Markets largely range-bound as US-Iran ceasefire negotiations still uncertain. Oil prices see larger swings. Brent crude dipped below US$107 before rebounding. Services ISM cools in March but remains in expansion territory

Markets have been largely range-bound to start the week as investors await clearer signals on whether the Middle East conflict would de-escalate or broaden. Iran rejected a US cease-fire proposal and submitted an alternative 10-point response, according to IRNA. Media reports have also suggested the administration explored a potential 45-day cease-fire, despite more escalatory public messaging. President Trump has said the US would target Iranian civilian infrastructure absent an agreement to reopen the Strait of Hormuz by Tuesday. The S&P is near flat currently and the US dollar and treasuries are little changed.

There have been larger swings in oil. Brent crude traded below US$107 a barrel before recovering towards US$111 after Iran rejects a proposed ceasefire. OPEC+ has warned that the Iran war could cause lasting damage to Middle East energy infrastructure, even after hostilities end. It also agreed—largely symbolically—to lift May production quotas by 206,000 barrels a day, marking a second consecutive monthly increase. Any near-term supply impact is likely to be limited while the Strait of Hormuz remains blockaded.

ISM services cooled a touch in March, with the headline index easing to 54.0. New orders firmed to 60.6, but the series has been a poor guide to actual services spending in recent years despite sitting above its 12 month average of 52.0. The employment subindex slipped back into contraction and fell to 45.2, the lowest level in more than two years. Price pressures picked up, with prices paid rising to 70.7 and 45.7% of firms reporting higher prices.

The US labour market report released at the end of last week was stronger than expected, with March payrolls up 178k and the unemployment rate falling, pointing to a stabilising labour market even as the Iran conflict began. Average hourly earnings increased at a 3.5% annual rate, down from 3.7%. Hiring was broad-based, helped by a rebound in health-care jobs after the resolution of a strike. The labour market is likely to see greater conflict-related impacts in coming months if hostilities persist.

US rates were largely unmoved by the ISM release. Treasury yields were little changed on the day, holding onto the post-payrolls back-up seen late last week. Market pricing indicates the Federal Reserve will keep rates on hold this year after Friday’s stronger labour market print trimmed easing expectations. The 10-year yield was steady around 4.34%.

The US dollar eased modestly against G10 as markets tracked developments in US–Iran ceasefire negotiations. Liquidity was thin, with reported FX derivatives volumes ~60% below recent levels amid a European public holiday. Moves across G10 were small overall, with the yen the marginal underperformer. NZD/USD briefly dipped below 0.5690 yesterday (a new low since the conflict began) before rebounding toward 0.5710, leaving it little changed versus Thursday’s local close.

NZ rates markets closed sharply higher in yield in the local session on Thursday. This reflected moves in offshore markets which partially reversed the rally through the middle of last week. Swaps beyond 1y finished 9–11bp higher with a steeper curve (2y 3.43%, 10y 4.34%) while OIS markets price ~60bp of RBNZ tightening by December. The government curve underperformed at the margin with 10-year matched maturity swap spreads widening to 38bp, toward the top end of the well-established range from recent months.

There’s no domestic data of note in the day ahead. Household spending in Australia is expected to have increased 0.3% mom in February which will help assess growth momentum ahead of the Iran shock. In the US, durable goods orders ex-transport are expected to remain firm, consistent with ongoing AI-led capex and continued strength in core order backlogs.

Stuart Ritson is a Markets Strategist at BNZ Markets.