Investors adjust positions as geopolitical tensions ease, reducing risk premiums in oil and safe-haven assets.
Global markets are factoring in a rising probability of a truce between the U.S. and Iran, following signals of diplomatic progress. The shift has led to a pullback in crude oil prices and a modest decline in gold, as traders reduce exposure to geopolitical risk premiums.
Oil futures, which had climbed 8% over the past month amid escalating tensions, pared gains by 2.3% in early trading. Safe-haven assets like the Japanese yen and Swiss franc also weakened slightly, reflecting reduced demand for hedges. Analysts note that while negotiations remain fragile, the absence of immediate military action has eased near-term concerns.
Equity markets showed muted reaction, with energy and defense sectors underperforming while broader indices held steady. The S&P 500 remained near record highs, supported by expectations of stable energy supplies and reduced inflationary pressures from lower oil prices.