Brent crude oil prices declined on Tuesday following a recent surge that brought them to a five-month high, as investors weighed hopeful signals of renewed peace talks between the United States and Iran. Around midday in New York, Brent crude fell 1.3 percent to $108.13 per barrel, after earlier fluctuating between nearly $112 and below $106.

The recent price increase was driven by attacks on Saudi Arabian infrastructure carried out by Iran-backed Houthi militants. However, oil prices softened after reports emerged—though subsequently denied by official sources—suggesting Pakistan had put forward new proposals to revive peace negotiations. Market participants expressed caution regarding such headlines, illustrating the volatility and sensitivity surrounding geopolitical developments impacting oil markets.

Ed Al-Hussainy, portfolio manager at Columbia Threadneedle, noted the frequent cycles of optimism and disappointment triggered by conflicting reports, describing the environment as prone to “constant back and forth.” Giovanni Staunovo, commodity analyst at UBS, added that the market’s strong reaction to unverified news was somewhat unsettling, though traders often have to act swiftly despite uncertainty. Rory Johnston, founder of Commodity Context, characterized the price movements as driven by a classic “peace deal headline jawbone.”

The retreat in oil prices contributed to lower yields on core government bonds globally. The yield on 10-year UK gilts fell by 0.03 percentage points to 5.41 percent, while the equivalent Italian bond yield decreased 0.05 percentage points to 4.52 percent. In the United States, the 10-year Treasury yield edged down by 0.01 percentage points to 5.13 percent.

Alongside the drop in yields, US equities gained ground. The S&P 500 index rose 0.3 percent, and the Nasdaq 100 added 0.2 percent, supported by a rebound in chipmaker stocks for a second consecutive day amid investor optimism about upcoming earnings reports. Market attention remained focused on SpaceX’s forthcoming financial disclosure for insights on the artificial intelligence sector’s trajectory, particularly concerns about borrowing outpacing demand, which could affect the sector’s sustainability.

In European fixed income markets, French government bonds underperformed relative to German equivalents, with the 10-year yield spread widening to more than 1.5 percentage points—a level approaching its highest since 2011. Meanwhile, the euro gained 0.2 percent against the US dollar, trading at $1.1230, and the British pound strengthened 0.6 percent to $1.3370.