The most consequential geopolitical standoff in years is playing out in real time. Round three of nuclear talks between Iran and the United States (US) kicked off Thursday in Geneva, mediated by Oman, with US special envoy, Steve Witkoff, and Iranian Foreign Minister, Abbas Araghchi, passing messages through Omani intermediaries on the shores of Lake Geneva.
Why nuclear matters to both sides
Iran’s nuclear programme is not simply about a bomb. For Tehran, enrichment capability is sovereign leverage. It is the ultimate deterrent and the ultimate bargaining chip, in the world’s most fragile region. Iran has maintained throughout these talks that it has the right to peaceful nuclear technology under the Non-Proliferation Treaty, and it is not entirely wrong on the legal framing. But enrichment at 60% purity, which Iran reached before the June 2025 Israeli-US strikes, is a short, technical step from weapons-grade material. The International Atomic Energy Agency (IAEA) found Iran non-compliant with its nuclear obligations in June 2025 for the first time in two decades. That finding changed the diplomatic landscape entirely.
For Washington, a nuclear-armed Iran is not a manageable problem. It is a structural red line that reshapes the entire Middle Eastern order. A nuclear Iran forces Saudi Arabia to pursue its own programme, neutralises Israel’s strategic deterrence, and emboldens every Iranian-backed proxy from the Houthis to Hezbollah with an umbrella they currently do not have. US President, Donald Trump’s position entering these talks has been maximum pressure – zero enrichment, full dismantlement, and broader conversations covering Iran’s ballistic missile programme and regional proxy network. Iran’s position is that discussions around missiles and proxies are off the table entirely. That gap is considerable, and US officials have privately indicated that a deal will be difficult to reach.
Should this stand-off escalate, it has the potential to put oil markets, and the global markets, into a tailspin. Here is why.
Why Iran moves oil markets
To understand why this matters to oil markets, you need to understand the geography. The Strait of Hormuz is a narrow channel of water sitting between Iran and Oman, roughly 33 kilometres wide at its narrowest point. Approximately 13 million barrels of crude oil transit this chokepoint every single day – that is 31% of all global seaborne crude flows. Iran has already demonstrated it is willing to weaponise this geography. During the previous round of talks in February, Tehran briefly halted Strait traffic, citing security precautions. It was not an accident; it was a message. Brent crude spiked to a six-month high of $71/barrel on the back of that move alone. Any serious military escalation that closes or disrupts the Strait, even temporarily, sends oil to levels that would rewrite inflation expectations across every major economy.
To protect this area, the US is willing to take action, and there are four scenarios that could play out.
The four scenarios and what they mean for markets
Scenario 1 – Limited strikes, with a symbolic outcome: the most politically convenient outcome for both sides. The US launches targeted strikes on lower-value military infrastructure, claims a decisive result, and Iran absorbs the hit, responds proportionally, and both governments declare the matter resolved for domestic audiences. Oil rallies 8% to 10% on the strike news and gives back most of the move within two weeks as the actual damage assessment emerges. Iran rebuilds quietly, enrichment resumes within 18 months, and the world returns to where it started – except with a permanently elevated geopolitical risk premium baked into the oil price.
Scenario 2 – Full military degradation: all known military installations, Islamic Revolutionary Guard Corps command structures, missile batteries and naval assets are targeted in a sustained campaign. Iran’s conventional military capability is materially degraded. The problem is what comes next. Iran’s retaliation options include Strait of Hormuz closure, strikes on Gulf state infrastructure, Axis of Resistance (proxy) activation across Lebanon, Iraq and Yemen, which could all send Brent through $90/barrel within days. A conflict of this scale draws in Russia diplomatically, complicates US relationships across the Gulf, and introduces a sustained period of geopolitical risk premium that markets have not yet priced in. This is not a clean outcome, even if the immediate military objectives are met.
Scenario 3 – Full regime destabilisation: the most structurally disruptive scenario and the one analysts are increasingly unwilling to dismiss. A campaign aimed not at Iran’s military capacity but at the regime itself – fracturing the state along ethnic lines and drawing Iran inward for a generation. Iranian-backed regional activity collapses without Tehran’s funding and coordination. Gulf states position to access Iranian oil infrastructure under new arrangements. The short-term supply shock is severe. The long-term picture depends entirely on how quickly Iranian production can be normalised under new governance – a process that, based on precedent, could take two decades and remain incomplete.
