BY EMMANUEL OGBONNA
Global financial markets traded cautiously on Tuesday as investors reacted to new U.S. military strikes in southern Iran, a development that added fresh uncertainty to already fragile negotiations aimed at ending the conflict in the Middle East.
European and Asian markets delivered mixed performances after the U.S. military confirmed it had carried out what it described as “self-defense” operations targeting missile launch facilities and vessels allegedly involved in laying naval mines near key shipping routes.
The strikes took place despite comments from U.S. President Donald Trump suggesting that diplomatic negotiations with Iran were making progress. In a social media post, Trump said discussions to end the conflict were “proceeding nicely,” fueling hopes that a broader agreement could still emerge despite the renewed military activity.
Investors struggled to assess the implications of the strikes, with markets swinging between optimism over possible diplomatic progress and concern that tensions could escalate again in one of the world’s most strategically important energy-producing regions.
In Europe, Germany’s DAX fell 0.7% in early trading to 25,214.08, while France’s CAC 40 declined 0.9% to 8,187.07. Britain’s FTSE 100 outperformed regional peers, rising 0.7% to 10,540.40 as energy-related shares gained support from volatile oil prices.
U.S. stock futures pointed higher ahead of Wall Street’s reopening following the Memorial Day holiday. Futures tied to the S&P 500 and the Dow Jones Industrial Average each gained around 0.5%, suggesting investors were still betting that diplomacy could eventually stabilize the region.
Oil markets remained highly volatile following the latest developments. Brent crude, the international benchmark, rose $3.03 to $96.45 per barrel after dropping nearly $5 during the previous session. Meanwhile, U.S. benchmark crude oil fell $3.67 to $92.97 per barrel as traders weighed the possibility of restored oil flows if a ceasefire agreement eventually materializes.
The U.S. military said Monday’s strikes were intended to protect American forces operating in the region from what it called threats posed by Iranian military activity. Officials said the operation was conducted with restraint because of the ongoing ceasefire framework currently under discussion with Tehran.
However, the Pentagon did not provide extensive details regarding the alleged threats or clarify how the latest military action might affect ongoing negotiations. Iran also refrained from issuing an immediate official response, leaving markets uncertain over whether tensions could escalate further.
The Middle East conflict and shifting signals from Washington have become major drivers of global markets in recent weeks. Investors have responded sharply to each new diplomatic development, military operation and statement from senior officials as they attempt to gauge whether the crisis is moving toward de-escalation or a broader regional confrontation.
Stephen Innes of SPI Asset Management said markets may be moving ahead of political realities.
“Markets are behaving as though a full Iran breakthrough already exists, even though the hardest parts of the negotiation remain unresolved,” Innes wrote in a market commentary. “Washington continues to signal optimism, while Tehran insists no agreement is imminent.”
Across Asia, trading was similarly uneven.
Japan’s Nikkei 225 slipped 0.3% to 64,996.09 after retreating from Monday’s record close above the 65,000 mark. Investors in Tokyo locked in profits after recent gains while monitoring geopolitical developments and energy price fluctuations.
Hong Kong’s Hang Seng Index was little changed at 25,599.45, while China’s Shanghai Composite Index edged down 0.2% to 4,145.37.
South Korea’s KOSPI surged 2.6% to 8,047.51 as markets reopened following a public holiday, with investors catching up on gains recorded elsewhere during Monday’s global rally.
Australia’s S&P/ASX 200 declined 0.4% to 8,657.80, pressured by weakness in mining and energy shares.
Global markets had rallied strongly on Monday after regional officials indicated that the United States and Iran were nearing an agreement that could potentially end the conflict, reopen the Strait of Hormuz and reduce tensions threatening global oil supplies.
The proposed framework reportedly includes provisions involving Iran’s stockpile of highly enriched uranium and the restoration of commercial shipping through the strategically critical Strait of Hormuz, which carries roughly one-fifth of the world’s oil exports.
Any long-term reopening of the shipping route would significantly ease concerns for global energy markets and regional economies. The conflict has already disrupted trade and raised fears of prolonged instability after Gulf nations and major transportation hubs, including the United Arab Emirates, were targeted by Iranian missile and drone attacks earlier in the crisis.
A sustained ceasefire could also pave the way for reconstruction efforts and the restoration of damaged energy infrastructure throughout the region, analysts say.
Currency markets were relatively stable Tuesday. The U.S. dollar rose slightly to 159.09 Japanese yen from 158.91 yen, while the euro slipped marginally to $1.1636 from $1.1645.
Investors are expected to remain highly sensitive to developments surrounding U.S.-Iran negotiations in the coming days, with markets likely to continue reacting sharply to any signs of either diplomatic progress or renewed military escalation.
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