Global equity markets rebounded, and oil prices retreated on Wednesday after a report that Iranian intelligence operatives had indirectly approached the CIA with an offer to discuss ending the conflict with the United States and Israel, a day after the attacks began.
“In public, Iran’s surviving leaders have defiantly refused to negotiate with President Trump to end the American and Israeli assault on their country. But a day after the attacks began, operatives from Iran’s Ministry of Intelligence reached out indirectly to the C.I.A. with an offer to discuss terms for ending the conflict, according to officials briefed on the outreach,” the NYT report said.
While the report added that US officials were “sceptical”, at least in the short term, that either the Trump administration or Iran was really ready for an offramp, and that the offer was not being considered “serious” in Washington, the mere possibility of talks was enough to lift risk appetite across global markets.
US futures, European stocks gain, oil pulls back from highs
European and US stock futures gained ground.
Futures on the S&P 500 rose more than 0.3% after the index fell nearly 1% in the previous session.
In Europe, the STOXX Europe 600 advanced more than 1.5%, while London’s FTSE 100 rose 0.6% and France’s CAC 40 gained over 1.2%.
Brent crude fell to $82 a barrel after earlier climbing to $84.39 in volatile trading.
Prices had already eased slightly after Trump announced an insurance guarantee for Gulf shipping and suggested that US naval escorts could accompany oil tankers through the Strait of Hormuz, a critical artery for global energy supplies.
The pullback in oil offered relief to investors concerned about the inflationary impact of prolonged supply disruptions.
Energy markets have been highly sensitive to developments in the region, particularly as Israeli strikes continue to target Iranian military infrastructure.
Safe havens retreat as USD halts rally
The US dollar, which had strengthened for two consecutive sessions as investors sought safety, slipped 0.25%, halting its recent rally.
A selloff in global bonds also eased, with the yield on the 10-year US Treasury note rising two basis points to 4.08%.
Bitcoin climbed to nearly $72,000, suggesting some return of risk appetite after days of turbulence.
“We’re in a headline market,” Guillermo Hernandez Sampere, head of trading at asset manager MPPM, told Bloomberg.
“Rapid movements with higher volatility will remain for a longer period until supply chains are secure again. It will take some time to calm markets.”
Israeli officials have urged US to dismiss the outreach
Despite the market bounce, uncertainty over the trajectory of the conflict remains elevated.
The New York Times reported that Israeli officials, who are said to favour a weeks-long campaign aimed at severely weakening Iran’s military capabilities and possibly destabilising its government, have urged the United States to dismiss the outreach.
Questions also remain over whether any Iranian officials are in a position to negotiate or enforce a ceasefire, given reports of leadership disruption in Tehran following targeted strikes.
Besides, Trump, who had previously indicated openness to talks, wrote on social media on Tuesday that it was now “too late” for negotiations.
Experts have suggested that any halt to the bombing would require Tehran to significantly curtail its ballistic missile and nuclear programs and end support for proxy groups such as Hezbollah.
For now, markets appear to be reacting to the prospect of diplomacy, however tentative.
But with both sides publicly hardening their positions, investors are likely to remain highly sensitive to further headlines in the days ahead.
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