Bianca Botes, Director at Citadel Global
Last week was a week where nobody truly knew what was going on when it comes to the war in Iran. On Monday, United States (US) President, Donald Trump, released a statement walking back the 48-hour hard deadline he had given to Iran to open the Strait of Hormuz the previous Friday, as he called for five days of engagement to discuss ending the war and announced that the US was already in talks with Iran. On Tuesday, President Trump announced that the US sent Iran a 15-point plan, delivered through Pakistan, laying out the US’s conditions to end the war. Iran, on the other hand, denied being in talks and rejected many points in the US’s plan.
Where things stand
The contradictory signals between Washington and Tehran intensified and by Thursday the picture had sharpened considerably – not in favour of a deal. Iran formally rejected the US 15-point ceasefire plan and issued a five-point counteroffer of its own, which includes reparations for the war, guarantees against future strikes and most significantly, Iranian sovereignty over the Strait of Hormuz. That last demand is a non-starter for Washington and effectively signals Tehran’s intent to retain the Strait as a permanent strategic lever.
President Trump, undeterred however, stated on Thursday that Iranian negotiators are “begging” for a deal, while Iran’s foreign minister described the message exchange as Iran responding “with warnings” rather than engaging in any form of negotiation. Both sides, however, are telling very different stories about what is happening and the strikes have not stopped, with Israel delivering a fresh wave of airstrikes on Tehran on Wednesday, despite the exchange of proposals taking place.
The uncertainty around what the real story is has led analysts to speculate on two scenarios and how each will impact the global markets going forward.
The deal scenario
If a ceasefire takes hold and a broader framework gains traction, the market response would be swift across multiple asset classes.
Oil is the most direct transmission mechanism. Brent is currently trading around $104/barrel – up roughly 60% from pre-war levels – and any credible de-escalation signal would unwind a meaningful portion of that risk premium fast. Under a baseline deal scenario, Brent could spike briefly before ending 2026 closer to $70/barrel, as flows through the Strait of Hormuz normalise and the supply disruption premium dissipates. The Strait handles roughly 20% of all globally traded oil and markets are acutely sensitive to any indication of it reopening.
For equities, relief would be broad-based. The S&P 500 has fallen approximately 4.55% over the past month, and easing energy costs alongside reduced inflation pressure would support its recovery, particularly in rate-sensitive sectors that have been repriced sharply.
Gold’s reaction in a deal scenario is more nuanced. Spot gold climbed nearly 2% to $4,558.81/ounce earlier this week as falling oil prices helped temper inflation concerns on reports of ceasefire progress, but the metal remains roughly 17% below its late-January peak. For the rand and emerging market (EM) currencies, more broadly, de-escalation would reduce the oil inflation shock feeding into import costs and current account pressures, reducing those headwinds.
The no deal scenario
The stakes of a breakdown are substantially higher and the current communication trajectory points in that direction.
Brent crossed the $100/barrel level on 9 March and is hovering around $107/barrel this morning, with commercial traffic through the Strait at a standstill and Gulf storage near capacity. In a prolonged conflict with sustained disruption, oil could remain elevated for an extended period. A tail-risk scenario (high-impact, low-risk event that can result in high financial losses) involving Iranian strikes on regional energy infrastructure could push Brent above $130/barrel before markets adapt.
Analysts project US gasoline to reach $3.50/gallon under a persistent high-price scenario – $1 more than before the war – making inflation a structural policy problem rather than a transitory one. That matters enormously for the US Federal Reserve (Fed). With US core Producer Price Index running at 3.6% year-on-year in January and US inflation above target since 2021, any sustained energy price shock will further delay Fed rate cuts and keep the cost of capital elevated.
The US Dollar Index has held firm near 99.50 on safe-haven demand, with rising oil prices further complicating the Fed’s policy path and underpinning the greenback. A stronger dollar for longer is a headwind for EM and South African assets broadly as it tightens financial conditions at the margin and adds pressure to rand-denominated portfolios already navigating global risk aversion.
For gold, the no-deal path is potentially more constructive in the medium term. Many commodity analysts still maintain a year-end 2026 target of $6,000/ounce to $6,300/ounce, both premised on structurally elevated geopolitical tension and inflation sticky enough to keep real rates suppressed. Higher nominal rates complicate the near-term view, as rising bond yields increase the relative appeal of yielding assets over non-yielding bullion, but a prolonged Middle East conflict would likely keep gold’s safe haven appeal alive.
The bottom line
The honest read is that neither side is close to a durable agreement. Washington wants Iran’s nuclear programme dismantled. Tehran will not trade its enrichment rights, its strategic control of the Strait, or its demand for reparations for any ceasefire on US terms. In fact, Iran’s five-point counteroffer – particularly the demand for Hormuz sovereignty – is not a negotiating position; it is a statement of intent.
Markets will continue to trade the headlines and the seesaw price action of the past three weeks as oil falls on ceasefire rumours, then recovers as Tehran rejects proposals, is likely to persist. Until there is verified, direct contact between the two governments and movement on the core issues, the risk premium and volatility will remain alive.
ENDS
