US-Iran talks are still on track according to a CNN diplomatic source

The diplomatic efforts between Washington and Tehran remain alive despite rounds of military exchanges in the Gulf, with CNN reporting that US-Iran talks are still on track. US President Trump continues to combine military pressure with diplomacy in an attempt to force a broader agreement after months of stalled negotiations and intermittent conflict. The latest clashes saw both sides exchange limited strikes and retaliatory actions, continuing a pattern that has emerged over recent weeks. Yet neither side appears willing to cross the threshold into a full-scale war, with military actions remaining relatively calibrated and contained. For financial markets, however, the military exchanges themselves may be less important than the negotiating deadlock. The central issue remains the ongoing disruption surrounding the Strait of Hormuz. This is likely to keep energy prices elevated even if neither Washington nor Tehran seeks major escalation. Recent oil price reactions have been relatively restrained and I think that's linked to the risk of the Fed tightening into a negative supply shock, which eventually would dampen demand and lower oil prices. The markets are now looking at the US-Iran story through the lens of inflation and monetary policy rather than military escalation. The immediate risk is not necessarily a wider war, but rather a prolonged stalemate that keeps energy prices elevated and forces central banks to deliver rate hikes. This article was written by Giuseppe Dellamotta at investinglive.com.