Iran–US Diplomatic Signals Rattle Global Markets as Oil Falls, Dollar Gains

Global financial markets saw significant volatility on Monday as easing fears of a military confrontation between Iran and the United States pushed oil prices sharply lower, while the US dollar strengthened on expectations of tighter monetary policy.
Oil prices dropped by more than 3 percent in Asian trading after US President Donald Trump expressed optimism about reaching a diplomatic agreement with Iran over its nuclear programme. His comments signaled a possible de-escalation following weeks of heightened tensions and military rhetoric surrounding Iran.
Iran’s Supreme Leader Ayatollah Ali Khamenei, however, warned that any US-initiated conflict would escalate into a regional war. Responding to the warning, President Trump told reporters that such statements were expected, adding that he still hoped diplomacy would prevail.
Market sentiment was further influenced by developments in the United States, where Kevin Warsh has taken over as the new chair of the Federal Reserve. Warsh is widely viewed as a strong inflation hawk, raising expectations that interest rates could remain high or increase further. This outlook pushed the US dollar higher across global markets.
A stronger dollar weighed heavily on precious metals, with gold prices falling nearly 6 percent to around $4,586 per ounce, while silver also recorded notable losses. Equity markets across Asia showed mixed reactions, with most major indices edging lower amid ongoing concerns over the technology sector.
The United States has long opposed Iran’s nuclear ambitions and withdrew from the Joint Comprehensive Plan of Action (JCPOA) in 2018. Relations between the two countries further deteriorated in recent months amid internal unrest in Iran and renewed US pressure. However, Trump’s recent conciliatory remarks have temporarily reduced fears of war, reshaping investor expectations worldwide.