Trump Warns Iran on Hormuz Fee & Israel-Lebanon To Talk

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Markets are taking comfort from President Trump's latest rhetoric on Iran as we head into talks over the weekend. China may have played a role in making these talks happen.

Lizzy Burden

Joumanna Bercetche

President Trump is painting an optimistic picture, but the big question is whether the temporary ceasefire can be turned into something more permanent. It was touch and go yesterday due to Israeli strikes on Lebanon.

The US delegation will be led by JD Vance, Steve Witkoff, Jared Kushner. Iran's delegation includes the Speaker of Parliament and Foreign Minister. There is still a lot of daylight between US demands (full dismantling of nuclear sites, limit ballistic missiles, stop supporting militias) and Iranian demands (low-level enrichment, US withdrawal from region, sovereignty over Strait of Hormuz).

What progress has been made on reopening the Strait since the ceasefire was announced?

Lizzy Burden

Joumanna Bercetche

There hasn't been a lot of progress. Only three ships passed through yesterday, compared to 120 before the war. About 800 ships are waiting around the Persian Gulf. Iran released a map for safe passageways, asserting control. Trump criticized Iran for charging fees and doing a poor job of allowing oil through.

The question is whether Iran genuinely wants to rewrite protocol or is using this as a bargaining tool for more leverage and economic concessions.

Israel's Prime Minister agreed to hold direct talks with Lebanon, but Netanyahu vowed to keep up attacks on Hezbollah, threatening to derail US-Iran talks.

Lizzy Burden

Dan Williams

Netanyahu promises no ceasefire against Hezbollah, but attacks have shifted to more traditional preemptive/responsive strikes. Hezbollah still managed long-range rocket attacks. The fact that Israel-Lebanon talks are happening is significant, as only a few years ago speaking about normalizing ties was criminal in Lebanon.

There are a lot of moving parts, but they seem to be coming together to enable the US-Iran talks in Pakistan.

Oil is heading for its biggest weekly loss in more than nine months. Asian shares are rising ahead of the talks.

Lizzy Burden

Winnie Hsu

Oil is coming off session highs for Brent and WTI ahead of the weekend talks. The focus is on talks rather than a fight, driving weekly declines. MSCI Asia is having its best weekly performance since late 2022, first weekly gain since the war began. China's CSI 300 is near a three-year high, with PPI jumping 0.5% in March, first exit from factory deflation in three years.

Tech-heavy benchmarks in South Korea and Japan are leading gains. Taiwan's TAIEX is less than 1% from fresh highs, awaiting TSMC data.

Traders are awaiting March US CPI for the war's inflationary impact driven by fuel prices. Bond traders are hedging against losses.

Lizzy Burden

Mark Cranfield

Expectations are for headline CPI to jump above 3%. Higher petrol prices are the key driver. If we get a high number, yields will push higher and the US dollar will likely jump. The Japanese yen will be in focus for potential intervention if it goes above 160.

If CPI comes in below expectations, yields won't fall far because oil prices are still above $90 and no one expects them to come down quickly given the weekend talks. It's asymmetrical - most likely yields pop higher.

Oil is rising for a second day after Saudi Arabia said production capacity has been reduced due to attacks on its infrastructure.

Lizzy Burden

Anthony DiPaola

Saudi Arabia's East-West pipeline was damaged, affecting about 700,000 barrels per day of flow capacity (about a tenth of pipeline capacity). Saudi Arabia has had to shut in some production because export capacity is reduced. The longer-term impact is how quickly facilities can be restored once the war ends.

The Strait of Hormuz remains the main point of contention. More tankers are heading there but not yet going through. Iran is saying it's open but wants to control it, requiring approval and potentially payment. The situation is unclear, so shippers are advised it may not be safe.

The World Bank could mobilize up to $25 billion for countries grappling with the economic fallout of the war.

Lizzy Burden

Ajay Banga

The impact depends on the length and duration of the disruption. If there's a ceasefire now with 3-4 months of normalization, there's some impact on growth and inflation. If conflict continues for 6-8 months, the downstream effects are very different. For emerging markets, inflation is the immediate concern.

The World Bank has a crisis response toolkit that can divert 10% of undisbursed project balances for crisis management. This could provide $20-25 billion of liquidity quickly, potentially up to $50-60 billion if needed. Targeted, temporary, transparent support is preferred over blanket subsidies.

Pakistan has stepped up security ahead of the peace talks. Futures are pointing higher in Europe.

Lizzy Burden

Faseeh Mangi

Expectations are that some kind of deal could be reached. The words used are 'optimistic' but also 'fragile'. The ceasefire is quite fragile with violations. The base case is an agreement is reached and Hormuz is opened, but key issues remain: Hormuz, uranium enrichment, and sanctions on Iran.

Hungary is heading to the polls this weekend. Viktor Orban's grip on power faces a serious challenge amid economic stagnation, soaring living costs, and corruption.

Lizzy Burden

Viktor Orban after 16 years in power could potentially come out of power. One of the great protagonists of his downfall has been the economic story.

Oliver Crook

Peter Virovacz

This is the first time since Orban took power that he faces headwinds on the economy. Hungary has had two technical recessions, inflation was 25% at one point, food inflation 45%. The situation has improved but there are cracks. Hungary is a small, open economy so global conditions matter.

If there is political change, the EU might be more willing to make a deal on funds, but the deadline is tight. You can't change the structure of the economy within four years. The market is betting on political change and sees it as positive. There's a 40% chance of Fidesz winning, 5% chance of a hung parliament. If there's no clear winner, it could create volatility.

Treasury Secretary Scott Bessent and Fed Chair Jerome Powell summoned Wall Street leaders to an urgent meeting on concerns about cyber risks from Anthropic's new AI model.

Lizzy Burden

Avril Hong

The meeting was arranged at short notice at Treasury headquarters on Tuesday. CEOs from Citigroup, Morgan Stanley, Bank of America, Wells Fargo, Goldman Sachs were summoned. JP Morgan's Jamie Dimon was unable to attend. The meeting signals regulators consider AI-powered cyber attacks as one of the biggest risks to the financial industry.

Anthropic's new model 'Mythos' is more capable of identifying and exploiting vulnerabilities in major operating systems and web browsers. Anthropic has limited release to trusted partners including Amazon, Apple, and JP Morgan through Project Glasswing. We may be entering an era where AI progress is defined by what is being held back.

Italian PM Giorgia Meloni ousted the CEO of Leonardo while retaining CEOs of energy firms Eni and Enel.

Lizzy Burden

Alessandra Migliaccio

Meloni's failed referendum campaign shook her up. She wants to ensure loyalty before elections next year. The previous Leonardo CEO was too independent and not fully aligned with the party line. The new CEO, Mariani, is loyal and reliable. For energy companies, she renewed CEOs to ensure implementation of needed policies on energy.

Mariani will follow the government line and is more appreciated in Washington. For Eni, this means continuing to search for oil elsewhere and making deals.

Oil is set for its biggest weekly fall since June due to the ceasefire news. CPI is expected to show the biggest month-on-month increase in headline inflation since 2022, driven by higher gasoline prices.

Lizzy Burden

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