US markets reopen from the long weekend into a story that has flipped twice over: a peace deal that looked nearly done on Friday is now being tested by fresh military action, and the price tape is having to work out which signal to trust.
A Self-Defense Strike, A Mixed Message
Over the weekend, U.S. Central Command confirmed it had conducted "self-defense" strikes against missile launch sites and mine-laying boats in southern Iran. The action arrived alongside reports that talks were still progressing, with a Pakistani mediator briefing Beijing that an agreement was close. Markets are now being asked to hold two contradictory facts at once: the path to a deal is still open, but military exchanges are not yet over. The framework under discussion would extend the ceasefire for roughly two months, with Washington lifting its blockade and Tehran reopening the Strait of Hormuz in stages.
That ambiguity is showing up most clearly in crude. Brent jumped to $98 in the Asia session, picking up the Hormuz risk premium that had been priced out on Monday. WTI traded in the opposite direction, down roughly 5%, finally catching up with Monday's plunge that the U.S. holiday had delayed. The divergence isn't a contradiction. Brent is the cleaner read on Middle Eastern supply, while WTI reflects a domestic balance where inventories have been building for several weeks. Both prices remain down over 10% on the week despite Tuesday's bounce, which tells us where the broader directional bet still sits.
Tokyo's Record Run Pauses for Breath
Japan's Nikkei 225 cooled off Tuesday, slipping below 65,000 after Monday's rally pushed the index to a fresh all-time high. The AI complex that drove that move took some profits, with Advantest, Kioxia, and Fujikura giving back recent gains. SoftBank Group went the other way, adding another 6% on reports that two of its portfolio companies are moving closer to U.S. listings, taking the four-session move to roughly 50%. After that kind of acceleration, a quiet Tuesday is healthy rather than worrying.
Warsh Takes Over, Waller Sounds the Alarm
Kevin Warsh was sworn in as Federal Reserve Chair on Friday in a White House ceremony, formally closing out the Powell era. The handover lands at an awkward moment. On the same day, Governor Christopher Waller said publicly that energy-driven inflation is not headed in the right direction and that long-term inflation expectations have already moved up since the start of the year. With oil still sitting near $100 and the Iran story unresolved, the new chair inherits a board that is increasingly split on whether the next move is a cut or a hike.
USD/JPY remains stuck near 159, with the dollar resilient even as Brent climbs. That tells us the rate-differential story is doing more work right now than the risk-off impulse. A clean deal lifts equities and pressures the dollar; a breakdown puts oil back toward the highs and intervention back on the table in Tokyo.