Scenario 4 – A deal gets done: the Omani mediator signals progress and the world exhales. Sanctions relief is offered in exchange for verified enrichment limits and restored IAEA inspector access. Iranian crude re-enters global markets in volume for the first time in years. Brent sells off meaningfully – estimates suggest $8 to $12 downside on a credible deal – and the geopolitical risk premium that has been building in energy markets for months deflates rapidly. This is the scenario oil bulls do not want and the global economy arguably needs. It requires both sides to accept a political outcome that looks like compromise, which remains the hardest thing to sell domestically on either side of the negotiating table.
The market read
Brent is hovering around $70/barrel heading into the weekend, with the risk premium very much alive. The Omani mediator’s cautious optimism on Thursday offered a flicker of hope, but the structural gap between US and Iranian positions has not narrowed enough for confidence. Early March has been flagged by multiple analysts as a potential escalation window if talks stall.
For now, watch the strait, watch the carrier strike groups positioned in the Arabian Sea, and watch the tone from Witkoff carefully. Because, when the language shifts from diplomatic to declarative, oil will move before the headlines do.
A LOOK AT THE WEEK’S MARKETS
Week’s key themes:
- South Africa’s 10-year yield falls to 7.89% following the budget
- Nvidia falls 5.5% despite beating earnings estimates
- Brent crude seesaws on Iran-US talks
- Dollar looks set to snap a three-month losing streak
Bonds
US 10-year Treasury yields dropped to around 4.03% on Thursday, near a three-month low, as investors sought safety amid uncertainty around American trade policy. Trump’s 15% tariff threat ultimately settled at 10%, but the rhetoric drove demand for longer-duration Treasuries. US-Iran nuclear talks in Geneva added a geopolitical bid to the pricing. Despite sticky US inflation and a resilient labour market, yields continued lower – though rate traders have pushed back their first US Federal Reserve (Fed) cut expectation to July.
United Kingdom (UK) gilt yields held just above 4.3%, near a one-year low, with markets watching a by-election in Gorton and Denton closely. The seat vacancy follows Labour’s Andrew Gwynne’s resignation, and a Labour loss could reignite leadership speculation around UK Labour-Prime Minister, Keir Starmer. Any political disruption – particularly involving Chancellor of the Exchequer, Rachel Reeves – raises concerns over UK fiscal discipline and debt sustainability. Softer employment data, subdued inflation, and a dovish Bank of England (BoE) tone provided some offset.
German bund yields steadied above 2.7% ahead of Friday’s inflation print, with European Central Bank (ECB) President, Christine Lagarde, reiterating that European Union headline inflation is on track to hit 2% over the medium term as wage pressures ease.
South African 10-year yields ended around 7.89%, after Finance Minister Godongwana confirmed public debt will peak this fiscal year – the first debt stabilisation in 17 years. South African, debt-to-gross domestic product is projected to peak at 78.9% in 2025/26, with debt servicing costs expected to fall to 20.2% of revenue by 2028/29. Positive outlook revisions from Fitch and Moody’s are increasingly anticipated, lending further support to the bond rally.
Indices
US futures extended Thursday’s losses into this morning, with tech names continuing to slide in after-hours trade. Dow futures dropped around 0.5%, dragged by tech conglomerate, Microsoft and cloud-based software company, Salesforce. Cybersecurity firm, Zscaler, fell nearly 10% after billings and deferred revenue missed expectations. Entertainment streamer, Netflix, was the exception, surging around 11% to 13% in extended trade after walking away from its Warner Bros. Discovery bid – the price war with mass media conglomerate, Paramount Skydance, made the deal untenable. During Thursday’s session, the S&P 500 shed 0.54% and the Nasdaq dropped 1.18%, with semiconductors leading losses. Specialised chip manufacturer, Nvidia, fell 5.5% despite beating estimates, as investors questioned the staying power of AI-driven capex.
London’s FTSE 100 climbed to a fresh intraday record near 10,832, powered by strong earnings. Multinational industrial technology company, Rolls-Royce, gained nearly 5% on upgraded guidance and a buyback announcement, multinational creative transformation company, WPP, reversed losses to close 5.4% higher, and financial markets infrastructure provider, London Stock Exchange Group, surged 9% after unveiling £3 billion in additional shareholder returns. Mining stocks offset gains, with Fresnillo, Antofagasta, Anglo American and Rio Tinto all declining.
Frankfurt’s DAX 40 Index closed 0.5% higher near 25,278. Software giant, SAP, led with a 3.1% gain, industrial tech company, Siemens, added 1.9%, and retailers were lifted by Puma’s quarterly earnings report. Telecommunications company, Deutsche Telekom, fell 2.4% despite solid fourth quarter numbers, citing mixed 2026 guidance. Broader European indices closed mixed – the STOXX 50 dipped 0.2% while ASML slid 4.5% tracking Nvidia’s weakness.
