GLOBAL MARKETS: Stocks flat, oil falls as rate worries offset Iran talks optimism

NEW YORK — Global stock markets were largely unchanged on Monday, while oil prices declined as optimism over progress in U.S.-Iran negotiations was tempered by expectations of higher interest rates that continued to pressure financial markets.

U.S. Vice President JD Vance said during talks in Switzerland that Iran had agreed to allow international nuclear inspectors into the country. Discussions regarding inspection arrangements could begin as early as this week.

In a significant step toward easing tensions, the U.S. Treasury Department authorized Iranian sales of crude oil, petrochemicals, and petroleum products through August 21. The move temporarily relaxes decades-old sanctions as Washington works toward a final peace agreement with Tehran. In exchange, Iran is expected to uphold commitments related to nuclear inspections and ensure free navigation through the Strait of Hormuz.

On Wall Street, the Dow Jones Industrial Average closed higher, while the S&P 500 and Nasdaq ended lower, weighed down by losses in communication services and consumer discretionary stocks.

The Dow gained 0.29%, while the S&P 500 fell 0.37%. The Nasdaq Composite posted the steepest decline, dropping 1.32%.

In Europe, the STOXX 600 index rose 0.58%, while MSCI’s global stock index slipped 0.03%.

According to Gerry Sparrow, chief investment officer at Sparrow Capital Management, investors remain focused on the Federal Reserve’s hawkish stance and diminishing expectations that new Fed Chair Kevin Warsh will begin cutting interest rates soon.

“The market was somewhat surprised by the new Fed chair’s actions, as many investors had expected a more accommodative approach to interest rates,” Sparrow said.

The Federal Reserve last week left interest rates unchanged but signaled that borrowing costs could rise later this year amid persistent inflation concerns. Inflation remains above the central bank’s long-term target of 2%.

Reflecting those concerns, the yield on benchmark 10-year U.S. Treasury notes rose 5.78 basis points to 4.509%.

Meanwhile, signs of progress in U.S.-Iran negotiations helped push oil prices lower. Brent crude futures settled down 3.38% at $77.90 per barrel, significantly below their May peak of $126.41.

Sparrow noted that while developments in the peace talks were encouraging, investors were disappointed that the Federal Reserve did not signal a more supportive monetary policy stance.

Pound Gains After Starmer Announces Resignation

The British pound strengthened after Prime Minister Keir Starmer announced his resignation, opening the door for Britain’s seventh leader in a decade.

Sterling reversed earlier losses and rose 0.11% to $1.3244.

Former Manchester Mayor Andy Burnham is considered the leading contender to replace Starmer. However, investors remain focused on who will become the country’s next finance minister, a key concern for U.K. bond markets.

The euro slipped 0.36% to $1.1427 after touching a three-month low of $1.1418 on Friday.

The U.S. dollar rose 0.19% against the Japanese yen to 161.58. Market analysts noted that the threat of intervention by Japanese authorities remains one of the few factors preventing the currency from approaching its 40-year high of 161.96 reached in 2024.

The U.S. dollar index, which measures the greenback against a basket of major currencies, advanced 0.17%.

Meanwhile, spot gold climbed 0.72% to $4,190.17 per ounce as investors continued to seek safe-haven assets amid ongoing uncertainty over interest rates and global economic conditions. -Reporting by Chibuike Oguh in New York; Additional reporting by Wayne Cole and Harry Robertson; Editing by William Maclean and Will Dunham/Reuters