Despite U.S. Secretary of State Rubio's cautious outlook on the prospects of a U.S.-Iran deal, reports from the Middle East indicate significant progress in the talks. Market expectations for eased Middle East tensions and the return of Iranian crude to the international market surged rapidly. International oil prices staged a sharp "cliff dive" during Thursday's trading session, while U.S. stocks, previously pressured by soaring oil prices, rebounded across the board.
During the U.S. stock market's afternoon session on Thursday, Eastern Time, Iranian media cited Middle Eastern sources reporting that a final draft of a U.S.-Iran agreement had been reached with Pakistan's mediation and is expected to be announced within the coming hours. The reported agreement involves restrictions on Iran's nuclear activities, an international verification mechanism, and arrangements for the lifting of some sanctions. Representatives from the U.S. and Iran have engaged in multiple rounds of indirect talks in locations including Oman over the preceding weeks.
Stimulated by the news, international crude oil prices swiftly turned from gains to losses. Oil prices, which had surged over 4% earlier on Thursday due to Middle East tensions, experienced a sharp reversal during the U.S. stock market's afternoon session:
U.S. WTI crude, which had reached a daily high of $102.66 during the early U.S. trading session, fell to $95.76, representing an intraday decline of over 2.5%. Brent crude, which had hit a daily high of $109.3 during early U.S. trading, dropped to $102.17, marking an intraday loss of over 2.7%.
In other words, both major international benchmark oil prices retreated more than $6 from their daily highs, indicating the market began rapidly pricing in expectations for the "return of Iranian crude."
Simultaneously, the three major U.S. stock indices launched a full counteroffensive. The stock market, which had weakened earlier due to soaring oil prices and risk-aversion sentiment, quickly recovered lost ground following the oil price plunge:
The Dow Jones Industrial Average, which had fallen over 300 points (down more than 0.6%) in early trading, reversed to gain over 300 points by the afternoon, rising nearly 0.7% for the day. The S&P 500 Index, down nearly 0.6% at one point in early trading, turned positive and reached a new daily high with a gain exceeding 0.4%. The Nasdaq Composite, which had dropped nearly 0.9% earlier, reversed course and hit a daily high with an increase of approximately 0.5%.
Market observers believe the decline in oil prices alleviated investor concerns about reignited inflation and also reduced the risk premium associated with further escalation in the Middle East.
**Rubio: Progress in U.S.-Iran Talks, No Guarantee of Deal, Iran Must Not Have Nuclear Weapons is the Bottom Line**
Concurrently, according to reports from media including Xinhua, U.S. Secretary of State Rubio stated on Thursday that the U.S. negotiations with Iran have made some progress, but he could not guarantee a deal would definitely be reached. He also indicated that if a "good deal" cannot be achieved, "everyone knows" what other options the U.S. has.
Rubio said that while there are some positive signs, he did not want to appear overly optimistic. "So, let's see what happens in the next few days."
Rubio stated that the primary desire is to reach a "good deal," and the U.S. side "will do everything possible to achieve that goal." "However, the President has also made clear that if a good deal cannot be reached, he has other alternatives."
Rubio emphasized that the core U.S. objective remains ensuring Iran can never obtain nuclear weapons. He expressed the U.S. willingness to resolve the issue diplomatically, but stressed that any agreement must include strict, verifiable restrictions. "Iran cannot have nuclear weapons, that is the bottom line," he emphasized.
Rubio added that the U.S. hopes to see Iran cease high-level uranium enrichment activities and accept long-term international supervision.
Recent statements from within the U.S. administration regarding the Iran issue have notably turned more positive. The President had previously hinted that U.S.-Iran negotiations were "making real progress" and stated that if an agreement is reached, "it would have a positive impact on the entire Middle East and global energy markets."
However, neither side has officially released the agreement text yet, and uncertainty remains over whether the deal will ultimately be finalized. Hardliners within Iran and factions within the U.S. Congress could potentially pose obstacles to the agreement.
**Market Begins Trading "Supply Return" Logic**
For the energy market, the most critical question is: if the agreement is finalized, will Iranian crude oil exports resume on a large scale?
The market widely anticipates that once the U.S. eases energy sanctions, Iran could rapidly increase crude supply to the market by hundreds of thousands to potentially over a million barrels per day within the coming months.
Previously, international oil prices had risen for several consecutive days due to escalating Middle East geopolitical tensions, heightened risks in the Strait of Hormuz, and market concerns over supply disruptions. Now, rumors of a U.S.-Iran agreement suggest some geopolitical risk premium could be quickly squeezed out.
Analysts point out that current oil market volatility is no longer just about supply and demand but also involves "trading on political expectations." As long as the market perceives room for easing U.S.-Iran relations, the war premium embedded in oil prices may continue to be eroded.
For U.S. stocks, the decline in oil prices implies easing inflationary pressures, helping to stabilize market expectations regarding the Federal Reserve's policy path. This is particularly beneficial for technology and consumer sectors previously burdened by cost pressures.
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