Global financial markets extended gains after the United States and Iran refrained from launching fresh attacks for a third consecutive night, easing fears of an immediate escalation in the Middle East. The calmer tone supported equities and government bonds, while oil prices slipped below $90 per barrel as concerns over potential supply disruptions eased.
The latest developments suggest that both Washington and Tehran are allowing diplomatic efforts more time, despite heightened tensions in recent weeks.
Trump Gives Diplomacy More Time
US Ambassador to the United Nations Mike Waltz said President Donald Trump is giving diplomacy “some time” to work, following last week’s warnings that Washington could intensify military strikes against Iran if tensions continued to escalate.
According to a report by The New York Times, Trump and his advisers have decided to pause plans for broader US military action, amid concerns that expanding operations could strain American air defence inventories, including Patriot interceptor missile stockpiles.
However, Waltz dismissed suggestions that the US military is facing equipment shortages, stating in an interview with NBC News that American forces possess all the weapons required to carry out any mission if necessary.
White House Keeps Military Option on the Table
In a statement, the White House reiterated that President Trump prefers a diplomatic resolution to the crisis but remains prepared to act if Iran continues what Washington describes as hostile activities in the Strait of Hormuz or against US allies.
“The President always prefers a diplomatic solution,” the statement said, adding that “all options remain available” should Iran escalate its actions.
Markets Respond to Reduced Immediate Risk
The absence of fresh military exchanges has improved investor sentiment across global markets. Stock indices advanced, government bond yields stabilised, and demand for traditional safe-haven assets moderated as investors assessed the reduced likelihood of an immediate regional conflict.
Meanwhile, oil prices retreated below the $90 threshold after recent gains driven by fears that fighting could threaten energy exports through the Strait of Hormuz, one of the world’s most important oil shipping routes.
Despite the market’s positive reaction, analysts caution that geopolitical risks remain elevated, with investors continuing to monitor diplomatic negotiations and any changes in military activity that could quickly alter the outlook for global energy markets.
