U.S. President Donald Trump said the war with Iran is “very close to over,” indicating that Washington could soon scale back military operations in the region. His comments came in an interview set to air Wednesday morning in the United States.
Trump said that if American troops were withdrawn immediately, it would take Iran around twenty years to rebuild its infrastructure and military capacity. He added that talks between Washington and Tehran may continue, saying “we'll see what happens,” and suggested that Iran appears willing to negotiate.
Diplomatic contacts continue
The remarks follow recent diplomatic engagement led by Vice President Vance, who confirmed that channels between the two governments remain open. This has strengthened expectations that a ceasefire agreement could be reached in the coming weeks, potentially formalizing an end to active hostilities.
Earlier this week, heightened tensions in the Strait of Hormuz disrupted global trade flows, underscoring the region’s importance as a key route for oil shipments. While the situation remains fragile, optimism over a possible resolution has helped support a gradual rebound in global equities.
Oil holds steady as supply fears ease
Market reaction so far has been restrained. West Texas Intermediate crude traded near $87.50 per barrel, little changed on the day. Prices have remained stable as speculation grows that renewed negotiations could lessen the risk of further supply disruptions from the Middle East.
Energy analysts continue to monitor developments closely, given the strategic role of the Strait of Hormuz in global oil transport and the potential for any setback in talks to quickly feed back into pricing.
Geopolitical risk premium seen easing
The president’s comments suggest that a significant geopolitical risk premium, which has been weighing on global markets, may be starting to unwind. A reduction in conflict-driven uncertainty would likely help stabilize energy costs, easing one of the more volatile components of recent inflation.
More stable oil prices could also relieve pressure on headline inflation, which last stood at an annualized 3.4 percent, according to the latest Consumer Price Index data. That dynamic is drawing attention from policymakers and market participants tracking the inflation outlook.
Implications for federal reserve policy
A calmer energy backdrop gives the Federal Reserve slightly more room to maneuver on interest rates. Minutes from the central bank’s most recent meeting highlighted a data-dependent stance, and any sustained moderation in energy prices is likely to feature in upcoming policy discussions.
As perceptions of tail risk recede, the yield on the 10-year U.S. Treasury note has edged down to about 4.52% in overnight trading. The move reflects a tentative shift away from safe-haven assets and a reassessment of how much protection is still needed against geopolitical shocks.
Risk appetite gradually returning
Equity markets have begun to reflect a measured return of risk appetite. The S&P 500 has gained roughly 1.2% over the past five sessions, signaling that traders are slowly looking beyond the recent escalation and refocusing on corporate and macroeconomic fundamentals.
Corporate earnings reports due next week are now expected to be evaluated more on growth prospects and balance sheet strength than on resilience to external shocks. Sectors most sensitive to global trade and capital flows are likely to see the sharpest repositioning.
Focus shifts from headlines to fundamentals
With the prospect that a major geopolitical tail risk could be removed, many market participants are re-examining defensive allocations and exposure to safe-haven assets. Liquidity may increasingly move toward higher-risk instruments that tend to benefit from a more stable global backdrop.
If tensions continue to ease, market behavior is expected to become more closely aligned with macroeconomic signals—such as inflation, employment, and growth data—rather than abrupt geopolitical headlines. For now, the trajectory of talks between Washington and Tehran remains the key variable shaping that transition.
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