A look at the day ahead in European and global markets from

Ankur Banerjee

The ever-inching prospect of a deal to end the Iran war and

open the Strait of Hormuz paved the way for investors to put on

their risk-on hat on Monday, sending stocks in Tokyo and Taipei

to record highs while pushing oil prices and the U.S. dollar

lower.

Doubts also linger though, especially after U.S. President

Donald Trump played down hopes of an imminent breakthrough,

noting he had told his representatives not to rush into any deal

with Iran even as pressure builds to find a solution.

With markets in the UK and U.S. closed for public holidays,

liquidity will be thin as traders keep an eye on headlines.

The will-they-won't-they saga over a deal has left investors

jittery but overall the hope is that it's a matter of when, not

if, a deal is agreed to end the nearly three-month-old conflict.

Sentiment was also helped after shipping data showed two

liquefied natural gas tankers are exiting the Strait of Hormuz,

while a supertanker with Iraqi crude for China left the Gulf on

Saturday after being stranded for nearly three months.

Still, the reality is that a resolution won't push oil

prices back to the levels they were before the war and the

energy supply chain will take time to recover, meaning inflation

worries are going nowhere and neither are calls for

higher-for-longer rates.

Traders are now fully pricing in a 25-basis-point rate

increase from the U.S. Federal Reserve in January 2027, a stark

reversal from two rate cuts expected this year before the war

began.

Key developments that could influence markets on Monday:

U.S.-Iran talks