Trump says Iran talks in ‘final stages’ but investors remain nervousOil prices pare losses amid worries about supply and depleting inventoriesDollar regains front foot after weak May PMIs in Asia and EuropeYen breaches 159 per dollar again despite hawkish BoJ commentsHopes and Threats Keep Markets Guessing on IranPresident Trump revived hopes of a near-term end to the Middle East conflict, telling reporters on Wednesday that the United States was “in the final stages of Iran”. However, his positive remarks were a double-edged sword, as he warned that if there’s no deal within a few days, the US might need to “do some things that are a little bit nasty”.Tehran is currently reviewing the latest US peace proposal but responded firmly to Trump’s latest threats, warning it would escalate the war “beyond the region” if there is fresh aggression against Iran.The renewed threats and doubts about whether the two sides can reach a deal capped yesterday’s selloff in oil futures, with prices recovering slightly today.It’s hard to see Iran agreeing to hand over its enriched uranium to the US or Trump giving in to the various Iranian demands such as compensation for damages from the war. Yet, reports that Trump is resisting pressure from Israel’s Prime Minister Netanyahu to resume strikes against Iran are aiding risk sentiment today.Oil Supply Worries PersistBut a bigger priority for the markets right now is not so much how a deal is reached, but how quickly. Concerns are mounting that global oil stockpiles will be depleted within weeks if the Strait of Hormuz stays shut. The number of analysts predicting that oil could soon reach $200 a barrel has been rising lately.At the same time, though, there have been some signs in recent days that more ships have been allowed to safely sail through the Hormuz Strait, with Iran claiming there were 26 crossings over the past day.Dollar Shines as Weak PMIs Dampen Global OutlookNevertheless, the risk of second-round inflation effects from high energy prices remains elevated and rate hike expectations have continued to gather pace. The ECB’s Olli Rehn didn’t sound too hopeful, suggesting that the Eurozone was headed toward the “adverse scenario” from the war in Iran, hinting at a rate hike in June.The growing signals from the ECB of late haven’t been able to offer much support to the euro, however, as Fed rate hike bets have also been intensifying. More importantly, the Eurozone economy faces a greater risk of stagflation from any policy tightening, with business activity shrinking for a second straight month in May, according to the flash PMI readings.The services sector seems to be the hardest hit from the jump in fuel prices, with the UK’s services PMI dipping below 50.0 for the first time since April 2025.Aussie Slides, Yen Flirts With 159.00The May PMIs for Australia and Japan were also on the soft side, helping the US dollar to bounce back from yesterday’s lows, as the American economy has so far remained resilient.The Australian dollar is today’s worst performer as an unexpected jump in the country’s unemployment rate in April reinforced bets that the RBA will go on pause in June after three consecutive hikes.The Japanese yen also remains under pressure, even as BoJ board member Junko Koeda upped the hawkish rhetoric earlier today. The dollar has spiked lower versus the yen in the past hour, raising suspicions about another small intervention move by Japanese authorities that have become almost daily occurrences lately.The drop to 158.88 yen came after the dollar crawled back above the 159.00 level.Nvidia Fails to Rally After Stellar EarningsIn equity markets, the mood is mostly positive, as aside from the cautious optimism that the US and Iran are close to reaching an agreement on ending the conflict, Nvidia reported bumper earnings yesterday.The chipmaker beat both its earnings per share and revenue forecasts in Q1 and issued upbeat guidance for the current quarter. But as has been the case in recent quarters, the stock suffered from ‘sell the news’ as some traders had set even higher expectations.On the whole, however, Nvidia gave little indication that AI demand is about to cool, even as it faces challenges in China, while hinting that other sectors such as robotics could soon start to benefit more strongly from the AI boom.Nvidia’s stock was trading slightly lower in the pre-market, with US futures currently flat.