On Friday, West Texas Intermediate (WTI) crude oil prices declined sharply, trading around $92.55 and down 3.28% on the day, following a recent rally earlier in the week [1]. This pullback was attributed to renewed hopes for indirect diplomatic talks between Iran and the United States, as Iran’s Foreign Minister Seyed Abbas Araghchi traveled to Pakistan for discussions aimed at reviving dialogue with Washington [1][2][3]. Newswires and Pakistani sources confirmed that Araghchi would present a proposal for talks, with meetings expected to involve Pakistani mediators [2][3]. However, direct negotiations remain uncertain, as Tehran has previously ruled out talks under current conditions, citing the ongoing US naval blockade as a major obstacle [2].
The prospect of renewed US-Iran talks eased geopolitical tensions, reducing safe-haven demand for the US Dollar. The US Dollar Index (DXY) fell from a one-week high near 98.94 to around 98.56, down about 0.27% on the day [2]. This shift in sentiment supported risk assets, with EUR/USD rebounding to 1.1715, up 0.27% [2], and GBP/USD rising to 1.3498, up 0.24% [3]. A three-week extension of the ceasefire between Israel and Lebanon further contributed to improved risk appetite [3].
Despite the short-term correction in oil prices, structural upside risks remain due to ongoing disruptions around the Strait of Hormuz and sporadic military actions, which continue to fuel concerns over global supply [1][2]. Traders are closely monitoring whether Washington will ease the naval blockade and if Tehran will move to reopen the Strait, as the dual blockade keeps oil prices elevated and inflation pressures in focus [2].
US economic data added to the cautious outlook. The University of Michigan Consumer Sentiment Index fell to 49.8 in April, its lowest level since 1978, down from 53.3 in March [1][2][3]. The Consumer Expectations Index also declined to 48.1 from 51.7 [2]. Inflation expectations surged, with the 1-year outlook rising to 4.7% from 3.8% and the 5-year outlook increasing to 3.5%, the highest since October 2025 [2][3]. Joanne Hsu, director of the poll, noted that the Iran conflict appears to influence consumer views primarily through shocks to gasoline and other prices [3].
Looking ahead, market participants are focused on upcoming monetary policy decisions from the Federal Reserve and the European Central Bank, both expected to keep rates unchanged amid mounting inflation concerns driven by higher oil prices [2]. In the UK, core Retail Sales rose 0.7% MoM in March, supported by petrol sales, while yearly headline Retail Sales expanded by 1.7% [3].
CONCLUSION
The renewed prospects for US-Iran talks have eased geopolitical tensions, leading to a pullback in oil prices and a weaker US Dollar, while supporting risk assets like EUR/USD and GBP/USD. However, persistent supply risks and rising inflation expectations continue to weigh on the economic outlook. Markets remain focused on upcoming central bank decisions and further developments in US-Iran relations for future direction.