European and US markets opened with cautious trading on Monday as investors weighed the breakdown in US-Iran peace talks, a sharp surge in oil prices, and a heavy week of central bank policy decisions.
The pan-European Stoxx 600 index edged up more than 0.1% after recovering from earlier losses, while major regional indices posted modest gains. France's CAC 40 rose 0.19% to 8,173.54, Germany's DAX climbed 0.42% to 24,231.11, and the UK's FTSE 100 added 0.04%.
However, US stock futures signaled a more cautious tone, with Dow futures falling 0.14% (70 points), S&P 500 futures slipping about 0.1%, and Nasdaq-100 futures hovering near flat. The decline follows stalled diplomatic efforts between the US and Iran, which have intensified supply concerns around the critical Strait of Hormuz.
Oil prices surged sharply on the geopolitical tensions. Brent crude rose more than 2% to $107.46 per barrel and later traded near $108, while US West Texas Intermediate gained 1.8% to $96.14, moving close to $97. The rally is driven by severe disruptions in the Strait of Hormuz, where an estimated 10-13 million barrels per day are effectively held back from global markets, reinforcing upward pressure on prices.
Energy stocks led European sector gains, rising 0.9%, as retail stocks also performed well, gaining over 0.7%. In contrast, food and beverage stocks fell 0.5%, and mining stocks slipped 0.1% amid ongoing supply chain bottleneck concerns around the Strait of Hormuz.
Geopolitical developments remained a key driver. Iran reportedly made a new proposal to the US to reopen the Strait of Hormuz and end the conflict, while suggesting nuclear talks be postponed, as reported by Axios. This follows Donald Trump's statement that he had scrapped plans to send envoys to Pakistan for talks with Iran, saying, “Too much time wasted on traveling, too much work!” He added, “Nobody knows who is in charge, including them. Also, we have all the cards; they have none!” Meanwhile, Iran's Foreign Ministry spokesman stated no meetings between Tehran and Washington were planned.
Central bank meetings are in the spotlight this week. The Federal Reserve will announce its policy decision on Wednesday, followed by the European Central Bank and Bank of England on Thursday. Economists broadly expect the central banks to hold interest rates steady this month while signaling the possibility of future hikes. The Fed meeting could mark the final one chaired by Jerome Powell before Kevin Warsh is expected to take over in May after the US Department of Justice dropped its criminal probe into Powell.
US Treasury yields moved higher as investors positioned for fresh signals from the Fed, with persistent inflation concerns and geopolitical tensions keeping upward pressure on yields. Global markets remained largely subdued, with Asian markets showing a mixed picture—Japan’s Nikkei 225 climbing to fresh record highs, while China and Hong Kong lagged.
In corporate news, Meta Platforms faced a setback after China moved to block its roughly $2 billion acquisition of AI startup Manus, adding a fresh layer of geopolitical risk to its AI strategy. European wind energy firms outperformed, with Nordex jumping over 12% on strong Q1 results, Vestas Wind Systems rising 3%, and Oersted advancing 3.9%.
