Wild swings on markets as Trump claims total resolution of Iran war could be near

Equity markets experienced a sharp recovery following the U.S. President’s statement about productive talks with Iran.

Brent crude oil prices dropped from $115 to $98 per barrel, then rose back to $105. UK 10-year gilt yields fell sharply but then climbed back above 5%.

Both sides in this conflict are proving to be unreliable narrators, which continues to create a sense of nervousness.

Susannah Streeter, chief investment strategist, Wealth Club said: “Markets have been taken on a wild ride, as investors have swung from deep pessimism to giddy optimism about the trajectory of the war with Iran.

“Clinging to President Trump’s words is fraught with risks, given how hopes have already risen and then been dashed over the last four weeks.

“Even if the US and Iran come to some agreement, bringing Israel fully on board may prove difficult given the nation’s renegade tendencies. Nevertheless, for now, sentiment has turned more upbeat after the US President claimed that two days of conversations aimed at a total resolution of the conflict were ‘good and productive.

“Brent crude has dropped sharply, having jumped above $115 earlier, it fell below $100 a barrel before climbing higher again.

“At this level, energy costs will remain super-painful for companies and consumers. It’s clear that traders are still expecting significantly lower flows from the Middle East, even if a ceasefire is agreed, given the disruption to supply routes and the damage to facilities.

“Iran’s claim that Trump has ‘backed down’ is likely to add fresh uncertainty into the mix. The President will still want to project a strongman image and is unlikely to want any resolution to depict him in a weaker position on the global stage.

“Both sides in this conflict are proving to be unreliable narrators, and that’s still causing nervousness. There’s still high tension in the bond markets, with inflationary concerns not subsiding. UK 10-year gilt yields have swung sharply, dipping back but then climbing higher above 5% again as hopes for a fast resolution start to fade.