The JSE All Share Index closed at 126,584, down 0.13%, while the Top 40 Index ended at 118,446, down 0.22%. The softer close masked mixed underlying performance, with strength in financial services companies, Nedbank, Discovery and FirstRand offset by weaknesses in heavyweights such as global energy company, Sasol, mining company, Anglo American and technology investor, Naspers. In short, it was a mildly weaker day at index level, driven mainly by pressure in large-cap names.
Commodities
Brent crude is holding near $72/barrel after a volatile session, as US-Iran nuclear talks in Geneva yielded mixed signals. Iran described progress as encouraging, while a US source said American negotiators left disappointed. Talks will resume following consultations in each capital, with technical-level meetings set for Vienna next week. Tensions lingered after Tehran ruled out allowing enriched uranium to leave the country, and a significant US military build-up in the region kept markets cautious. President Trump has not ruled out military action should diplomacy fail. Traders will also watch Sunday’s expanded Organisation of the Petroleum Exporting Countries, OPEC+ supply meeting closely, with an anticipated broader oil glut weighing on the outlook. Oil is on track for a weekly decline.
Gold is holding firm around $5,190/ounce extending a two-day gain and heading for a fourth consecutive weekly rise. Trump’s 10% global tariffs took effect this week, with the potential to climb to 15% for certain countries following a Supreme Court ruling against broader duties. On the monetary policy front, Chicago Fed’s, Austan Goolsbee, flagged possible rate cuts if inflation eases, while Fed Governor, Stephen Miran, supports a full one-point cut in 2026 – though the probability of a June move has slipped to 50%, and expectations for a third cut by year-end have largely evaporated.
Platinum is trading near $2,300/ounce, approaching four-week highs, supported by the same trade and geopolitical tailwinds. Washington sanctioned over 30 entities tied to Iranian oil and arms dealings, adding to safe-haven demand. Fundamentals also remain constructive – a persistent supply deficit, driven by years of underperformance in South African mine output, continues to tighten above-ground inventories. Palladium-to-platinum substitution in autocatalysts, stronger automotive demand, and renewed Asian investment interest have added further upside momentum.
Currencies
The US Dollar Index is holding around 97.8, moving sideways as markets awaited January’s US Producer Price Index reading – forecast to show wholesale inflation slowing to 0.3% month-on-month from 0.5% in December. Thursday’s US jobless claims data came in below expectations. The Fed is widely expected to hold rates steady until at least June, balancing sticky inflation against employment risks. Tariff uncertainty persists, with the Trump administration signalling rates could rise from 10% to 15% for certain countries. The dollar looks set to snap a three-month losing streak, closing the month higher.
The euro is holding just below $1.18/€ ahead of today’s inflation-data release, with markets focused on how euro strength could influence ECB policy. ECB rate cut odds remain slim – money markets price just a 30% chance of easing by December. ECB President, Lagarde, reiterated to the European Parliament that inflation is on track to converge to the 2% target, with food inflation settling just above that level later this year. She confirmed the ECB monitors foreign exchange movements, to mitigate inflation risks and ensure price stability, but will not intervene directly.
Sterling slipped to $1.35/£ as voters went to the polls in the Gorton and Denton by-election. A labour defeat could reopen leadership questions around Prime Minister Starmer, with investors wary that political instability might invite a looser fiscal stance. BoE rate cuts are increasingly priced in following softer UK employment and inflation data.
The offshore yuan has strengthened to around C¥6.83/$, a high note seen since April 2023, even as the People’s Bank of China set its midpoint fixing at 623 basis points weaker than Reuters’ estimate – the largest deviation on record – signalling discomfort with the pace of appreciation. Dollar weakness and tariff uncertainty drove the move, with markets now eyeing next week’s Chinese Purchasing Managers Index data for direction on China’s economic momentum.
The rand is trading broadly steady but finished slightly weaker on Thursday, closing at R15.94/$, up 0.59% on the day after moving in a R15.83/$ to R16.01/$ range. The currency had initially strengthened on the back of a constructive National Budget and softer producer inflation, but those gains faded into the close. However, the rand is making gains again this morning as sentiment stabilises and markets digest yesterday’s moves.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 15.89
EUR/ZAR: 18.76
GBP/ZAR: 21.42
BRENT CRUDE: $71.33
GOLD: $5,181
Sources: Bloomberg, Investing.com, Reuters, Trading Economics and TradingView.
Written by: Citadel Advisory Partner and Citadel Global Director, Bianca Botes.