The euro rose in European markets on Tuesday against a basket of global currencies, extending its gains for the seventh consecutive day against the U.S. dollar, recording its highest level in six weeks, benefiting from the drop in the levels of the American currency after a breakthrough in negotiations between the United States and Iran, despite the naval blockade that the U.S. Navy began implementing on the Strait of Hormuz and Iranian ports.

With inflation in the eurozone exceeding the European Central Bank's medium-term target due to high energy prices, the probability of raising European interest rates at least once this year has increased, pending the release of more crucial economic data in Europe.

Price overview

• Euro exchange rate today: The euro rose against the dollar by more than 0.1% to ($1.1770), the highest since March 2, from today's opening price of ($1.1758), and recorded a high of ($1.1753).

• The euro ended Monday's trading up by 0.3% against the dollar, in its sixth consecutive daily gain, within the longest streak of daily gains this year, thanks to hopes of the continued war truce between the United States and Iran.

The U.S. Dollar

The dollar index fell on Tuesday by 0.1%, deepening its losses for the seventh consecutive session and recording a six-week low, reflecting the continued drop in the levels of the American currency against a basket of global currencies.

This drop comes amid improved risk sentiment in the markets after media reports confirmed the continuation of negotiations between the United States and Iran regarding reaching a lasting peace agreement in the Middle East.

Diplomatic efforts

Diplomatic efforts continue, sponsored by Pakistan and Turkey, to bring viewpoints closer between the United States and Iran and to push toward engaging in a new round of negotiations, following the stumbling of the previous round held in the Pakistani capital, Islamabad, on Friday.

Media reports confirmed that a new round of negotiations between Washington and Tehran may be held in Islamabad next Thursday, with the Swiss capital, Geneva, proposed as a potential alternative for the second round of U.S.-Iranian negotiations.

Keiichi Iguchi, senior strategist at Resona Holdings, said: The series of statements has created some relief in the markets, as it renewed the possibility of reaching a diplomatic solution.

Global oil prices

Global oil prices fell by an average of 1%, with signs appearing that Washington and Tehran may revive peace talks after the United States began a blockade of the Strait of Hormuz.

Undoubtedly, the decline in global oil prices reduces fears of accelerating inflation, which lessens the pressure on global central banks, especially the European Central Bank and the Bank of England, to raise interest rates in the near term.

European interest rates

• Lagarde, President of the European Central Bank, said: The bank is ready to raise interest rates even if the expected rise in inflation is short-term.

• The money market pricing of the probabilities of the European Central Bank raising European interest rates by about 25 basis points in April is currently stable around 35%.

• Sources reported to Reuters that the European Central Bank is likely to begin discussing raising interest rates during the meeting of this month.

• In order to re-price the above probabilities, investors await the release of more economic data in the eurozone regarding the levels of inflation, unemployment, and wages.

The Japanese yen rose in Asian trading on Monday against a basket of major and minor currencies, on its way toward achieving its first gain in the last four days against the U.S. dollar, benefiting from the drop in the levels of the American currency after a breakthrough in negotiations between the United States and Iran, despite the naval blockade that the U.S. Navy began implementing on the Strait of Hormuz and Iranian ports.

With the current decline in global oil prices, indications are increasing that inflationary pressures on monetary policy makers at the Bank of Japan are receding, which reduces the likelihood of raising Japanese interest rates later this month.

Price overview

• Japanese yen exchange rate today: The dollar fell against the yen by 0.2% to (159.08¥), from today's opening price of (159.42¥), and recorded a high of (159.44¥).

• The yen ended Monday's trading down by 0.1% against the dollar, in its third consecutive daily loss, amid market assessment of the collapse of talks in the first round between the United States and Iran in Pakistan.

The U.S. Dollar

The dollar index fell on Tuesday by about 0.1%, deepening its losses for the seventh consecutive session and recording a six-week low, reflecting the continued drop in the levels of the American currency against a basket of global currencies.

This drop comes amid improved risk sentiment in the markets after media reports confirmed the continuation of negotiations between the United States and Iran regarding reaching a lasting peace agreement in the Middle East.

Diplomatic efforts

Diplomatic efforts continue, sponsored by Pakistan and Turkey, to bring viewpoints closer between the United States and Iran and to push toward engaging in a new round of negotiations, following the stumbling of the previous round held in the Pakistani capital, Islamabad, on Friday.

