An extended ceasefire in the Iran war gave global markets a renewed sense of optimism that negotiations to end the conflict could succeed. Stocks and oil prices wavered early this week as news reports cast doubt that U.S. and Iranian delegations would meet as expected before the initial two-week ceasefire was set to expire on Wednesday evening. President Donald Trump announced on Tuesday that he would extend the pause on military operations but continue a blockade of Iranian ports while the administration awaits a “unified proposal” from Iran. Lingering safety concerns related to ships attempting to transit the Strait of Hormuz kept oil prices elevated.

Policymakers at the Federal Reserve will be juggling the macro effects of the war and uneven jobs growth when they gather next week. Interest rate futures tracked by the CME Group indicate that market participants anticipate no change in the Fed’s benchmark rate at the conclusion of the meeting on Wednesday, reflecting the threat that oil poses to inflation and growth over the long run. The nomination hearing for Kevin Warsh, President Donald Trump’s pick to take the helm at the Fed, was held on Tuesday. It remained unclear when the Senate Banking Committee will vote on whether to advance the nomination.

PGIM’s Q2 Fixed Income Views addresses the risk outlook amid the war in Iran, the AI infrastructure boom’s enduring influence on the global economy, and how higher government yields and wider spreads bode well for returns over the long term.