Oil climbs, stocks slip as Iran deadline keeps markets on edge

Dubai: Oil prices moved higher on Tuesday while equities lost momentum, with investors pulling back ahead of a key US deadline tied to the Iran conflict.

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Brent crude climbed above $111 a barrel after volatile swings, continuing a steady upward grind in recent sessions. At the same time, US stock futures fell about 0.5%, while Asian markets struggled to hold early gains, reflecting hesitation across risk assets.

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The dollar held firm, reinforcing its role as the preferred haven during the ongoing conflict.

Deadline risk keeps markets in check

Focus remains on the approaching deadline set by US President Donald Trump for Iran to agree to terms that include reopening the Strait of Hormuz.

The stakes are high. Any escalation risks further disruption to energy flows, which have already tightened supply and pushed oil prices higher over the past six weeks.

Trading conditions have remained thin following holiday closures, limiting conviction even as headlines continue to drive short-term moves.

Michael Brown, Senior Research Strategist at Pepperstone, said recent sessions reflect a lack of clear direction.

“Trade has been tentative in recent sessions amid a swathe of holiday closures, despite a plethora of catalysts.”

Oil strength complicates policy outlook

Rising oil prices are feeding directly into inflation expectations, complicating the path for central banks.

US Treasury yields edged up to around 4.35%, reinforcing expectations that borrowing costs may stay elevated. That backdrop is reducing appetite for equities while supporting the dollar.

Brown said the current environment limits the Federal Reserve’s ability to respond to softer growth signals.

“The ongoing energy price shock, amid continued conflict in the Middle East, though, obviously prevent the FOMC from easing at this juncture.”

Labour data shows underlying weakness

Recent US economic data has added to the cautious tone.

Payrolls rose by 178,000 in March, but underlying trends point to weaker momentum, with hiring concentrated in a narrow set of sectors and labour force participation falling.

Brown described the data as masking softer conditions beneath the surface, noting that headline strength does not fully reflect the state of the labour market.

Headline-driven market swings

Market direction continues to be shaped more by geopolitical developments than fundamentals.

Equities briefly gained on ceasefire hopes earlier this week before losing momentum as rhetoric around escalation intensified. Oil, meanwhile, has continued to edge higher, supported by supply concerns.

Brown warned against reading too much into short-term moves during thin trading conditions.

“It’s folly to try and extract too much signal from a couple of days of very thin holiday trade.”

What comes next

Attention now turns to upcoming US inflation data, particularly CPI and PCE readings, which will shape expectations around interest rates in the weeks ahead.

Geopolitical developments remain the dominant driver in the near term. Clear progress toward de-escalation could stabilise markets, while further escalation risks pushing oil higher and keeping pressure on equities.

Cautious positioning is likely to persist until there is more clarity on both fronts.

- With inputs from Bloomberg.