Stocks flatlined, while the dollar strengthened on Monday as investors fretted that talks between the United States and Iran were at a stalemate, leaving the vital Strait of Hormuz virtually closed, which sent oil prices higher.

US President Donald Trump on Sunday rejected Iran’s response to a US proposal for peace talks to end the war, saying Tehran’s demands were “totally unacceptable”.

Brent crude futures, which are around 45% higher than they were before the US and Israel began strikes on Iran on February 28, jumped as much as 4.6% overnight and were last at $103 a barrel, showing a 2% gain on the day.

The MSCI All-World index was relatively flat on the day, while in Europe, the US stock futures were also steady.

The correlation between the oil price and the stock market has turned positive in the last two weeks, meaning that the two are more likely to move in tandem than in opposite directions, which was the prevailing dynamic for most of the war so far.

Also Read: Iran FM spokesperson describes proposal to end war with US as legitimate, generous

Investors are able to look beyond energy prices for the time being, given the still-strong enthusiasm, in particular, for anything tech-related, as well as macro data, including last week’s US solid payrolls report, showing that the global economy is not sputtering at this point.

“Markets are very good at assimilating this and learning to live with things that we thought were impossible. And that’s where we are with crude right now. But if it goes up another 50%, then that will be another test that we have to navigate,” IG chief market strategist Chris Beauchamp said.

“If you’re looking at the earnings data, it’s really good. And were it not for the Iran situation, we would be really firing on all cylinders, even more so than we are. But people are content to believe that, somehow, there has to be some kind of deal with Iran, however ugly,” he said.

Read More: US stocks climb to all-time highs

An Iranian plan sent to the US stressed the need for an end to the war on all fronts and the lifting of sanctions on Tehran, along with reparations and a recognition of Iran’s control of the Strait, Iranian media reported.

“The conflict in the Middle East is now entering its 11th week,” said Bruce Kasman, global head of economics at JPMorgan. “Energy prices have surged but remain at levels that are headwinds rather than expansion-ending obstacles.”

“The risk of a sharper move rises with each week that the Strait of Hormuz stays closed, and our commodities team sees operational stress levels starting sometime in June.”

Iran has effectively shut the strait since the war started late in February, choking off a corridor that normally handles around a fifth of the world’s oil and gas shipments.

The dollar edged up modestly, gaining 0.2% on the Japanese yen to 156.9 yen, while the euro dipped 0.1% to $1.1778 and sterling fell 0.16% to $1.3613, as pressure continued to build on British Prime Minister Keir Starmer following heavy losses for his ruling Labour Party in last week’s local elections.

Also Read: https://tribune.com.pk/story/2607099/investors-book-gains-amid-us-iran-tensions?amp=1

Optimism over AI helped drive Chinese stocks to 11-year highs overnight, while South Korea’s chipmaker-heavy KOSPI index rose 4.3%.

Data on Monday showed China’s producer prices jumped to a near-four-year high, while consumer inflation also accelerated on elevated global energy costs.

The Gulf will be on the agenda when Trump visits China from Wednesday, meeting Chinese President Xi Jinping in their first face-to-face talks in more than six months.

In commodity markets, gold slipped 1.3% to $4,654 an ounce, having drawn scant support as a safe haven or as a hedge against inflation risks.