Veiled pro-government supporters wait to receive donated meals as they line up under a banner depicting portraits of Iran’s late Supreme Leaders Ayatollah Ali Khamenei and Mojtaba Khamenei during a state-run religious rally in central Tehran, Iran, April 29, 2026.
Null Photo | Null Photo | Getty Images
Until the weekend, global markets were betting that the fragile ceasefire between the United States and Iran would turn into a long-term peace deal.
But following escalating rhetoric, actions over the Strait of Hormuz and renewed Iranian attacks on the United Arab Emirates over the past 48 hours, experts are warning that war could return.
Market analysts said the developments could mark a turning point in the war and a critical moment for financial markets and global energy supplies, which are in decline as the Strait of Hormuz remains largely closed.
“This is an incredibly sensitive time,” Ben Powell, BlackRock’s chief investment strategist for Asia Pacific, told CNBC on Tuesday.
“It’s very disturbing to have a missile alert here in Abu Dhabi for the first time in weeks. Everyone was hoping it would pass,” said the UAE-based strategist.
“Looking to the future, I think there are real complications as to whether this escalation yesterday was just part of the negotiation. Iran has shown that it still has cards to play, and perhaps it shows the UAE that it can leave OPEC, but the energy outflow from the region is still dependent on Iran’s goodwill. Or it could be the beginning of a more difficult moment,” he told CNBC’s “Access Middle East.”
Money is not flowing to energy and other important parts of the global economy, he said, adding that it feels like we are approaching a “crisis moment” where stocks are being depleted and the delayed effects of the energy shock are starting to become more evident.
war and peace
World markets were tense on Tuesday morning following the latest developments in the Middle East situation over the weekend. The United States has launched Project Freedom to try to end the standoff in the blocked Strait of Hormuz. Essentially, the plan is to “free” ships stranded in the strait and escort them safely out of the waterway, which has been blocked by both Iran and the United States.
These efforts were met with resistance from Iran, and the United States announced that it had sunk several Iranian boats as a result of skirmishes in the strait, although Iran denied that any of its boats had been sunk.
Iran has since struck the UAE’s oil infrastructure with missiles and drones, and appears to have resumed its strategy of violently attacking its neighbors in the Middle East to pressure the United States to end the war.
Women stand looking out at the Dubai skyline, including the world’s tallest building, Burj Khalifa, as seen from Creek Harbor on April 3, 2026.
Fadel Senna | AFP | Getty Images
Financial markets were mixed on Tuesday, with exchanges lower in Asia and mixed in Europe, but U.S. stock futures rose ahead of trading on Wall Street.
This apparent recovery in the US came after major averages fell on Monday and oil prices rose amid growing concerns that conflict in the Middle East could be restarted in retaliation.
Geopolitical watchers are now warning that the already tentative cease-fire between the US and Iran is now more likely to completely collapse, and markets are likely to remain on edge waiting to see what happens next.
“The question this week is whether geopolitical risks remain turbulent but contained, or break through and weigh on markets and corporate earnings,” Tina Fordham, founder of Fordham Global Foresight, said in an analysis on Tuesday.
“Judging by today’s apparent resumption of Iranian attacks on targets inside the UAE and on ships attempting to transit the Strait of Hormuz, I am now leaning towards the latter,” she warned.
Describing Iran’s apparent resumption of drone and missile attacks against the UAE as “the biggest escalation in recent weeks,” she said it showed the United States that there was still fight left in Iran, with or without a peace deal.
“Iran is signaling that it is still capable of inflicting pain and will not be forced to surrender. The United States is increasingly being forced to choose between a long war it does not want to fight and a bad and embarrassing deal,” Fordham said in emailed comments.
“Project deadlock”
The latest turn of events in the Iran war appears to have been triggered by the United States’ “Project Freedom” strategy, announced on Sunday, aimed at forcibly reopening the Strait of Hormuz. The move comes as the White House appears to have grown frustrated with the impasse over the peace deal with Iran. Pakistan-mediated talks have stalled in recent weeks, with both sides at odds over the deal.
US President Donald Trump told Fox News on Monday that Iran would be “blown off the face of the earth” if it targeted US ships protecting commercial ships passing through the strait.
Motorists pass an anti-American billboard that references President Donald Trump and the Strait of Hormuz on a building in Valiasl Square in Tehran on May 2, 2026. Hours after President Donald Trump said he was “not satisfied” with Iran’s new negotiation offer, a senior Iranian military official said on May 2 that new fighting between the United States and Iran is “likely.”
– | AFP | Getty Images
Overnight, Iran’s government signaled it remained interested in Pakistan-mediated peace talks with the United States, warning that a political solution was the only way to break the deadlock over the deal.
“While negotiations are progressing thanks to Pakistan’s kind efforts, the United States should be wary of being dragged into the quagmire again by malicious actors. So should the UAE. Project Freedom is a project deadlock,” Iranian Foreign Minister Abbas Aragushi commented on X overnight.
He said recent developments in the war “make it clear that there is no military solution to the political crisis.”
