Key Takeaways:
Iran's president said the country must escape a "neither war nor peace" state, signaling a potential shift in Tehran's posture after the US and Iran traded strikes across the Middle East this week.
Iran's President Masoud Pezeshkian said the country must escape a "neither war nor peace" state, warning it will not surrender if attacked, as crude held above $90 a barrel after the US and Iran exchanged strikes that threaten a two-month cease-fire.
"War is not in the national interest, but if they attack our territory, we will never surrender or retreat," Pezeshkian said Wednesday at a memorial event for the late Supreme Leader Ali Khamenei, according to Iran's Student News Agency.
The comments came hours after the US military struck Iranian air defenses and radar sites near the Persian Gulf, a response to the downing of an American Apache helicopter gunship Monday near the Strait of Hormuz. Iran's Islamic Revolutionary Guards Corps said it retaliated by launching drones at US naval targets in Bahrain and firing missiles at American facilities in Jordan. Brent crude traded at $91 a barrel Wednesday, while West Texas Intermediate was at $88. The S&P 500 futures pointed to a 0.8% decline.
The exchange threatens a fragile two-month cease-fire and complicates President Donald Trump's repeated claims that a nuclear deal is imminent. Trump said Tuesday an agreement could be signed within days, but Iran's foreign ministry accused the US of undermining diplomacy, saying negotiations cannot advance without "a minimum level of conducive conditions."
The Strait of Hormuz, which handles about one-fifth of the world's seaborne oil, has been at the center of market concern since the war began with US-Israeli strikes on Iran in late February. Brent crude has risen 39% since the conflict started, pushing the national average US gasoline price to $4.15 a gallon, according to AAA. The last time oil traded above $90 for a sustained period was during the Russia-Ukraine supply shock in 2022, when Brent peaked at $139.
Iran's foreign ministry sought to create a rift between the US and its regional allies, saying Persian Gulf countries should prevent American forces from launching strikes from their territories. Bahrain's military said it intercepted several Iranian drones and missiles, while Jordan reported intercepting five missiles. Kuwait's army said its air defenses engaged hostile targets.
European equities fell Wednesday, with the Stoxx 600 down 0.5% and France's CAC 40 slipping 0.23% to 8,199.29, as luxury and industrial stocks weighed on sentiment. Asian markets also declined, with South Korea's Kospi dropping 4.5% and Japan's Nikkei 225 closing 1.9% lower. Technology stocks faced additional pressure amid a rotation out of high-beta names.
"Not only are we oscillating between deal or no deal with the US and Iran, but markets are also swinging between 1999-style AI exuberance and 2000-type tech crash fears," Deutsche Bank analysts wrote in a note Wednesday.
The ambiguity of Pezeshkian's "neither war nor peace" framing creates a scenario where markets must price a wider range of outcomes. If diplomacy collapses entirely, Brent could test $100, according to options market pricing. If a deal materializes, the unwind of the geopolitical risk premium could push crude below $80, providing relief to global equities and consumer-facing sectors. The next catalyst is any official response from Washington to Pezeshkian's remarks, which will signal whether the US views the statement as a negotiating opening or a hardening of Iran's position.
This article is for informational purposes only and does not constitute investment advice.
