Global stocks steady, oil prices fall as Iran peace talks progress

Global markets showed signs of stabilization on Monday, with European stocks and US futures trading steadily as oil prices dipped. This shift followed reports of progress in US-Iran peace talks, easing concerns about the fragility of the process to end the ongoing conflict.

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There does appear to be further progress being made during talks in Switzerland towards a lasting settlement, and oil prices have dipped again. It is clear there is still a long way to go, and more obstacles may emerge before a long-term deal is signed.

Meanwhile, the British pound and UK bonds experienced a rise after Prime Minister Keir Starmer announced his resignation. This development paves the way for Britain's seventh leader in a decade, introducing a new element of political uncertainty. Investors are closely watching to see who will succeed Starmer, with former Manchester Mayor Andy Burnham considered a favorite, though the identity of the next finance minister is a key concern for UK bond markets.

Asian stocks also climbed overnight, supported by the apparent progress in peace talks. Japan's Nikkei index rose 1.6%, and South Korea's market added 0.7%. This positive sentiment was further bolstered by strong demand for semiconductor stocks, which had previously driven the South Korean market up over 11% last week.

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A new leader does not fundamentally alter the difficult fiscal situation they’re going to inherit.

Despite the positive developments in peace talks, analysts caution that a long road remains. Susannah Streeter, chief investment strategist at Wealth Club, noted that while progress is being made, "more obstacles may emerge before a long-term deal is signed." The market's reaction reflects a cautious optimism, balancing the potential for a lasting settlement with the inherent uncertainties of international diplomacy.

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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.