Even before the first 30 days of the 60-day negotiation period had elapsed, during which the 14-point memorandum of understanding between Washington and Tehran was expected to evolve into a final peace agreement, the foundations of the talks collapsed as both sides accused each other of violating the deal.

The US Central Command (CENTCOM) and President Donald Trump said Iran had breached the memorandum by targeting commercial vessels in the Strait of Hormuz, imposing pre-approved shipping routes, and threatening to levy transit fees on vessels. In response, the US military resumed and expanded its nightly airstrikes across Iran, which Tehran also described as a violation of the agreement.

Iran subsequently declared the memorandum of understanding void, while chief negotiator Mohammad Bagher Ghalibaf said the country was engaged in a "fundamental and existential war with the United States."

With fewer than 30 days remaining before the negotiation deadline expires, attention is turning to the outlook for global oil markets.

US midterm elections matter more than the 60-day deadline

A senior Washington source working closely with the US Treasury Department told OilPrice.com that "the 60-day negotiation period is not the most important date. November 3, when the US midterm elections take place, is what really matters."

The source said Trump does not want to spend the remainder of his final term as a weakened president and is therefore seeking a decisive outcome on Iran while keeping gasoline prices at levels that do not undermine Republican prospects in the elections.

According to the source, historical data shows that every $10 increase in crude oil prices raises the average price of gasoline in the United States by around 25 to 30 cents per gallon.

Every one-cent increase in the national average gasoline price also reduces US consumer spending by more than $1 billion annually, placing additional pressure on the economy.

The report noted that this relationship carries significant political weight. Historically, US presidents and their parties have won all 11 presidential elections held when the economy avoided recession during the previous two years, while incumbents facing an economy in recession have won only once in seven elections.

The same pattern has also applied to midterm elections. Although Trump cannot seek another term, he is keen to avoid becoming a lame-duck president during the remainder of his presidency while also cementing a political legacy that could help preserve his family's influence within the Republican Party.

The report quoted Bob McNally, former energy adviser to President George W. Bush, as saying: "Nothing scares an American president more than high fuel prices."

He added that gasoline prices above $4 per gallon represent a particularly sensitive threshold for US administrations because of their negative impact on consumer spending and economic growth.

According to the report, the average US gasoline price stood at approximately $3.85 per gallon at the time of writing.

Iran understands the political pressure facing Trump

According to the US source, Iran fully understands the political constraints facing Trump, making it in Tehran's interest to intensify military operations while stopping short of provoking a large-scale US attack on the country's critical civilian infrastructure.

"As oil prices rise again and gasoline prices move higher with them, Iran is reminding us what could happen if the conflict escalates further, while we currently lack the tools needed to contain those risks," the source said.

The report noted that the United States is already producing oil at record levels, limiting its ability to increase supply quickly. It also said that drawing further from the strategic petroleum reserves of International Energy Agency member countries has become more difficult following the substantial releases made in recent weeks, while the impact of such measures could take months to materialize.

Other alternatives, including increasing supplies from Venezuela, Brazil, or Argentina, or constructing new pipelines that bypass the Strait of Hormuz, would require at least two years before affecting global oil supplies.

Bab el-Mandeb could become the next flashpoint

The report said last week's large-scale missile and drone attack by the Iran-backed Houthis on Abha International Airport in southern Saudi Arabia, together with renewed threats against Saudi oil facilities, was intended to remind Washington that Tehran could also carry out its previous threat to close the Bab el-Mandeb Strait.

The strategic waterway, located between Yemen and the coasts of Djibouti and Eritrea, handles roughly 10% of global oil trade.

According to the report, Iran has considered closing Bab el-Mandeb alongside the Strait of Hormuz since the outbreak of the war between Israel and Hamas but has so far refrained from taking that step.

"We believe this is the next likely step on the escalation ladder, and if it happens, it would significantly disrupt global oil markets while giving Iran additional leverage in negotiations over a final agreement," the US source said.

What does Iran want from a final agreement?

According to a senior energy sector source working closely with Iran's Ministry of Oil, Tehran aims to secure as many of the demands contained in its original 14-point proposal as possible before the negotiations conclude.

Those demands include:

* Israel's withdrawal from Lebanon.

* The withdrawal of all US forces from the Strait of Hormuz and surrounding areas.

* The removal of all international sanctions imposed on Iran.

* A $300 billion reconstruction package.

* Allowing Iran to manage the reduction of its enriched uranium stockpile within its own territory under the supervision of the International Atomic Energy Agency.

* Retaining its civilian nuclear program for peaceful purposes and electricity generation.

The report argued that meeting these demands would eliminate what Iran views as the existential threat facing the Islamic Revolutionary Guard Corps, which Washington considers the central pillar of the Iranian political system.

