Global Equities Rally as Hopes for US-Iran Diplomatic Breakthrough Ease Oil Pressure

Global stock markets climbed toward record highs as investors reacted to news that the United States and Iran could resume diplomatic negotiations within the next 48 hours. US President Donald Trump indicated that talks in Islamabad could signal an end to the conflict, prompting a broad risk-on sentiment across Wall Street and Asian markets. The shift in sentiment is primarily driven by the anticipation of stabilized energy flows through the Strait of Hormuz. While the conflict has previously pushed oil prices toward a peak of $119, the prospect of peace has led traders to price in de-escalation, easing the cost burden on global businesses. On Wall Street, the S&P 500 rose 1.2% to 6,967.38, placing it just 0.2% shy of its January record. The Nasdaq Composite jumped 2% to 23,639.08, and the Dow Jones Industrial Average gained 317.74 points to close at 48,535.99. In Asia, South Korea's Kospi saw a significant 3.0% jump, while Japan's Nikkei 225 gained 0.5%. Energy markets reflected the optimism, with Brent crude settling around $95.27 and US benchmark crude at $91.29. This cooling of energy prices contributed to a decline in Treasury yields, with the 10-year yield dropping to 4.25% from 4.30% late Monday. Despite the rally, the IMF has revised its global outlook, raising inflation expectations to 4.4% from 4.1% and lowering growth forecasts to 3.1% from 3.3%. Analysts warn that the current optimism remains fragile as long as the conflict persists and the Strait of Hormuz remains a potential chokepoint for global oil supply.