Hopes for Negotiated Iran Settlement Fade
AUTHOR
Jamie Coleman
Senior Strategist, Strategy and Insights Group
For the week ending 27 March 2026
As of midday Friday, global equities were lower on the week after mid-week optimism over a potential ceasefire in Iran faded. The yield on the US 10-year note continued to rise, jumping 13 basis points to 4.45%. The price of a barrel of West Texas Intermediate crude oil held steady at $97. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 25.7 from 23.8 last week.
IRAN CRISIS
Iran rejects US 15-point peace plan
This week, the US sent a document through intermediaries that laid out a series of preconditions to end the war with Iran. According to the Wall Street Journal, these conditions include: Iran dismantling its main nuclear sites and ending any enrichment of uranium on Iranian soil; suspending its ballistic-missile work; curbing support for proxies; and fully reopening the Strait of Hormuz. In return, Iran would have nuclear-related sanctions lifted.
On Thursday, Iran rejected the plan, saying US “aggression and assassinations” must end, the US must guarantee that the war will not be restarted, and that Iran will retain control over the Strait of Hormuz. It is uncertain whether Iran’s public statements align with possible backchannel talks by regime members. During a cabinet meeting on Thursday, President Trump said Iran was allowing 10 Pakistani tankers to pass through the Strait as a show of good faith. Morgan Stanley estimates that as many as a dozen tankers have passed through the chokepoint this week — a clear uptick.
Should diplomatic efforts fail, the US is reportedly readying potential military actions to end the war, including seizing or blockading Kharg Island, Iran’s main oil export terminal; invading Larak, and another strategically-located island near the Strait of Hormuz; and blockading or seizing ships transporting Iranian oil on the eastern side of the Strait.
Iran’s attack on joint US–UK airbase on Diego Garcia, an island in the Indian Ocean thought to be well beyond the reach of Iran’s missiles, drew significant attention this week, as the attack demonstrated that Iranian missiles could reach much of Europe. Amid Iran’s continuing strikes on infrastructure targets in neighboring countries, US-allied Gulf states are considering entering the war.
Late Thursday afternoon, Trump extended the pause on strikes on Iranian energy infrastructure he put in place last weekend until April 6, saying talks are “going very well.”
In addition to a second Marine Expeditionary force and elements of the 82nd Airborne Division being deployed to the Middle East, the US is reportedly considering sending an additional 10,000 combat troops in the coming days.
QUICK HITS
Country or Region |
Manufacturing PMI |
Services PMI |
Composite PMI |
US (S&P) |
52.4 from 51.6 |
51.1 from 51.7 |
51.4 from 51.9 |
Eurozone |
51.4 from 50.8 |
50.1 from 51.9 |
50.5 from 51.9 |
United Kingdom |
51.4 from 51.7 |
51.2 from 53.9 |
51.0 from 53.7 |
Japan |
51.4 from 53.0 |
52.8 from 53.8 |
52.5 from 53.9 |
Amid ongoing tumult in the Middle East, PMI data showed that input prices rose across developed markets, especially in Europe, where they jumped more than 10%. Supplier delivery times lengthened as well, suggesting supply chain stress. Price pressures in the US were less pronounced.
President Trump’s summit with China’s XI Jinping has been reschedule for May 14 and 15 in Beijing.
On Thursday, the European Parliament approved the trade deal between the European Union and the US by a vote of 417 to 154.
Prices of memory chip makers fell this week on news that an algorithm developed by Google can cut the amount of memory required to run large language models by at least a factor of six. The breakthrough could alleviate memory chip shortages and reduce the cost of deploying AI.
Rengo, Japan’s umbrella body of labor unions, released their initial report of FY26 wage negotiations, resulting in an average raise of 5.26%. Overall, the report signals that Japan’s wage dynamics remain robust.
On Friday, Ukraine and Saudi Arabia signed an agreement establishing a framework for future military contracts, primarily focused on air and drone defense.
Goldman Sachs has found that while oil supply shocks still tend to reduce job growth and raise unemployment, the impact today is roughly one-third as large as it was in 1975-1999, likely reflecting the lower oil intensity of US GDP and a surge in domestic shale production.
Asian nations are reportedly considering Covid-style measures like remote work to manage fuel shortages.
The US Senate passed a bill early Friday funding most of the Department of Homeland Security. If passed by the House of Representatives, long security lines at the nation’s airports should be alleviated.
European Central Bank President Christine Lagarde warned that markets are underestimating the risks from the war in the Middle East.
According to a transcript of a sealed hearing earlier this month, a federal prosecutor conceded under questioning by a judge that the US Justice Department's investigation of a $2.5 billion renovation project at the Federal Reserve found no evidence of a crime.
The US Q4 current account deficit narrowed to $190 billion from $239.1 billion in Q3. The current account measures things such as trade in goods and services and net income from investments abroad.
A survey of about 200 oil and gas producers conducted by the Dallas Fed showed that 50% of respondents see no increase in wells drilled this year, while 47% see a slight to significant increase in drilling. Respondents expect West Texas Intermediate crude to trade at $74 per barrel by the end of 2026.
The Federal Reserve ran an operating loss of $18.7 billion last year, its third straight year of losses. The loss was significantly smaller than in 2023 or 2024, when the Fed had losses of $114.3 billion and $77.6 billion, respectively.
The US Postal Service on Wednesday said it is seeking to impose a temporary 8% fuel surcharge for package and express mail deliveries to deal with rising transportation costs, which include higher oil prices as a result of the Iran war. If approved by the Postal Regulatory Commission, the surcharge would take effect April 26 and remain in place until January 17, 2027, the Postal Service said in a notice on its website.
Weekly US jobless claims data remained low this week at 210,000, indicating little immediate stress on the country’s labor market.
Germany’s Bundesbank said the country’s economy probably stagnated in Q1.
The British Retail Consortium said Thursday that its measure of expectations for the economy over the next three months plunged to -53 in March from -30 previously — the worst reading since the tracker began in March 2024.
The US has made its offer of security guarantees for a peace deal in Ukraine conditional on Kyiv ceding the country's entire eastern region of Donbas to Russia, President Volodymyr Zelensky told Reuters.
Japan's two-year government bond yields hit the highest levels in three decades on Thursday at 1.35% as a result of the surge in energy costs.
THE WEEK AHEAD
Monday: Eurozone economic confidence indicator
Tuesday: Japan unemployment, retail sales, industrial production; UK GDP; eurozone CPI; Canada GDP; US Conference Board consumer confidence, JOLTS
Wednesday: Global manufacturing PMIs; US retail sales
Thursday: US trade balance
Friday: Good Friday holiday; Japan services and composite PMIs; US employment report; S&P Global services and composite PMIs
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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.