Veiled government supporters stand in a line under a banner bearing portraits of Iran’s late supreme leaders Ayatollah Ali Khamenei and Ayatollah Mojtaba Khamenei, waiting to receive donated food during a state-run religious rally in downtown Tehran, Iran, on April 29, 2026.
Nurfoto | Nurfoto | getty images
By the weekend, global markets were betting on a fragile ceasefire between the US and Iran turning into a long-term peace deal.
But escalating rhetoric, actions at the Strait of Hormuz and fresh Iranian attacks on the UAE in the past 48 hours have experts warning that war could break out again.
Market analysts said the latest developments could mark an inflection point in the war and a critical moment for financial markets and global energy supplies, which are dwindling because the Strait of Hormuz remains largely closed.
“This is an incredibly delicate moment,” Ben Powell, chief investment strategist for APAC at BlackRock, told CNBC on Tuesday.
“It’s very disconcerting to get our first missile warning for several weeks in Abu Dhabi. We were all hoping that was behind us,” the UAE-based strategist said.
“Looking ahead, I think there’s real complexity as to whether this escalation yesterday was just part of the conversation — Iran showing they still have cards to play, perhaps signaling to the UAE that the UAE may leave OPEC, but the energy leaving the region is still up to Iran’s side — or it could be the beginning of a more difficult moment,” he told CNBC’s “Access Middle East.”
Energy and other key parts of the global economy are not flowing, he said, adding that it now feels like we are approaching a “critical moment” where reserves have been depleted, and the delayed effects of energy shocks are beginning to come increasingly into focus.
war and Peace
Global markets were in turmoil on Tuesday morning following the latest developments in the Middle East over the weekend, in which the US attempted to end the standoff over the blocked Strait of Hormuz by launching “Project Freedom”, essentially, trying to “free” ships stuck in the strait and get them safely out of the waterway, which is blocked by both Iran and the US.
Those efforts were met with Iranian resistance, with the US saying it had sunk several Iranian boats as a result of the clashes in the Channel, although Iran denied that any of its boats had been sunk.
Iran later attacked oil infrastructure in the United Arab Emirates with missiles and drones, appearing to resume its strategy of pressuring the US to end the war against its Middle East neighbours.
Women look at the Dubai skyline with the Burj Khalifa, the world’s tallest building, seen from Creek Harbor on April 3, 2026.
Fadel army AFP | getty images
Financial markets remained mixed on Tuesday Stock markets in Asia fell and Europe were mixed, while US stock futures hit higher levels ahead of the upcoming session on Wall Street.
The apparent surge in the US comes after a decline in the major averages on Monday and a rise in oil prices amid growing concerns that the conflict in the Middle East could rekindle with a vengeance.
Markets are likely to remain tense as they wait to see what happens next, with geopolitical observers now warning that the chances of the already temporary US-Iran ceasefire collapsing completely are increasing.
“The question of the week is whether geopolitical risks will remain messy but controlled, or weigh on markets and corporate earnings,” Tina Fordham, founder of Fordham Global Foresight, commented in an analysis Tuesday.
“Given the apparent resumption today of Iranian attacks on targets in the UAE and on ships attempting to pass through the Strait of Hormuz, I am currently leaning towards the latter,” she warned.
Describing the apparent resumption of Iranian drone and missile attacks against the UAE as “the biggest escalation in a few weeks”, he said Tehran has shown the US it still has a fight left, peace deal or no deal.
“Iran is signaling that they still have the ability to inflict pain and will not be forced to surrender. The US faces a choice between a long war it doesn’t want to fight, or a bad, embarrassing deal,” Fordham said in email comments.
‘Project Deadlock’
The latest turn of events in the Iran war appears to have come about because of the US ‘Project Freedom’ strategy announced on Sunday, which aims to force the reopening of the Strait of Hormuz. The move came as the White House grew frustrated with the impasse over a peace deal with Iran. Pakistan-mediated talks have stalled in recent weeks with both sides disagreement on an agreement.
US President Donald Trump told fox news It said on Monday that Iran would be “blasted off the face of the earth” if it targeted US ships protecting commercial vessels passing through the strait.
Motorists make their way past an anti-US billboard referring to President Donald Trump and the Strait of Hormuz, installed on a building in Valiyasar Square in Tehran on May 2, 2026. A senior Iranian military official said on May 2 that renewed fighting between the US and Iran was “likely”, hours after President Donald Trump said he was “not satisfied” with a new Iranian negotiating proposal.
– | AFP | getty images
Tehran signaled overnight it was still interested in Pakistan-brokered peace talks with the US and warned that a political solution was the only way to break the impasse over a deal.
Iran’s Foreign Minister Abbas Araghchi said, “As negotiations move forward with the compassionate effort of Pakistan, the US should be wary of being dragged back into the quagmire by well-wishers. The UAE should do the same. Project Freedom is deadlocked.” commented on x All night long.
He said the latest developments in the war “make clear that there is no military solution to the political crisis.”