Will Peace Talks Calm Markets or Keep Pressure on Rates?

This week opens with one dominant market theme, whether the oil risk premium begins to ease or remains embedded in the broader macro picture. For now, attention is centred first on the Iran peace talks at 8pm ET on Tuesday, as their outcome could shape whether markets move towards relief or back into defence.

Crude remains the clearest signal. Brent is trading near $107 and WTI near $112 after a weekly gain of just under 11%. Markets are no longer treating this as a short-lived geopolitical shock. As long as the Strait of Hormuz remains unstable, traders are pricing the risk of higher transport costs, firmer inflation and less room for central banks to turn supportive. Partial vessel passage has not been enough to convince markets that energy flows are truly secure again.

Trump has tied the next phase of the conflict directly to whether passage through Hormuz is restored, while also keeping the door open to a deal. This leaves markets caught between two possibilities. A credible de-escalation could push crude lower and lift sentiment across equities and higher-beta assets. A failure to make progress, or a return to a more aggressive tone, would likely keep oil elevated and bring inflation concerns back to the centre of market pricing.

This matters even more because the rest of the week brings two major inflation tests. On Thursday, US Core PCE m/m is forecast at 0.4%, unchanged from the previous reading, while final GDP q/q is expected at 0.7%, also unchanged. On Friday, US CPI y/y is forecast at 3.4%, up sharply from 2.4% previously. If oil remains high into those releases, firm inflation data could make it harder for markets to rebuild the case for easier policy. That would tend to support the dollar and limit follow-through in equities.

The payrolls report has already complicated that policy story. March nonfarm payrolls rose by 178,000, well above the 65,000 consensus. At face value, that helps reduce fear of a sharp growth slowdown. But the details were less clean. January was revised up to 160,000, while February was revised down to negative 133,000, leaving the broader trend less convincing than the headline suggests.

Stronger jobs data supports the growth outlook, but it also makes fast rate cuts harder to justify. If oil stays high at the same time, the result is a more difficult mix of persistent inflation pressure and tighter policy expectations. That is why this week still feels like oil first, inflation second, and rates third.

Across assets, the pattern remains fairly clear. The US dollar continues to act as the cleanest defensive signal when markets price conflict risk and a higher-for-longer policy bias. Gold remains caught between safe-haven demand and the headwind of a firmer dollar. Equities, especially the S&P 500, are trying to rebound, but high crude prices and inflation risk continue to limit conviction. Bitcoin is still trading more like a risk asset, which means its direction depends heavily on whether the week opens with relief or renewed tension.