The U.S. war with Iran enters its 11th week on Monday, but remains stuck in the same mire that has halted progress for more than a month. Markets are contending with familiar issues to start the week as both sides rejected a peace proposal and oil prices surged above $100 again.
"Totally unacceptable" was President Donald Trump's assessment of Iran's long-waited response to a U.S. effort to end the war, which has stoked energy inflation and weighed on growth prospects in markets around the world.
Both sides are likely to regroup on talks this week, but Trump's much-anticipated visit to China likely means the Iran issue will be put to one side as he discusses trade, Taiwan, and artificial-intelligence technology with President Xi Jinping later this week in Beijing.
The third of those topics may prove the most useful for Trump, who is counting on market excitement around AI to continue driving U.S. stocks higher into the summer months and the early stages of midterm elections later this fall.
The president will need the help given the slow progress he's made on oil and gas prices, which are likely to remain at multiyear highs as the crucial Strait of Hormuz shipping route remains effectively closed and a deal with Tehran is elusive.
AI has powered nearly two-thirds of the stock market's charge since the end of March, with the top five stocks representing more than a quarter of the S&P 500's $75.6 trillion in overall value and the Nasdaq riding a staggering second-quarter gain of 21.6%.
It's also kept the U.S. economy out of recession, and is partly responsible for keeping the job market relatively stable.
In short, it's a lot more important than oil these days -- and while the Iran crisis captures mainstream headlines, Trump likely understands where America's financial market advantage truly lies.
-- Martin Baccardax
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Trump Rejects Iran's Response as He Prepares for China Trip
It's another Monday and another chance for markets to seesaw based on the latest in negotiations to end the Iran war. On Sunday, President Donald Trump set stocks up to fall this morning, while oil prices were surging after he rejected Iran's response to the U.S. plan as "totally unacceptable."
-- Iran sent its response to mediators in Pakistan, The Wall Street Journal
reported, citing people familiar with the matter. The report said Iran's
response didn't resolve U.S. demands that it make advance commitments on
its nuclear program and its store of highly enriched uranium.
-- Iran proposed to end the fighting and gradually reopen the Strait of
Hormuz to commercial traffic as the U.S. removes its Navy blockade of
Iran's ports, the Journal reported. "I have just read the response from
Iran's so-called "Representatives." I don't like it -- TOTALLY
UNACCEPTABLE!" Trump posted Sunday.
-- The flare up in tensions comes as Trump prepares to leave for China,
where he is meeting with President Xi Jinping. He arrives in Beijing on
Wednesday and sets out on an array of events the next day, including a
welcome ceremony, a tour of the Temple of Heaven, and a state banquet.
-- U.S.-China relations have been "refocused on what matters most," a White
House spokeswoman said Sunday. The president can be expected to "deliver
more good deals," and discussions will touch on the proposed U.S.-China
board of trade and the U.S.-China board of investment.
What's Next: The U.S. delegation intends to touch on trade in industries and goods in the aerospace, agriculture, and energy sectors, including possible purchase commitments. Trump will join Chinese President Xi Jinping on Friday for a bilateral tea and working lunch before flying home.
-- Liz Moyer and Janet H. Cho
Warsh's Favored Inflation Measure Points to Lower Price Growth
Kevin Warsh's nomination as the next Fed chair is coming, with the Senate preparing a confirmation vote as the next batch of inflation data is due. Warsh has a preferred way to measure inflation that produces a result nearly a full percentage point lower than the Fed's currently preferred yardstick.
-- Fed officials typically track inflation through the personal consumption
expenditures price index, paying closest attention to core PCE, which
strips out food and energy prices. Warsh told the Senate Banking
Committee he prefers a different gauge: "trimmed mean," which looks at a
generalized change in prices not a one-time change.
-- By that measure, inflation in March from a year earlier rose 2.4%,
according to the Dallas Fed, versus the 3.2% rise in core PCE. The gap
between the two yardsticks could spell the difference between a Fed with
room to cut interest rates and one without.
-- Core PCE always excludes food and energy, no matter how their prices
change in any given month. The trimmed mean is calculated differently.
After the price change in every spending category is measured each month,
the most extreme gains and losses are excluded from the final tally.
-- In March the Dallas Fed, which produces a popular version of the measure,
excluded computer software and accessories, whose prices jumped at a
60.2% annualized rate, and tax preparation services prices, which fell at
a 27% annual pace. Both were included in core PCE.
What's Next: Even if Warsh wants to reorient the Fed around trimmed mean measures of inflation, he has to convince his Fed colleagues. The Dallas Fed's next trimmed mean reading comes out May 28. If it comes in well below core PCE, Warsh may keep citing it. The next inflation reading -- the CPI -- is Tuesday.
