The global energy sector and macro markets are closely watching Washington this week, as US President Donald Trump held a crucial Situation Room meeting to make a "final determination" on a tentative deal to pause the US-Iran war. The proposed framework outlines a 60-day ceasefire extension, under which Iran clears sea mines within 30 days, the US lifts its naval blockade in phases, oil sanctions are relaxed, and negotiations on Tehran's 440kg enriched uranium stockpile begin. The critical market catalyst is the proposed reopening of the Strait of Hormuz, which carries roughly 20% of global petroleum liquids and has been effectively blocked since hostilities began, driving WTI crude back above $100 per barrel.
Trump concluded the Situation Room meeting without a decision, stating he is "not satisfied" with Iran's terms. Tehran confirmed nothing is finalised, with a $24 billion frozen asset demand, half payable upfront, and the uranium stockpile remaining live sticking points. Trump further complicated talks by demanding Saudi Arabia, Turkey, Egypt, and Jordan expand the Abraham Accords as a precondition to any deal.
Away from the negotiating table, hostilities have not stopped. Despite the fragile ceasefire, US forces struck Bandar Abbas in what has been described as defensive action to maintain the truce, targeting missile sites and Iranian boats attempting to mine the shipping lanes, drawing an IRGC ballistic missile retaliatory strike on a US base in Kuwait.
For Australian markets, even a successful deal won't be a clean fix. The ASX 200 is down 7% since the war began in late February, lagging Wall Street, Tokyo, and Seoul. Although the ASX bounced 0.9% Friday on ceasefire reports, Wilson Asset Management's Damien Boey says the underperformance is as much domestic as geopolitical with the RBA having raised rates three times this year to 4.35%, with another hike priced in before Christmas. "Equity market investors probably need to brace for more turbulence," he said. JPMorgan's Kerry Craig argues a durable recovery needs Chinese fiscal stimulus to reignite commodity demand and enough disinflation to convince the RBA to pause.
For now, the ASX is stuck between a war it can't control and an RBA that won't budge.
