Ceasefire agreement about to expire, tensions rise between the US and Iran! Oil prices surge while stocks and bonds pull back, key indicator to watch is TA

Due to the turmoil in the Middle East over the weekend, casting a shadow over the prospects for a ceasefire before the deadline and peace talks, oil prices soared on Monday (April 20), dragging down the U.S. stock market and U.S. Treasuries.

The MSCI global stock index fell by about 0.3%, and European stocks dropped 1%. Previously, Asian markets had continued to climb, ignoring risk factors.

S&P 500 futures dropped 0.4%, after the benchmark index had just hit consecutive all-time highs. On Monday, technology stocks took a breather. Previously, the U.S. stock market rebound was largely driven by the tech sector, with the "Magnificent Seven" rising 20% since the U.S. benchmark index touched a low in 2026 on March 30. Meta Platforms Inc., Nvidia, and Amazon all fell more than 1% in pre-market trading.

Brent crude surged 4.6%, nearing $95, after the U.S. Navy seized an Iranian vessel in the Strait of Hormuz for the first time. Earlier, Iran had just interrupted shipping through the strait again, less than 24 hours after announcing ships could pass.

However, Kpler data showed that over 20 ships carrying oil products, metals, natural gas, and fertilizers passed through the strait on Saturday, making it the busiest day for this chokepoint since March 1.

Monday’s risk-off sentiment is weakening the previous rebound—one that had erased all of the U.S. equity losses triggered by the outbreak of war. U.S. President Donald Trump and Iranian officials have released different signals about the next stage of the war, leaving the world unsure whether talks will be held on Tuesday, as the ceasefire agreement is about to expire.

Investec economist Sandra Horsfield said, "The market is trying to grasp any news that might point to some kind of outcome, leading to such intense volatility. But the situation remains extremely uncertain and highly volatile."

She noted that, despite a market pullback, the rally triggered on Friday after Iran said it would open the Strait of Hormuz had not been fully reversed, indicating at least a partial "improvement in sentiment" still remains in the market.

U.S.-Iran Talks Full of Uncertainty

Traders believe that, although market volatility may remain high during negotiations, there is still significant pressure for both sides to reach an agreement. The Iranian official news agency cited President Masoud Pezeshkian, stating that war is not in the interest of either side and that tensions should be eased through diplomatic channels.

BNP Paribas Wealth Management Chief Investment Strategist Stephan Kemper said, "Although developments over the weekend have undoubtedly dampened optimism, they have not completely destroyed it. The market still expects a solution to emerge in the short term, allowing energy supplies to resume."

Meanwhile, the outlook for further U.S.-Iran talks also appears full of uncertainty. Iranian official news media reported Sunday that Iran had refused to hold new talks with the United States. Just hours earlier, U.S. President Trump stated he would send an envoy to Pakistan for talks; if Iran does not accept his conditions, the U.S. would launch new strikes.

"Whether this impasse is just a detour on the road to a solution or will develop into a deeper obstacle remains to be seen; but greater volatility seems the most likely outcome," said Hargreaves Lansdown Head of Equity Research Derren Nathan in a report.

Investec's Horsfield stated, "We have always believed there will be repetition and twists in this process, and not a straight line toward the final outcome."

Outside the Middle East, UK Prime Minister Keir Starmer is expected to address Parliament on Monday. He faces calls to resign after being criticized for his handling of appointing Peter Mandelson as UK Ambassador to the United States, after the latter failed the vetting process.

Focus on Warsh Confirmation Hearing

Although Middle Eastern developments are still unfolding, traders will also focus this week on whether Kevin Warsh will attend the Senate confirmation hearing to determine if he will become the next Federal Reserve chair. The yield on U.S. two-year Treasury notes fell back below the Fed’s 3.75% policy cap; during the war, as oil prices soared, this yield had remained above that level for quite some time.

If Warsh sends a signal favoring monetary easing this year and is willing to ignore energy shocks caused by the conflict, short-term Treasuries could receive an additional boost. Currency market pricing now shows around a 50% probability of a rate cut by December.

European bond yields rose sharply; the yield on 10-year German government bonds rose by 3.6 basis points, reaching 3.0015%. Meanwhile, the increase in U.S. Treasury yields was more modest. The dollar edged higher.

Gold fell below $4,800, after earlier touching an intraday low of $4,737, the lowest level since April 13. Bybit Chief Market Analyst Han Tan said, "After the chaos around the Strait of Hormuz over the weekend, soaring oil prices mean inflation risk remains obvious, offsetting gold’s appeal as a safe haven. In the development of this conflict so far, the dollar has been favored over gold as a safe haven asset."

He also said, "Unless there is a meaningful and sustained de-escalation of the current conflict, spot gold is expected to continue consolidating below the $5,000 range."

Earnings Season in Full Swing

In addition, the earnings season has had a strong start. According to Bloomberg Industry Research compilation, S&P 500 constituent companies that have reported so far have posted profits 11% higher than expected overall.

Major companies reporting earnings this week include Tesla and Boeing on Wednesday, as well as Intel the next day. In addition, the economic impact from the ongoing Middle East war, now in its seventh week, will begin to emerge this week, with the Purchasing Managers’ Index (PMI) released on Thursday.

Global Gate Asset Management Chief Investment Strategist Patrik Lang said, "Earnings season provides support, which is important, but the current dominant factor remains geopolitics. Once an agreement is reached, the market's attention will return to earnings. Market strength may still be somewhat concentrated, as most growth still comes from the 'Magnificent Seven.'"

This week will also see the release of UK inflation data, U.S. retail sales data, and European PMI, but market focus will remain on shipping dynamics in the Gulf region.

Bob Savage, Head of Market Macro Strategy at Bank of New York Mellon, said, "The key barometer of geopolitical risk is now condensed into a single data point: the number of ships passing through the Strait of Hormuz. While peace talks are important, the market is currently more concerned about the inflationary pressure caused by oil and other supply shortages."