It added that the United States' long-term objective, from the Obama-era nuclear agreement through subsequent versions, has been to gradually weaken the Revolutionary Guard by restricting its financial and political influence before eventually integrating it into Iran's regular armed forces, a process Washington believed could ultimately reshape the country's political system.

Trump's options between politics and war

The report argued that any agreement signed by Trump that accepts all of Iran's demands would deal a significant blow to the political legacy he hopes to leave behind.

At the same time, the US president cannot escalate the conflict to a level that would trigger a sharp increase in fuel prices and hurt Republican performance in the midterm elections, as that would weaken his influence during the remainder of his presidency and reduce the prospects of preserving the political movement he leads within the Republican Party.

The report also noted that a Republican defeat could expose Trump to renewed legal and political challenges after leaving office.

As a result, both the US and Iranian sources believe the most likely scenario is a continuation of the current approach, with military operations remaining below the threshold of full-scale escalation while negotiations continue toward a final agreement.

The US source concluded: "After the midterm elections, regardless of the outcome, all political constraints on Trump will disappear. At that point, I don't believe he will stop until he secures the agreement he wanted from the beginning, including regime change in Iran."

Wall Street's major indexes advanced during Tuesday's session, supported by a rebound in semiconductor stocks that shifted investors' focus away from developments in the Middle East conflict and toward the corporate earnings season, with results from major technology companies expected to provide fresh clues on the outlook for artificial intelligence spending.

The gains came as US forces launched fresh strikes on southern and western Iran in response to the killing of American soldiers, while a senior Iranian official said Tehran had received a proposal from mediators for a 10-day ceasefire.

Meanwhile, Brent crude climbed above $90 a barrel following the military strikes.

Chip stocks lead market gains

The semiconductor sector led the rally, with the Philadelphia Semiconductor Index rising 3.7% to post its second consecutive session of gains.

Although the index ended last Friday more than 20% below its record high reached in late June, confirming its entry into a bear market, it remains up about 72% since the start of the year.

Shares of SanDisk, Western Digital, and Micron Technology jumped between 7.7% and 10.2%.

Chipmakers have come under heavy pressure in recent weeks as investors questioned whether the sector's rally had become overextended and scrutinized the returns generated by the massive AI infrastructure spending of major technology companies.

Among the S&P 500 sectors, information technology led the gains with a 1.3% advance.

Art Hogan, chief market strategist at B. Riley Wealth Management, said investors are trying to balance strong corporate earnings against the ongoing military developments involving Iran. He added that markets are looking for reassurance from major technology companies, particularly Alphabet, that capital spending plans remain intact, which could help limit the recent correction in semiconductor stocks.

Indexes and stocks

As of 9:57 a.m. Eastern Time:

The Dow Jones Industrial Average rose 171.34 points, or 0.33%, to 52,010.60.

The S&P 500 gained 30.20 points, or 0.41%, to 7,473.48.

The Nasdaq Composite advanced 172.68 points, or 0.68%, to 25,680.75.

Investors are awaiting earnings this week from Alphabet and Intel, which could determine whether the AI-driven rally still has enough momentum to continue amid elevated profit expectations.

Tariffs add to market uncertainty

US President Donald Trump added to market uncertainty after announcing a 50% tariff on a broad range of Canadian imports.

The Financial Times also reported that Trump is preparing to impose new tariffs on dozens of countries later this week before the current 10% global tariff expires on Friday.

Notable stock movers

3M surged 9.5% after the company raised its full-year profit forecast.

Danaher fell 13% after lowering its outlook for core revenue growth and reporting weaker-than-expected revenue from its biotechnology business.

MSCI declined 11% after raising its full-year operating expense forecast despite reporting quarterly revenue that exceeded expectations.

Software stocks also came under pressure after a financial institution lowered its price targets on several companies. Adobe, Intuit, Workday, and Salesforce fell between 1.5% and 2.6%.

Market breadth was positive, with advancing stocks outnumbering decliners by a ratio of 1.19 to 1 on the New York Stock Exchange and 1.47 to 1 on the Nasdaq.

The S&P 500 recorded five new 52-week highs and five new lows, while the Nasdaq Composite posted 22 new highs and 64 new lows.

Bitcoin rose to around $65,500 during Tuesday trading, marking its highest level in two weeks, as semiconductor stocks recovered from the sell-off that weighed on the cryptocurrency market last week, while Asian chipmakers led a broad rally in risk assets.

The world’s largest cryptocurrency gained 1% on the day and around 5% over the past week, with trading volume reaching approximately $33 billion.

