Iran-US talks are deadlocked again: What is the current situation? Where will the global market go from here?

As the global markets open this week, risk appetite remains resilient, but geopolitical pressures are heating up once again - over the weekend, the prospect of negotiations between the US and Iran suffered a major setback. Last Saturday, US President Trump canceled the plan to send envoys Steve Witkoff and Jared Kushner to Islamabad for talks with Iran, citing "serious internal struggles and chaos within the Iranian leadership." On Sunday, Iranian Foreign Minister Abbas Araghchi briefly returned to Islamabad. At that time, Pakistan was actively pushing for the US-Iran ceasefire negotiations to resume, but Trump suggested that the two sides may switch to telephone consultations. It was reported that Araghchi had left Islamabad and headed to Moscow. According to a US official and two informed sources, Iran has presented a new proposal to the US: to reopen the Strait of Hormuz, end hostilities, and postpone nuclear negotiations to a later date. Amid the continued uncertainty surrounding this key energy passage and the Iran conflict, oil prices rose slightly on Monday, further consolidating the risk premium in the energy market. International benchmark Brent crude futures rose by about 2% to $107.60 per barrel; US crude futures rose 1.89% to $96.18 per barrel. Goldman Sachs currently predicts that oil prices will remain high for a longer period and has raised its year-end target for Brent crude from the previous $80 per barrel to $90 per barrel, as the supply disruption in the Persian Gulf region is expected to be more lasting than previously anticipated. In a report released on Monday, Goldman pointed out that the normalization of exports in the Gulf region has been delayed until the end of June, along with a slowdown in production recovery, leading to a rapid tightening of supply. It estimated that global stocks were consumed at a record rate of 11-12 million barrels per day in April. This view was echoed by other market observers. Billy Leung, investment strategist at Global X ETFs, stated, "I think the so-called 'fat tail' risk is still ahead, not already passed." The 'fat tail' refers to the probability of extreme events occurring. Even if the shipping in the Strait of Hormuz eventually resumes, the lag in supply recovery and the continuing low stock levels imply that the market will remain tight. Global investment management company Invesco predicts that unless shipping fully returns to normal, Brent crude prices are likely to remain above $80 per barrel this year. Experts warn that the longer the strait remains closed, the more severe the economic impact will be, and rising oil prices will eventually dampen demand - especially in energy-importing regions. Stock Market: Resilient but with hidden concerns So far, the stock market has shown unexpected resilience. Global markets have recovered from the initial drop at the outbreak of the war, and despite facing energy shocks, stock indices hover near historic highs. Analysts believe this reflects a tug-of-war between geopolitical risks and strong structural DRIVERS (particularly in artificial intelligence (AI)). Leung pointed out, "The stock market is essentially balancing two forces - the 'left tail' risk of geopolitics and the 'right tail' opportunities of AI commercialization, and it appears that the 'right tail' is currently prevailing." However, some caution that market sentiment is becoming overly exuberant. "The main trend is still upward, I respect this trend, but I won't chase high right now. Overheated sentiment and crowded positions often signal weakening future returns in historical experience," added Leung. Some institutions see the volatility as a buying opportunity. Rajat Bhattacharya, Senior Investment Strategist at Standard Chartered Bank, anticipates short-term market fluctuations, but he expects the US and Iran to reach an agreement within a few weeks, thereby restoring shipping. "Any short-term volatility provides investors with an opportunity to increase exposure to risk assets in a diversified portfolio," he said. Historical experience also shows that the market can quickly recover from supply shocks. Ed Yardeni, economist and president of Yardeni Research, pointed out that during the 1956 Suez Crisis, oil prices doubled and the stock market fell, but after the canal reopened, the stock market quickly rebounded and set new highs. Asian stock markets generally rose on Monday, with Japan's Nikkei 225 index and South Korea's KOSPI index hitting new highs, while US stock index futures remained stable, showing that the developments over the weekend had not caused significant spillover effects in the market. Government bond markets remained stable, with the yield on the US 10-year Treasury rising 1 basis point to 4.322% and the yield on the Japanese government bonds rising by over 2 basis points to 2.463%. Commodities, Food, and Secondary Reactions Apart from oil, the broader commodities sector is beginning to show deeper and more lasting impacts, especially in terms of natural gas and food supply chains. Leung said, "Liquefied natural gas is a less-discussed aspect here. European benchmark gas prices are about one-third higher than pre-war levels, and about one-fifth of global liquefied natural gas supply has been cut off." The rising gas prices directly increase production costs for fertilizers and agriculture, adding the risk of sustained but lagged food price hikes. He added, "The pressure on the food supply chain will show up with a lag, so the related effects won't be immediately seen in the Consumer Price Index (CPI). I will closely monitor the development of secondary effects in agricultural production materials and shipping insurance in the next quarter." Invesco also pointed out that the effects of supply disruptions have extended beyond the oil sector to commodities such as helium, aluminum, and sulfur. Benjamin Jones, Invesco's Global Research Director, wrote in a report on Monday that this magnifies the inflationary impact on industrial supply chains, although central banks currently tend to temporarily overlook this impact, policy responses will become more complex as a result. As Leung said, "The bull market pattern is still intact... but the market is struggling to find a balance between genuine technical upside and energy shocks that have not been fully digested."