When Talk of Talks Moves Markets

After several days of escalating conflict in the Middle East, a new twist emerged: reports that Iranian officials had quietly reached out through back channels to explore talks with the United States. The message, according to reporting, was indirect and tentative. Washington remains skeptical. Still, the mere suggestion of a diplomatic off-ramp was enough to ripple through markets and energy prices within hours.

For a conflict that is barely a week old, that reaction says a lot about what everyone fears most: not the war itself, but the economic shock that could follow if it drags on. The entire situation hinges on a narrow stretch of water that most Americans rarely think about - the Strait of Hormuz.

About one-fifth of the world's energy shipments pass through that corridor. If tankers cannot safely navigate it, the global energy system quickly starts to wobble. That is why oil prices surged earlier in the week as threats from Tehran raised the possibility of attacks on shipping. Insurance costs jumped. Tanker traffic slowed. Some energy facilities across the region halted production as a precaution.

The White House understands the stakes. Donald Trump has proposed U.S. naval escorts for tankers moving through the strait and offered political risk insurance for ships willing to make the journey. Defense Secretary Pete Hegseth has signaled that the United States is prepared to protect maritime traffic.

It is a classic geopolitical balancing act-demonstrating military strength while hoping it deters escalation rather than invites it. And for the moment, the strategy seems aimed at one specific target: the price of oil. That is why the report about possible Iran-U.S. contacts mattered so much.

Oil prices briefly dropped after the news circulated, and Brent crude futures even dipped into negative territory during the immediate reaction. Travel stocks, which tend to suffer when fuel costs surge, nudged higher. Energy producers slipped. Traders clearly preferred the idea of negotiations to the alternative. But the optimism came with a large asterisk. Officials on both sides appear doubtful that any quick de-escalation is actually coming. Five days into the conflict, missiles and drones are still flying across the region.

Against that tense backdrop, the latest employment data offered a small reminder that the U.S. economy still has momentum. Private employers added 63,000 jobs in February, according to the ADP report, slightly above expectations. The number is not spectacular, but it is solid-another indication that the labor market remains resilient despite rising geopolitical stress and higher energy prices. New York Fed President John Williams reinforced that view this week, noting that the U.S. economy has historically weathered energy shocks better than many other regions.

For policymakers, the message is complicated but reassuring: growth has not collapsed. Yet if oil continues climbing, inflation could return to center stage. The Fed may find itself navigating between a strong labor market and a volatile geopolitical environment.

So far, American markets have handled the turmoil better than much of the world. Earlier in the week, European and Asian stock markets suffered steep declines-some dropping more than 3% in a single session. Wall Street fell too, but less dramatically. U.S. stocks have shown a surprising degree of resilience.

For the moment, the outlook for the coming days hinges on two questions. First: Will the conflict expand or cool down? Second: Can oil keep flowing through Hormuz without major disruption?

If energy shipments continue moving-even under naval escort-markets may stabilize. If the strait effectively closes, the economic consequences could escalate quickly. Goldman Sachs has already warned that a prolonged disruption could push Brent crude toward $100 per barrel.

Today's economic highlights:

On today's agenda: Australia's quarterly and annual GDP growth rates; China's NBS Manufacturing and Non-Manufacturing PMIs along with RatingDog Manufacturing PMI; consumer confidence in Japan; annual inflation rate in Switzerland; services PMIs in Spain and Italy, followed by unemployment rates in Italy and the Euro Area; in the United States, the MBA 30-Year Mortgage Rate, ADP Employment Change, ISM Services PMI, and EIA Crude Oil and Gasoline Stocks Changes. See the full calendar here.

