Stocks flat, oil falls as rate worries offset Iran talks optimism

Global stocks were mostly flat ⁠on ⁠Monday while oil prices fell, as ⁠optimism over progress in U.S.-Iran talks was offset by expectations of higher interest rates that ​pushed U.S. Treasury yields up.

U.S. Vice President JD Vance said in Switzerland that Iran agreed to allow nuclear inspectors into the country, ‌with conversations over the inspections possibly beginning ‌as soon as this week.

The U.S. Treasury Department authorized Iranian sales of crude oil and petrochemical and petroleum products through ⁠August 21, easing ⁠decades-old sanctions, as the United States pushes toward a final peace deal with Iran ​in return for commitments on nuclear inspections and free transit through the Strait of Hormuz.

On Wall Street, the benchmark S&P 500 and the Nasdaq finished lower, dragged down by communication services and consumer discretionary stocks. The Dow ended higher.

The Dow Jones Industrial Average rose 0.29%, the ​S&P 500 fell 0.37% and the Nasdaq Composite fell 1.32%. 

Europe’s STOXX 600 index rose 0.58%. MSCI’s gauge of ⁠stocks across ⁠the globe fell 0.03%.

Markets are ⁠being driven by the ​Fed’s hawkish outlook and reduced expectations that new Fed Chair Kevin Warsh would move to begin cutting rates, ​said Gerry Sparrow, chief investment officer ⁠at Sparrow Capital Management. 

“The market was somewhat surprised by the new Fed chair’s action as it was under the expectation that he was going to be a little easier on rates,” Sparrow said.

The Federal Reserve last Wednesday held interest rates steady, but policymakers expect a hike in borrowing costs later this year amid growing concerns about inflation lodged above the U.S. central bank’s 2% target. 

The ⁠yield on benchmark U.S. 10-year notes rose 5.78 basis points to 4.509%.

The apparent progress in U.S.-Iranian discussions ⁠pushed Brent crude futures to settle lower by 3.38% to $77.90 a barrel, far below its May peak of $126.41.

“The progress in peace talks is good, but the only negative surprise was the new Fed wasn’t a little bit more accommodative during its most recent announcement,” Sparrow said.