Media reports confirmed that a new round of negotiations between Washington and Tehran may be held in Islamabad next Thursday, with the Swiss capital, Geneva, proposed as a potential alternative for the second round of U.S.-Iranian negotiations.

Global oil prices

Global oil prices fell by an average of 1%, with signs appearing that Washington and Tehran may revive peace talks after the United States began a blockade of the Strait of Hormuz.

Japanese interest rates

• The pricing of the probabilities of the Bank of Japan raising interest rates by a quarter of a percentage point in the April meeting is currently stable around 10%.

• In order to re-price those probabilities, investors await the release of more data on the levels of inflation, unemployment, and wages in Japan.

American markets rose on Monday, as the S&P 500 and Nasdaq indices managed to erase all losses incurred since the outbreak of the war between Iran and the United States. The Dow Jones Industrial Average rose by 0.63% (301.68 points) to close at 48,218.25 points. The Nasdaq Composite index also climbed by 1.23% (280.84 points) to reach 23,183.74 points, while the S&P 500 index added 1.02% (69.35 points) to close at 6,886.24 points.

Trump's statements support sentiment

This rise brought the two main indices back above pre-war levels, reflecting a rapid recovery in investor sentiment after last week's temporary truce and the start of the earnings season. Technology stocks led the gains after U.S. President Donald Trump told reporters that Iran "wants to reach a deal badly," which helped offset concerns raised by Washington's announcement of the start of a naval blockade of Iranian ports. Weekend talks in Islamabad ended without progress, but signals from Washington kept diplomatic hopes alive.

Oil approaches $100 and mediators intervene

Oil prices rose due to supply concerns related to the Strait of Hormuz, but declined later, as Brent crude settled at $99.36 per barrel and West Texas Intermediate at $99.08. Pakistan, Egypt, and Turkey are expected to continue mediation efforts between Washington and Tehran, according to a report by Axios. International Energy Agency Executive Director Fatih Birol warned that more than 80 energy facilities in the Middle East have been damaged since February 28, and that restoring supplies could take two years. European markets closed with a slight decline, as the German DAX index fell by 0.26%.

Wall Street recorded a strong recovery on Monday, recovering all its losses resulting from the war between the United States and Iran, at a time when markets are still betting on the possibility of avoiding the worst-case scenario for the global economy.

The S&P 500 index rose by 1% to return to its levels before the start of the U.S. and Israeli attack on Iran in late February, becoming only about 1.3% below the record high it recorded this year. The Dow Jones also climbed 301 points or 0.6%, and the Nasdaq rose by 1.2%.

Even in the oil market, which saw a jump above $100 per barrel after the failure of ceasefire talks over the weekend, gains declined as Monday's session progressed. These movements reflect that financial markets are moving at a less intense pace compared to the large fluctuations that have prevailed since the beginning of the war.

Markets are living in a state of fluctuation between fears of the war continuing for a long time and hopes of reaching a settlement, especially since all parties benefit from the free flow of oil.

After the failure of weekend talks, U.S. President Donald Trump announced a blockade on the Strait of Hormuz, in an attempt to increase pressure on Iran and prevent it from benefiting from oil exports.

Any additional blockade is expected to reduce global oil supplies, after prices already jumped due to Iranian restrictions on ship movements in the Strait, a vital corridor through which a large part of Gulf oil passes to global markets.

Iran responded by threatening to target ports in the Arabian Gulf and the Gulf of Oman. After that, the price of Brent crude rose by 4.4% to close at $99.36, which is much higher than its pre-war level of about $70.

But the price is still lower than the peak it touched at $119 during previous peaks of tensions, and it also declined from the level of $104 it recorded earlier in Monday's session.

Samir Samana, head of global equity and real assets strategy at Wells Fargo Investment Institute, said: "Markets are deriving some optimism from the fact that the two parties are still talking and that the general ceasefire appears to be holding, so far."

Outside the White House, Trump indicated on Monday that the United States remains open to dialogue with Iran, saying: "I can say that we have received calls from the other side."

In contrast, major American companies began announcing their first-quarter results. Strong results may help ease concerns related to the Strait of Hormuz, as stocks in the long term tend to follow the direction of corporate earnings.

Goldman Sachs announced that it achieved profits amounting to $5.63 billion during the quarter, exceeding analysts' expectations. However, some indicators within the report raised concern, especially the decline in trading revenues for fixed income, commodities, and currencies, which led to the stock falling by 1.9%.

Major banks are expected to lead the quarterly results season, as JPMorgan, Citigroup, Wells Fargo, and Bank of America will announce their results during this week, alongside companies such as Johnson & Johnson, Netflix, and PepsiCo.

