Deal Optimism Lifts Markets, but Fresh Strikes Cloud the Outlook

Devarsh Vakil - HSL Prime Research

Iran's top negotiator and foreign minister travelled to Doha for talks with Qatar's prime minister on a potential agreement to end the war, even as Washington and Tehran both played down hopes for an imminent breakthrough.

Investor optimism over a U.S.-Iran peace deal was tempered by fresh U.S. strikes in the Middle East.

U.S. Central Command said the strikes were intended to protect the troops from threats posed by Iranian forces, as President Trump continued pressing for a regional peace deal. Trump also urged Arab nations to sign the Abraham Accords, which would normalise relations with Israel.

On Monday, stocks surged while the dollar and oil prices fell as optimism about a deal lifted risk appetite. Brent crude dropped to around $95 a barrel amid signs of a potential ceasefire and hopes of restored flows through the Strait of Hormuz, though some investors cautioned that a finalised agreement could take time.

Foreign ministers from Australia, India, Japan, and the U.S. are set to meet in New Delhi to reinvigorate the Indo-Pacific grouping known as the Quad.

The European Commission cut its 2026 Eurozone growth forecast to 0.9% from 1.2%, citing fallout from the Middle East conflict, while revising its inflation projection upward to 3.0% due to soaring energy costs.

Indian equities staged a sharp recovery on May 25, with the Nifty surging over 300 points past the key 24,000 level, lifted by improved global risk appetite on reports of progress in U.S.-Iran peace talks.

The rupee also rebounded, strengthening toward the month-end after touching a historic intraday low of 96.6 against the dollar. The currency has been under sustained pressure in 2026 - weighed down by elevated crude prices and foreign outflows - but the shift in Middle East diplomatic sentiment has offered meaningful relief.

Nifty's decisive close above 23,800 marks a breakout from its consolidation range. The next resistance levels sit at 24,370 and 24,600, while 23,800 now flips to immediate support.

Indian markets are set to open flat, with U.S. markets closed yesterday leaving little in the way of global cues.

Price action over the next two sessions will largely be shaped by derivative expiries - NSE today and BSE tomorrow - before markets shut for a holiday on Thursday. Expect broad consolidation following yesterday's surge.

Source : Equity Bulls

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