• Dollar index:
• Gold: $5,190
• Crude Oil (BRENT): $80.91 (WTI) $73.79
• United States 10 years: 4.07%
• BITCOIN: $71,285

In corporate news:

• Lennox International reaffirmed its 2026 guidance and set 2030 targets of $6.5–$7.5B revenue with a 22–23% segment margin at its investor day.
• AbbVie said its Allergan Aesthetics unit presented data on medical weight loss and highlighted changing patient profiles.
• Vertiv partnered with Generate Capital to accelerate data center capacity deployment with integrated power and cooling infrastructure.
• CoreWeave signed a deal with Perplexity to power the AI company's inference workloads using its data centers.
• Best Buy approved a quarterly cash dividend of $0.96 per share.
• Anti-tobacco groups urged Formula One to ban nicotine-pouch sponsorships from Philip Morris International and British American Tobacco, arguing they target young audiences.
• Essential Utilities said its Aqua Pennsylvania unit completed the $18M acquisition of the Greenville Municipal Water Authority.
• Digital Realty entered Portugal by acquiring a Lisbon data center expected to support up to 2.4 MW of IT load.
• Alliant Energy entered a credit agreement for a $400M term loan facility with an option to increase it by $100M.
• Eli Lilly said it is preparing to launch its oral obesity drug orforglipron in the U.S. in Q2 pending FDA approval.
• Strategy shares rose in premarket trading as bitcoin climbed above $71,000.
• Lockheed Martin and other defense contractors are expected to remove Anthropic AI tools from supply chains after a Trump administration ban.
• Walmart-backed PhonePe is targeting a $9B–$10.5B valuation in its planned Indian IPO.
• Criteria increased its stake in Naturgy to 28.5% after buying 2.5% from BlackRock for €611M.
• Talks between Blackstone and New World Development over a potential investment stalled due to disagreements about control of the Hong Kong developer.
• Ross Stores rises 6% in after-hours trading following its quarterly results.
• OpenAI / Microsoft OpenAI is developing an alternative to GitHub, according to The Information.
• Meta plans to create a new applied artificial intelligence engineering organization, according to the WSJ.
• Intel announces the retirement of board chairman Frank Yeary after the annual shareholder meeting in May.
• Levi Strauss completes the sale of Dockers to Authentic Brands Group.
• Trane Technologies completes the acquisition of Liquidstack.
• Telus Corporation / AST SpaceMobile partner to deploy satellite-based cellular broadband service across Canada.

Analyst Recommendations:

• Dow Inc.: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 38.
• Gitlab Inc.: Piper Sandler & Co downgrades to neutral from overweight and reduces the target price from USD 55 to USD 28.
• Lyondellbasell Industries N.v.: KeyBanc Capital Markets upgrades to overweight from market weight with a target price of USD 73.
• Ross Stores, Inc.: Telsey Advisory Group upgrades to outperform from market perform and raises the target price from USD 220 to USD 240.
• Sprouts Farmers Market, Inc.: Baptista Research downgrades to outperform from buy and reduces the target price from USD 128.70 to USD 86.10.
• Spx Technologies, Inc.: JP Morgan upgrades to overweight from dropped coverage with a target price of USD 260.
• Target Corporation: Telsey Advisory Group upgrades to outperform from market perform and raises the target price from USD 110 to USD 145.
• The Cooper Companies, Inc.: Rothschild & Co Redburn downgrades to neutral from buy and reduces the target price from USD 92 to USD 85.
• Vulcan Materials Company: JP Morgan downgrades to neutral from overweight and reduces the target price from USD 335 to USD 320.
• Crowdstrike Holdings, Inc.: Canaccord Genuity maintains its hold recommendation and reduces the target price from USD 515 to USD 400.
• Dentsply Sirona Inc.: Jefferies maintains its hold recommendation and raises the target price from USD 11 to USD 13.50.
• Duolingo, Inc.: Baird maintains its neutral recommendation and reduces the target price from USD 180 to USD 95.
• Harley-Davidson, Inc.: UBS maintains its neutral recommendation and reduces the target price from USD 27 to USD 19.
• Keysight Technologies, Inc.: Baptista Research downgrades to underperform from hold and raises the target price from USD 222.80 to USD 297.
• Sportradar Group Ag: BTIG maintains its buy recommendation and reduces the target price from USD 32 to USD 24.
• Venture Global, Inc.: Citi maintains its neutral recommendation and raises the target price from USD 9 to USD 12.
• Viking Holdings Ltd: Barclays maintains its equalweight recommendation and raises the target price from USD 63 to USD 77.
• Weatherford International Plc: Goldman Sachs maintains its neutral recommendation and raises the target price from USD 83 to USD 107.
• Zscaler, Inc.: Daiwa Securities maintains its buy recommendation and reduces the target price from USD 330 to USD 240.