Global oil prices and equity markets slipped on Wednesday as investors weighed the uncertain trajectory of US-Iran relations following an eleventh-hour extension of a ceasefire by US President Donald Trump, even as restrictions on Iran’s maritime access remained in place.
With the temporary truce nearing expiration, Trump announced an indefinite extension after what he described as a request from mediator Pakistan, citing the need to allow Iran’s “fractured” leadership more time to present a proposal. The move came despite his earlier position that the ceasefire would not be prolonged and warnings that military strikes could resume once it lapsed.
“I have…directed our Military to continue the Blockade and, in all other respects, remain ready and able, and will therefore extend the Ceasefire until such time as their (Iran’s) proposal is submitted,” Trump wrote on social media.
While Washington opted against fresh military action, it maintained its blockade of the Strait of Hormuz, a critical global shipping route, keeping tensions elevated and markets cautious.
Uncertainty surrounding proposed peace talks in Islamabad deepened after a White House official confirmed that Vice President JD Vance would no longer travel as planned, pending Iran’s response. Tehran, however, ruled out participation, citing what it called unreasonable US demands, while the semi-official Tasnim news agency also indicated no imminent engagement.
Market analyst Christopher Wong of Oversea-Chinese Banking Corp described the situation as a high-stakes standoff.
“The US and Iran may be trying to shore up leverage and playing a game of who blinks first.
“Whatever the outcome, the suspense in the interim may see risk appetite being curtailed but when either side blinks, risk proxies could rally.”
Oil benchmarks dipped slightly after volatile early trading, reversing some of the previous day’s three percent gains. Broader equity markets also weakened, following losses on Wall Street.
Asian markets reflected the downturn, with Hong Kong, Sydney, Singapore, Seoul, and Wellington all closing lower, while Shanghai remained unchanged. However, Tokyo and Taipei recorded modest gains.
Traders have struggled for direction throughout the week amid conflicting signals from Tehran regarding the Strait of Hormuz, through which nearly one-fifth of global oil supplies pass. Iran had briefly indicated it would reopen the waterway before reversing its position, citing US actions and the seizure of one of its vessels.
Trump, in turn, accused Tehran of violating the ceasefire by harassing ships in the strategic corridor. The resulting volatility has pushed crude prices up and down, though they remain below the $100 per barrel threshold.
Analysts say markets are currently balancing optimism over a potential resolution with fears of renewed escalation. Fawad Razaqzada of FOREX.com noted that sentiment has turned increasingly cautious.
“If there’s no deal, I would imagine that oil prices could climb back above $100, which would likely invite pressure on equities.”
Meanwhile, attention is also shifting to Washington, where the Senate is reviewing the nomination of Kevin Warsh to lead the Federal Reserve, succeeding Jerome Powell when his term ends next month.
Warsh, appearing before lawmakers, stressed the importance of central bank independence and pledged not to be influenced by political pressure.
The former Fed governor said he was committed to “ensuring that the conduct of monetary policy remains strictly independent.”
Trump, who has repeatedly criticised current Fed Chair Jerome Powell for not lowering interest rates aggressively, recently told CNBC he would expect swift rate cuts under new leadership.
