Oil prices remained stable on Monday after US President Donald Trump announced that the United States would assist ships in leaving the Strait of Hormuz, with operations beginning immediately. Iran has dismissed the proposal, though Trump indicated that negotiations with Tehran could still yield positive developments. A statement from US Central Command detailed that support would involve guided-missile destroyers, over 100 land- and sea-based aircraft, and 15,000 service members. However, a subsequent Axios report suggested the Navy might not necessarily escort vessels through the strait.
Iran's Response and Market Reaction
Iran earlier confirmed that the US had responded to its 14-point proposal via Pakistan and that it was reviewing the reply, though Trump remarked it was unlikely to be acceptable. Investors chose to hold off on judgment, leaving Brent crude futures nearly unchanged at $108.35 per barrel, recovering from an initial drop of over two percent. US crude edged down 0.1 percent to $101.85.
Dealers noted that a bulk carrier reported an attack by multiple small craft while transiting near Sirik in Iran on Sunday. However, it remained unclear how many ships would attempt to traverse the Strait of Hormuz even with naval protection.
Asian and European Market Movements
A holiday in Japan resulted in thin trading conditions, with Nikkei futures posting only a modest gain to 59,880, compared to a cash close of 59,513. MSCI's broadest index of Asia-Pacific shares outside Japan climbed 2.8 percent, driven by tech-heavy South Korean stocks that surged 4.05 percent upon returning from a holiday. Chinese blue chips dipped 0.06 percent.
In Europe, Eurostoxx 50 futures and Dax futures each added 0.3 percent. US futures also saw gains, with S&P 500 futures rising 0.1 percent and Nasdaq futures up 0.3 percent, as markets braced for over 100 earnings reports this week. Companies reporting include Advanced Micro Devices, Super Micro Computer, Palantir, Walt Disney, and McDonald's.
Earnings and Inflation Concerns
Goldman Sachs analysts noted that the S&P 500 earnings per share growth rate stands at 25 percent, with one-off gains contributing to a still brisk 16 percent. "Despite elevated energy prices and geopolitical uncertainty, corporate guidance and analyst estimate revisions have remained strong so far this quarter," they said. "However, the reward for EPS beats has been unusually small."
Concerns persist regarding the scale of artificial intelligence capital expenditure, now projected at $751 billion for 2026—$80 billion above estimates at the start of earnings season and 83 percent above 2025 spending. The threat of oil-driven inflation has also lifted bond yields, challenging equity valuations, while several major central banks have adopted a hawkish stance.
Central Bank Policies and Economic Data
Markets now imply only 2 basis points of easing from the Federal Reserve by year-end, down from 11 basis points a week ago. Expectations for the European Central Bank have risen to 76 basis points of hikes, while the Bank of England is seen at 63 basis points. Australia's central bank meets on Tuesday and is expected to hike its cash rate for a third consecutive time to combat persistent inflationary pressures.
The outlook for Fed policy could shift with a raft of data this week, including the April payrolls report on Friday. Median forecasts anticipate a rise of 60,000 jobs following March's outsized 178,000 gain, though seasonal adjustment issues introduce significant uncertainty. Analysts at Citi, for instance, predict a 15,000 drop in payrolls and an unemployment rate increase to 4.3 percent.
Currency and Commodity Markets
In currency markets, the dollar softened slightly as investors awaited further developments in the Middle East and clarity on whether the Strait of Hormuz could be reopened. The dollar held steady at 157.21 yen, still reeling from last week's Japanese intervention, which analysts estimate may have totaled around $35 billion. The euro was flat at $1.1726, while the pound remained at $1.3584 ahead of local elections in Britain that could see heavy losses for the ruling Labour Party.
In commodities, gold slipped 0.2 percent to $4,603 an ounce, remaining well within recent trading ranges.
