Markets suspended between diplomacy and oil: the Gulf remains the true deciding factor.

The weekend that reignited risk premiums

The start of the week for financial markets began with a clear feeling: diplomacy still exists, but geopolitical risk has by no means abated. In the Gulf, clashes linked to Iran continued to affect the region's energy and financial heartland. The United Arab Emirates declared that drones had targeted the area near the Barakah nuclear power plant, while Saudi Arabia announced it had intercepted three drones from Iraqi airspace. This is an important detail: the market is no longer pricing in just a conflict between the United States, Israel, and Iran, but the risk of an operational expansion towards the Gulf monarchies.

The immediate impact was felt in oil. On Friday, Brent crude closed at $109.26 a barrel, up 3.35% , while WTI rose to $105.42 , up 4.2% . Over the previous week as a whole, Brent crude had gained 7.84% and WTI 10.48% , reflecting fears that the Strait of Hormuz would remain blocked or at least not fully reliable. Before the war, around 140 ships passed through it every day ; according to the latest data cited by the Iranian Revolutionary Guards, 30 ships are said to have passed through, an improvement but still far from normal.

Iran-US: Tactical opening, no strategic turning point yet

The central issue remains the nuclear negotiations. Iran has sent a new proposal to the United States, mediated by Pakistan. The White House deemed it insufficient, but the simple fact that the negotiating channel remains open has slowed the immediate escalation. According to Axios, the Iranian proposal contains only limited improvements and does not provide sufficient detail regarding either the suspension of uranium enrichment or the handover of accumulated stockpiles.

Here comes the most sensitive issue: Iranian stockpiles. Reuters reported that Iran still holds over 400 kg of highly enriched uranium, which Washington is demanding be sold or removed from military reach. The possibility of transferring the material to Russia had previously been mooted, but the issue remains political rather than technical: the United States wants verifiable guarantees, while Tehran demands an end to the blockade, the easing of sanctions, and the release of frozen funds.

Donald Trump, meanwhile, has called off a planned attack on Iran, saying there's a "good chance" of reaching an agreement. But the truce is fragile: the message to the market is that the war can be stopped with an agreement, or restarted if diplomacy fails.

Wall Street slows: geopolitical relief is not enough

The reaction of US indices was cautious. On Monday, the Dow Jones closed up 0.32% at 49,686.12 points , but the S&P 500 lost 0.07% to 7,403.05 and the Nasdaq fell 0.51% to 26,090.73 . On Tuesday, with yields still rising, the pressure increased: the Dow at 49,515.42 points, the S&P 500 at 7,356.14 and the Nasdaq at 25,835.47 , with the technology index once again more vulnerable.

The reason is simple: if oil remains above $100 and fuels renewed inflationary pressures, the Federal Reserve may not have room to cut rates. Indeed, the market is starting to speculate on the opposite scenario: higher rates for longer, or even further tightening if energy inflation were to filter through to consumer prices.

Bonds and the dollar: the market looks to real rates

The real thermometer of the week wasn't just oil, but the Treasury. The yield on the 10-year US bond rose to 4.659% , a 15-month high, and on Tuesday it settled around 4.669% . It's a level that changes the price of everything: growth stocks, gold, currencies, and global government debt.

The dollar also benefited from this environment. The greenback index rose 0.4% to 99.39 , while the euro fell 0.51% to $1.1595 . Against the yen, the dollar strengthened to 159.06 , in an area that continues to put pressure on the Japanese authorities.

This is the most important macro point: the market isn't buying dollars just out of fear, but also because US real yields remain high. At a time when energy and geopolitics could reignite inflation, the dollar is once again becoming a defensive and profitable currency.

Europe and commodities: fragile rebound, gold under pressure

In Europe, the picture was more constructive but not without risks. The STOXX 600 rose 0.8% to 614.83 points , the German DAX gained 1.1% , and the CAC 40 gained 0.8% , supported by relief following the pause in the American attack and by the drop in oil prices. However, Europe remains more exposed than the United States to the energy shock because it imports much more energy and has a smaller share of technology in its stock markets.

On the commodities front, oil corrected but remained high: Brent crude was around $110.26 and WTI near $108.09 on Tuesday. Gold, however, lost strength: spot gold fell about 1.45% to $4,500.36 an ounce, as rising yields and a strong dollar are reducing the attractiveness of a zero-coupon asset.

The story behind the numbers

The message this week is clear: markets want to believe in diplomacy, but they're still paying a very high risk premium. Stocks might bounce on a soothing phrase, but oil above $100 , Treasuries near 4.7% , a strong dollar, and gold under pressure tell a less tranquil story.

The real variable isn't just whether the United States and Iran will sign an agreement. It's whether the deal will be credible enough to truly reopen Hormuz, reduce the risk on Gulf oil pipelines, and remove the geopolitical premium that has accumulated in recent weeks. Until then, the market will remain in an unstable equilibrium: optimistic enough not to collapse, but too exposed to energy to truly regain serenity.