Iran Denies It Reached Out to the US About Peace Talks

Iran denied a reportBloomberg Terminal that its Ministry of Intelligence reached out to the US to negotiate an end to the Middle East war.

The New York Times said Iranian operatives indirectly contacted the Central Intelligence Agency on Sunday to discuss terms to end the conflict. That is "pure falsehood and psychological warfare," the semi-official Tasnim news agency reported, citing a ministry source.

Oil briefly rose on the denial, though quickly reversed those gains as traders focused on a US plan to have its navy escort tankers through the Strait of Hormuz. Traffic through the chokepoint has slumped since the war erupted on Saturday with Israeli and US strikes on Iran. Brent was 0.2% lower at $81.24 a barrel as of 3 p.m. in London.

In public, Iran and the US have both vowed to continue fighting, raising the prospect of a protracted war in the Middle East. So far, over 1,000 people -- mostly in Iran -- have been killed and energy prices have soared.

A report underscoring economic resilience and cooling inflationary pressures drove stocks higher at a time when the war in the Middle East clouds the growth outlook. Bitcoin topped $73,000. Oil whipsawed.

Equities rebounded after data showed the US service economy expanded at the fastest pace since mid-2022 while a price index hit an almost one-year low. A rally in tech megacaps also lifted the market, with the Nasdaq 100 jumping 1.7%. Crude rose to around $75 in a volatile session that saw traders parsing the latest geopolitical developments. Bonds stabilized.

The US said it would attack deeper into Iran and that the country's military capabilities are "evaporating." About a dozen nations have become embroiled in the war, with Tehran targeting Israel and Gulf states while Israeli and American forces bomb targets in the Islamic Republic. The US sank an Iranian warship in international waters. Turkey also came under fire.

Meantime, Tehran dismissed a report that it had reached out to the US to negotiate an end to the conflict as "pure falsehood."

Although risk assets face a "significant headwind" from war in the Middle East and anxiety over artificial intelligence, economic strength and robust earnings mean the extent of a pullback will be limited, according to Goldman Sachs Group Inc.'s Peter Oppenheimer.

"While further escalation remains a risk, we think the more likely outcome is an increase in market risk aversion that likely lasts only a short time until investors can see a winding down of hostilities," said Scott Wren at Wells Fargo Investment Institute.

The S&P 500 climbed 0.9%. The dollar fell 0.2%. The yield on 10-year Treasuries rose one basis point to 4.07%.

"We have been seeing a bit of a squeeze on those bearish positions accumulated since the start of the week, as a tentative 'risk-on' mood crept back in," said Fawad Razaqzada at Forex.com. "The conflict is ongoing and there's no concrete evidence of de-escalation. This could keep pressure on risk assets for a while yet."

Veteran strategist Louis Navellier says today is an example of how geopolitical risks often present short-term buying opportunities. This could change if the Iran conflict heats up, but for now, "we are in a guarded uptrend," he noted.

As US stock investors endure bouts of volatility in the wake of the war in Iran, Citadel Securities' Scott Rubner said his fundamental analysis signals now is a time to turn bullish on equities.

From a technical standpoint, Jonathan Krinsky at BTIG notes that the S&P 500 has reclaimed the 6,800 level, creating the possibility of a "bear trap" below that support.

"It does face some initial resistance in the 6,880-6,900 range, but as of now, we continue to think a low has been made and we should be playing offense more than defense," he said.