On Monday, May 25th local time, news of significant progress in US-Iran peace talks triggered a global energy market crash. Brent crude futures, the most active contract, closed down 6.56% at $93.64 per barrel; WTI crude futures, the most active contract, fell 6.52% to $90.30 per barrel, both reaching their lowest levels since May 7th. Brent crude even fell more than 8% at one point during the session. Market expectations of a resumption of Iranian oil exports, coupled with the accelerated erosion of the geopolitical risk premium of tens of dollars in oil prices, jointly fueled this single-day plunge.
Global assets strengthened across the board. US stocks were closed for Memorial Day, but futures indices saw substantial gains—Nasdaq futures rose 1.2%, and S&P futures rose 0.9%. The pan-European Stoxx 600 index rose for the sixth consecutive day, the German DAX index surged 2.01%, and the Italian benchmark stock index broke through 50,000 points, reaching a record high. The Asia-Pacific markets reacted more positively: the Nikkei index surged about 3%, breaking through 65,000 points for the first time, and the Taiwan Weighted Index rose to 43,644 points, both hitting record highs. The ChiNext index rose more than 2%, regaining the 4,000-point mark.
As of Tuesday's (May 26) early Asian trading session, international oil prices continued to be under pressure. WTI crude oil once fell more than 7%, breaching the $90 mark, and Brent crude oil also fell below $94 per barrel. According to CCTV News, the US and Iran were still negotiating on the wording related to their nuclear programs and the lifting of sanctions on the 25th local time. The main differences currently hindering the finalization of an agreement include the wording of the nuclear issue, details of the sanctions lifting, and core issues such as the management rights of the Strait of Hormuz. However, according to a source familiar with the Doha talks, the two sides have reached a key understanding on the issue of Iran's frozen financial assets, and it is "very likely" that an agreement will be formally announced on Tuesday (May 26).
International Energy Agency Executive Director Fatih Birol warned that while the prospect of peace talks is easing market anxiety, the trend of continuous depletion of global oil inventories remains unchanged. Once inventories shrink to dangerous levels, coupled with rising summer travel demand, the oil market could still enter a dangerous phase in July and August.
The currency market also reacted positively to the peace talks. According to CME's FedWatch tool, the probability of the Federal Reserve keeping interest rates unchanged in June is 99.9%, and the probability of keeping rates unchanged in July is 90.3%. The probability of a rate hike this year has fallen sharply from nearly 70% the previous week to around 40%. The US dollar index fell nearly 0.4%, dropping below the 99 level, while the euro rose more than 40 basis points against the dollar, stabilizing at 1.16. Gold and silver rebounded across the board due to a weaker dollar and cooling inflation expectations. COMEX gold futures rose more than 1%, returning above $4,600, and COMEX silver futures rose 2.89%.
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