Middle East War updates: US-Iran pause strikes as Trump weighs up diplomatic options

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

• The US paused its two-week bombing campaign against Iran late on Friday, prompting Tehran to suspend its retaliatory attacks against Washington’s allies in the Middle East for a second night.
• US ambassador to the United Nations Mike Waltz said that while forces remained locked and loaded, President Donald Trump wants to give negotiations a little bit of room.
• According to Reuters, a senior Iranian official said that “Iran’s position remains ‘attack for attack’: if the attacks stop, Iran will also halt its operations and the message has already been conveyed ​to the US.”
• Shipping data showed that traffic through Bab el-Mandeb fell on 26 July after Iran-backed Houthis in Yemen attacked Saudi oil installations along the coast of the Red Sea, while transit through the Strait of Hormuz stayed low over the weekend.
• Another front emerged in the Caspian Sea, where Iran accused Ukraine of attacking an Iranian commercial vessel.

Market implications

Crude oil prices tumbled over 5% at the week’s open in reaction to the latest developments surrounding the Middle East crisis, which revived hopes for diplomacy to end the conflict. Furthermore, weaker oil prices eased inflation fears and tempered US Federal Reserve (Fed) rate-hike bets, dragging the safe-haven US Dollar (USD) away from the monthly high, retested last week.

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