US-Iran Tensions Rattle Markets as Trump Scraps Diplomacy

President Donald Trump abruptly abandoned diplomatic engagement with Iran overnight Wednesday, declaring the memorandum of understanding dead and calling continued negotiations with Tehran "a waste of time," triggering an immediate global market selloff. The escalation followed U.S. military strikes on more than 80 Iranian targets and Iranian attacks on commercial shipping, marking a sharp pivot from diplomacy to confrontation that rattled investors worldwide.

Crude oil prices surged on fears of supply disruptions in the region, while U.S. equity futures and Treasury bonds came under selling pressure. The U.S. dollar gained as traders piled into safe-haven assets, with currency markets rapidly repricing elevated geopolitical risk across the board. Trump, while calling Iran's leaders "a bunch of liars," did leave a narrow door open by suggesting U.S. negotiators could continue talks independently if they chose to.

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Iran vowed a "crushing response" to the American strikes, according to officials cited in reports, raising the prospect of further escalation in a conflict that markets had briefly hoped was winding down. The standoff adds a significant supply-risk premium to energy markets at a time when traders are already navigating a complex global macro environment.

Separately, minutes from the Federal Reserve's June meeting added to the cautious tone in financial markets. The Fed's internal discussion revealed a hawkish lean overall: participants broadly flagged elevated upside risks to inflation, while concerns about the labor market had receded. A small number of policymakers even made the case for raising interest rates, underscoring that the Fed is far from pivoting toward cuts despite cooling oil prices cited by New York Fed President John Williams in more optimistic comments on inflation.

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