Financial markets experienced a setback Thursday as the fragile ceasefire between the United States and Iran showed signs of strain, with both nations disagreeing about the scope of their recent two-week agreement.
Energy prices climbed while stock markets retreated as the critical Strait of Hormuz shipping lane remained essentially blocked to maritime traffic. Tensions escalated with renewed verbal disputes between Washington and Tehran, despite planned peace negotiations scheduled for the weekend.
Both Brent and WTI crude oil benchmarks surged past $98 per barrel Thursday morning before pulling back slightly, driven by fresh uncertainty about the ceasefire’s stability. While current prices remain below earlier weekly peaks, the increase was sufficient to halt Wednesday’s worldwide stock market gains.
Asian markets led the decline, with Japan’s Nikkei and South Korea’s KOSPI indexes dropping after several days of increases. European markets opened lower, and U.S. stock futures traded in negative territory before the opening bell.
Currency markets showed mixed signals, with the dollar trading relatively flat as investors awaited clarity on whether the U.S.-Iran truce would survive. The Japanese yen retreated from Wednesday’s advances, settling near 159 against the dollar.
Questions about the ceasefire’s longevity intensified as the Strait of Hormuz remained blocked to shipping. Iranian maritime authorities warned Wednesday that unauthorized vessels would face targeting and destruction, while Tehran continues weighing toll charges for waterway passage.
Iran has also accused Israel of violating ceasefire conditions through continued strikes in Lebanon. Although weekend peace discussions remain scheduled to begin Saturday, Iran’s chief negotiator called proceeding “unreasonable,” while President Trump issued additional military warnings.
These developments are unlikely to comfort investors hoping the ceasefire would provide the market breakthrough they anticipated, or that the global energy crisis would ease soon. This maintains concerns about potential inflationary pressures and helped slow Wednesday’s Treasury bond rally.
Regarding inflation data, traders will monitor Thursday’s February personal consumption expenditures report, projected to show U.S. prices rising 0.4% for the second consecutive month, even before recent energy price spikes.
Federal Reserve meeting minutes released Wednesday revealed some policymakers favoring rate increases for the next policy move. However, “many participants” still supported rate reductions, with “most” recognizing potential economic growth risks from the conflict that could justify additional cuts.
Shipping data shows daily traffic through the Strait of Hormuz has plummeted to under 10% of normal levels since the U.S.-Iran conflict began. Tehran’s demonstrated capacity to disrupt Gulf energy supplies illustrates how the conflict has already shifted regional power balances.
Thursday’s key economic releases include U.S. February PCE inflation data at 8:30 a.m., weekly unemployment claims at 8:30 a.m., and final fourth-quarter GDP figures at 8:30 a.m. A 30-year Treasury bond auction is scheduled for 1 p.m.