Among the most prominent gainers in Monday's session was SanDisk stock, which jumped by 11.8% after the announcement of its joining the Nasdaq 100 index on April 20, which means its entry into investment funds linked to the index such as Invesco's QQQ.

Oracle stock also rose by 12.7%, recovering part of its recent losses related to concerns about increasing its spending on artificial intelligence technologies.

Software company stocks also recorded gains, as ServiceNow shares rose by 7.3%, and AppLovin by 6.7%.

In the bond market, Treasury yields fell as oil prices declined, as the 10-year bond yield dropped to 4.29% compared to 4.31% at the end of the previous week.

This may provide some support for the housing market and mortgage rates, which have risen since the beginning of the war due to inflation fears resulting from rising oil prices. A report also showed that existing home sales in March came in weaker than economists' expectations.

As for global markets, declines prevailed in Europe and Asia, as the Hang Seng index in Hong Kong fell by 0.9%, and the KOSPI index in South Korea declined by the same percentage.

Oil prices rose on Monday after the U.S. Navy imposed a blockade on Iranian ports, following the failure of peace talks between Washington and Tehran over the weekend.

U.S. crude futures for May delivery rose by more than 2% to close at $99.08 per barrel, while Brent crude for June delivery rose by more than 4% to reach $99.36 per barrel.

The blockade went into effect at 10:00 AM Eastern Time (ET), as U.S. Central Command confirmed that forces would not obstruct ships destined for or coming from non-Iranian ports.

U.S. Central Command (CENTCOM) said in a statement: “The blockade will be implemented equally against ships of all nations entering or leaving Iranian ports and coastal areas, including all Iranian ports in the Arabian Gulf and the Gulf of Oman.”

Escalation after the collapse of Pakistan negotiations

The decision came after U.S. President Donald Trump issued an order to impose the blockade following the failure of the United States and Iran to reach an agreement to end the war during talks held in Pakistan over the weekend.

Trump threatened on Monday to destroy any Iranian military vessel that approaches the blockade areas.

The President said he ordered the U.S. Navy to intercept any vessel in international waters that has paid transit fees to Iran to pass through the Strait of Hormuz, a vital maritime corridor linking Middle Eastern oil producers to global energy markets.

Iran responds and mutual threats

In response, Iranian forces threatened to target ports across the Arabian Gulf in retaliation for the U.S. blockade, according to Iran's state-run Press TV.

Oil tanker traffic through the Strait of Hormuz has declined sharply due to the risks of attacks, leading to the largest disruption of oil supplies in history, as about 20% of global oil supplies passed through the Strait before the outbreak of war between the United States, Israel, and Iran on February 28.

Ambiguity regarding military escalation

It remains unclear whether Trump will resume airstrikes on Iran, although he agreed last week to a temporary two-week truce in exchange for allowing ships to pass through the Strait.

He had previously threatened to bomb bridges and power stations in Iran.

The Wall Street Journal quoted officials saying that Trump is considering carrying out limited strikes to break the deadlock in negotiations.

Decline in shipping traffic and crisis in the Strait of Hormuz

Tehran said that the passage of ships during the truce is conditional upon its approval, while Ali Akbar Velayati, advisor to the Iranian Supreme Leader, confirmed that “the key to the Strait of Hormuz remains in the hands of the Islamic Republic,” according to Press TV.

Data from LSEG showed that only three supertankers crossed the Strait on Saturday, despite their capacity to carry up to two million barrels per ship, while numbers exceeded 100 ships per day before the war.

Disagreements in negotiations and fears of a continued crisis

U.S. Vice President JD Vance, who led the U.S. delegation, said that negotiations failed because Iran refused to provide an “explicit commitment” not to seek a nuclear weapon.

He added: “The simple question is: do we see a real commitment from the Iranians not to develop a nuclear weapon? We haven’t seen that yet, and we hope it changes.”

On the other hand, Iranian Parliament Speaker Mohammad Baqer Qalibaf said that the United States “failed to win the trust of the Iranian delegation in this round of negotiations.”

Market expectations

Commodity fund manager at Schroders, Malcolm Melville, said that markets need a significant increase in ship movements over the next two weeks to convince investors that the crisis has ended.

He added that if traffic returns to about 75% of pre-war levels, it could be considered a near-normal return of supplies, especially with the use of some alternative pipelines that were not previously operating at full capacity.