-- Nicole Goodkind
Airlines Are Raising Bag Fees as Jet Fuel Costs Soar
Major U.S. airlines are compensating for their higher jet fuel costs by hiking fees for checked bags, extra legroom, row preferences, and wherever else they can generate more money, said Henry H. Harteveldt, president and travel industry analyst with Atmosphere Research Group in San Francisco.
-- The fee increases reflect that airlines can only raise ticket prices so
much before consumers start to balk, Harteveldt said. Some travelers are
picking tickets to save money, and others are more willing to pay for
extras. Cut-rate provider Spirit Airlines shut down this month under
pressure from jet fuel costs.
-- Jay Sorensen, president of IdeaWorks, which specializes in airline
ancillary fee strategy, said baggage fees are the largest single source
of such extra revenue. The 13 major U.S. airlines collected more than
$5.47 billion in checked-bag fees through September 2025, Bureau of
Transportation Statistics data says.
-- JetBlue Airways got things moving in March, raising its checked fees by
up to $10 a bag, citing increasing operating costs. United Airlines,
Delta Air Lines, and Southwest Airlines all followed suit in early
April.
-- Airlines also generate billions of dollars in revenue through their
loyalty programs tied to co-branded credit cards. Delta generates the
most, with $8.2 billion in 2025 revenue from American Express buying
SkyMiles for its cardholders, and more than $2 billion in the first
quarter 2026.
What's Next: Starting May 19, Delta will stop serving beverages and snacks on flights shorter than 350 miles, except for passengers in first class. A Delta spokesperson told Barron's that the change is "not related to costs," but about shifting resources to longer flights with more snacks and beverages.
-- Janet H. Cho
American Passenger on Hantavirus Cruise Ship Tests Positive
A U.S. citizen has tested positive for the Andes strain of hantavirus and another has mild symptoms, the Department of Health & Human Services said early Monday. All 17 American citizens from the MV Hondius cruise ship are currently en route to the U.S., HHS said.
-- One passenger on the repatriation flight has tested mildly positive for
the virus, while another is currently experiencing mild symptoms, the
health department said. The two passengers are traveling in the plane's
biocontainment units "out of an abundance of caution," it added.
-- Moderna stock jumped 20% last week after the World Health Organization
reported a cluster of hantavirus cases tied to an outbreak on the MV
Hondius cruise ship, which arrived in Spain's Canary Islands early
Sunday. The S&P 500 climbed 2.3% over the same period.
-- Investors are looking to Moderna, which helped launch the second
authorized Covid-19 vaccine in the U.S., to deliver another breakthrough.
The drugmaker has studied hantaviruses for years in collaboration with
the U.S. Army Medical Research Institute of Infectious Diseases.
-- In a statement Thursday, the company confirmed that it was exploring a
hantavirus treatment, styling the efforts as "early-stage and ongoing"
and as part of a broader push to address emerging infectious diseases.
What's Next: Investors probably shouldn't load up on Moderna shares just yet. There is currently "no meaningful revenue opportunity," Evercore ISI analysts said on Thursday, adding that the stock "tends to trade on outbreak headlines well beyond the underlying commercial implications."
-- Mackenzie Tatananni , George Glover and Callum Keown
The Pentagon Released UFO Files. What Investors Could Learn.
The truth is out there -- maybe. At the very least, the Pentagon delivered on President Trump's promise to release dozens of files about Unidentified Anomalous Phenomena, which is the modern term for UFOs, or unidentified flying objects. Think back to the sci-fi shows of the last century.
-- Reading the files, which came in thousands of pages, will take a long
time, but there were some interesting tidbits. In 2023, an aircraft made
"multiple 90-degree turns at an estimated 80 mph." That is potentially
impressive technology likely to excite investors in manufacturers like
Lockheed Martin and GE Aerospace.
-- In 2022 a football-sized object in the East China Sea hit the water at
high speed, with no splash or change in velocity. That could impress
investors of ship makers such as General Dynamics and Huntington-Ingalls
Industries, as well as the privately held shipbuilder Saronic and the
defense company Anduril.
-- The trove included FBI reports about objects that couldn't be seen but
could be detected on radar. Consider it akin to Star Trek-level optical
cloaking technology -- and likely interesting to anyone investing in
stealth technology companies such as Lockheed or Northrop Grumman.
-- In 2023, a pilot reported an incident in which their weapons systems were
paralyzed as they approached a small UAP, the documents show. Advanced
jamming and electronic warfare technology may gain the attention of RTX,
BAE Systems, and L3Harris Technologies investors.
What's Next: Lockheed's aeronautics revenue dropped 1% in the first quarter from a year ago because of lower sales on classified programs. But the company's classified programs are expected to use $500 million to $700 million in 2026, according to BofA estimates.
-- Al Root
-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Rupert Steiner
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(END) Dow Jones Newswires
May 11, 2026 06:33 ET (10:33 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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