Crude extends gains, most stocks drop as Mideast hopes dim

Crude oil prices extended their gains on Tuesday, while Asian stock markets largely retreated as prospects for a US-Iran agreement to reopen the Strait of Hormuz dimmed. The deadline for a truce between the two nations passed without a resolution, casting a shadow over market sentiment.

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President Trump is going to be very patient… he doesn’t want to rush to a deal.

Despite recent soft US economic data that has tempered expectations of immediate interest rate hikes by the Federal Reserve, traders anticipate that inflation will persist. This outlook is driven by the ongoing Middle East crisis and the sustained high price of crude oil, which remains around $90 a barrel. The persistent geopolitical tension has pushed long-term Treasury yields to levels not witnessed since June 2007, just prior to the global financial crisis. This surge is further exacerbated by increasing US borrowing costs and substantial corporate bond issuance aimed at funding investments in artificial intelligence.

The likelihood of a deal between Washington and Tehran appears slim. President Donald Trump indicated he would not extend a 60-day truce, part of a previous memorandum of understanding, while Iran deemed it "irrelevant" due to alleged early violations by the United States. Jared Kushner, a special envoy for the US president, described the conversations as "very positive and active" but acknowledged a significant lack of trust between the two nations. He suggested that President Trump would be patient and "make the right deal when the right deal is ready."

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He’ll make the right deal when the right deal is ready.

Trump himself stated that Iranian officials "want to make a deal, but they’re not going to make the kind of a deal that I feel is necessary." He also issued a veiled threat towards Oman, suggesting he would bomb the country if it interfered with an agreement, referencing ongoing talks between Muscat and Tehran regarding control of the Strait of Hormuz. The US appears to be adopting a long-term strategy, which investors fear could lead to prolonged periods of higher oil prices. Treasury Secretary Scott Bessent recently threatened "economic isolation like the world has never seen before" for Tehran, with new measures anticipated soon. This follows Trump's earlier comment that the US was "low-keying it" and observing Iran's economic struggles.

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President Trump is going to be very patient… he doesn’t want to rush to a deal.

Both major crude oil contracts saw increases on Tuesday, building on the previous day's gains of over two percent, with Brent crude trading above $91 per barrel. Equities mostly declined, mirroring losses on Wall Street. Tokyo's Nikkei index fell over two percent, while Seoul and Taipei experienced drops of more than one percent. Sydney, Singapore, and Mumbai also closed lower. Conversely, Hong Kong, Shanghai, Manila, Wellington, and Jakarta recorded gains. In Europe, London edged higher, but Paris and Frankfurt retreated.

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He’ll make the right deal when the right deal is ready.