Ethereum was the best performer among major cryptocurrencies, rising 3% to $1,922 and bringing its weekly gains to 8%.

XRP also climbed 3% to $1.13, posting a weekly gain of around 6%, while Solana advanced 2% to $78. BNB was steady at $574, while Dogecoin was little changed. Hyperliquid’s HYPE token rose 4% to $63, although it remained the only major cryptocurrency to record a weekly decline.

Chip stock recovery supports risk appetite

The rebound began in the same sector that triggered last week’s market decline. The MSCI Asia-Pacific Index rose 2%, recording its first gain in four sessions, supported by shares of Samsung Electronics and Taiwan Semiconductor Manufacturing Company.

Stock indices in South Korea and Taiwan each climbed around 4%, while mainland China’s technology index surged about 7% following intervention by state-backed institutions. Japan’s Nikkei also gained 3% after entering correction territory last week.

The report noted that the shock caused by China’s progress in artificial intelligence, which weighed heavily on semiconductor stocks last week, had started to fade as investors returned to buying the same shares.

Bitcoin ETF inflows and lower oil prices support gains

Bitcoin received further support from continued inflows into US spot Bitcoin exchange-traded funds, which recorded five consecutive days of net inflows exceeding $600 million. This marked the longest streak of institutional buying since mid-July, following eight straight weeks of net outflows.

Lower oil prices also helped improve risk appetite, with Brent crude falling around 1% to approximately $88.58 a barrel after Iran said mediators were discussing proposals to reduce tensions, including a plan for a 10-day halt to military strikes.

Jeff Mei, chief operating officer at BTSE, said: “Current Bitcoin and Ethereum prices are low but fair given the economic uncertainty dominating markets.”

He added that investors were now focused on the upcoming US Federal Reserve meeting. Traders expect interest rates to remain unchanged but are watching for signals about the direction of monetary policy for the rest of the year.

Federal Reserve could limit further gains

The Federal Reserve is scheduled to meet on July 28 and 29, while markets are pricing in around a 15% probability of an interest rate increase in July, with the possibility of a move in September still remaining.

Despite the rise in prices, spot cryptocurrency trading volumes remained limited, suggesting that the rally was driven more by improved risk appetite than by renewed investment conviction.

The report said that persistently high oil prices and US Treasury yields could encourage the Federal Reserve to maintain a hawkish stance, potentially limiting gains in risk assets, including cryptocurrencies.

It concluded that the main factor driving Bitcoin throughout the month had not changed, but had simply reversed direction. After falling last week alongside Asian semiconductor stocks, Bitcoin has now returned to a two-week high as those shares recovered.

Silver prices surged more than 5% in European trading on Tuesday, extending gains for a third consecutive session and climbing to their highest level in a week as the metal continued to recover from recent lows.

The rally was supported by a weaker US dollar and a pause in the advance of global oil prices, while improving market sentiment was driven by hopes that diplomatic efforts could ease military tensions between the United States and Iran, reducing the risk of higher oil prices and the inflationary pressures they could place on major central banks.

The Price

• Silver prices jumped 5.1% to $59.25 an ounce, their highest level in a week, after opening at $56.41. The metal touched an intraday low of $56.11.

• Silver gained 0.9% on Monday, marking its second consecutive daily advance as it continued to recover from an eight-month low of $54.77 an ounce.

US dollar

The US Dollar Index fell 0.15% on Tuesday, heading for its first decline in four sessions and reflecting broad weakness in the US currency against a basket of major and minor peers.

The decline came as demand for the dollar as a safe-haven asset eased, supported by improving investor sentiment and stronger risk appetite amid growing expectations that diplomatic efforts could contain the military escalation between the United States and Iran.

Oil prices

Global oil prices fell more than 0.5% on Tuesday, retreating from six-week highs amid profit-taking and growing hopes that diplomatic efforts could ease tensions around the Strait of Hormuz and ensure the continued flow of oil shipments through the vital waterway.

Iran conflict update

• International mediators submitted a formal proposal to Tehran calling for a 10-day ceasefire in an effort to revive the previously agreed temporary accord and reduce military tensions.

• Iran's Foreign Ministry confirmed that indirect contacts and exchanges of messages and proposals with Washington through mediators remain ongoing despite the continued airstrikes.

US interest rates

• According to CME Group's FedWatch Tool, markets are pricing in an 84% probability that the Federal Reserve will leave interest rates unchanged at its July meeting and a 16% chance of a 25-basis-point increase.

• For the December meeting, markets are pricing in an 18% probability that rates will remain unchanged and an 82% chance of a 25-basis-point increase.

• Investors are closely monitoring upcoming US economic data to further refine expectations for the Federal Reserve's policy path.