such commitments.
Crude oil prices rose slightly on Monday morning following the Tousa incident, though the gains remained modest. The limited price movement suggests traders are waiting for clearer signals from the diplomatic talks before making larger positioning changes.
Precious metals showed mixed signals on Monday. Gold and silver displayed weak bullish momentum, but the recovery in these safe-haven assets lacks the strength typically seen during major geopolitical crises. Traders appear cautious about taking aggressive long positions in either metal at current levels.
Bitcoin traded lower after failing to break above $75,000 last week. The cryptocurrency’s inability to rally alongside soaring US stock markets suggests that digital assets may have lost some appeal as speculative investments. The divergence between crypto and equities marks a notable shift in market dynamics.
In the foreign exchange market, the euro emerged as the strongest major currency since Tokyo’s open, while the Australian dollar showed the most weakness. The USD/JPY currency pair rose modestly after finding support below the 158 yen level, though momentum remained limited.
The economic calendar remains light for Monday, with no major data releases scheduled. This puts the focus squarely on geopolitical developments and Tuesday’s planned peace talks in Pakistan. Whether Iran reverses its decision not to attend could prove crucial for market direction this week.
Day traders are watching S&P 500 futures for potential long opportunities, despite the negative open. Trend traders remain positioned long in both the S&P 500 and NASDAQ 100, though enthusiasm has cooled from Friday’s record-setting session.
The USD/JPY pair continues to attract attention from trend traders, many of whom remain long despite the currency pair’s weak performance. Support below 158 yen held during recent testing, but traders are finding it difficult to maintain optimism about further upside in the short term.
Market participants will be closely monitoring any statements from US or Iranian officials ahead of Tuesday’s scheduled talks. Any indication that Iran might reconsider its attendance could quickly reverse Monday’s risk-off sentiment and send equity indices back toward their recent highs.
The coming days will prove critical for determining whether the current ceasefire can be extended or whether the conflict between the United States and Iran will escalate further. Markets are positioned for continued volatility as the Wednesday deadline approaches and diplomatic efforts face mounting challenges.
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