Markets recover as Trump hints Iran war is nearing its end

Oil prices extended declines Tuesday as investors assessed comments from U.S. President Donald Trump on a possible early end to the war as well as his warning to ramp up attacks on Tehran if it prevented the flow of oil via the Strait of Hormuz.

Earlier in a phone conversation with CBS News, Trump said he was considering seizing control of the Strait, adding that “the war is very complete, pretty much,” sending U.S. stocks higher. Asia markets also recovered, with South Korea’s Kospi trading more than 5% higher to lead gains in the region. Europe markets were set to open in the green as oil prices pared losses.

U.S. stock futures, however, were lower early Tuesday as traders assessed Trump’s latest comments that signaled a possible escalation over Strait of Hormuz. The critical chokepoint has been effectively closed, with a spokesperson for the Iranian Ministry of Foreign Affairs, Esmail Baghaei, warning that oil tankers passing through the waterway “must be very careful.” 

The oil shock on Monday, meanwhile, spurred South Korea to impose a price cap on fuel products for the first time in 30 years. President Lee Jae Myung said the government will explore ways to diversify its energy import sources, according to a TV broadcast, as gasoline prices in the country surge.

Amid the geopolitical and energy turmoil, people have been placing bets on the Iran war, prompting a backlash and raising questions about the red lines prediction markets should enforce. Last week, Polymarket reportedly posted on X the odds of a nuclear detonation by year-end, drawing online outcry, before it deleted the post and removed nuclear-related markets.

The Iran war has put the brakes on the next Bank of England rate cut

Before the war in Iran erupted, the Bank of England was widely predicted to be on course to cut interest rates at its meeting next week.

But the U.S. and Israel’s attack on major oil producer Iran, and the turmoil engulfing the wider Middle East as the war escalates, have put the brakes on a March rate cut, economists have predicted.

— Holly Ellyatt