US-Iran peace talks collapsed further on Monday morning, May 11, 2026, after President Donald Trump called Iran's latest peace proposal “totally unacceptable.” As a result, stock index futures fell and Treasury yields climbed. Investors are now watching every headline from the Middle East with growing anxiety.

What Iran Demanded

Iran's rejected proposal had several firm conditions. First, it called for US recognition of Iranian sovereignty over the Strait of Hormuz. Second, it demanded an end to the U.S. naval blockade. Third, Iran asked the US to guarantee no further military strikes. Fourth, it pushed for a full lift of sanctions and an end to the US ban on Iranian oil sales. Trump rejected the offer outright.

The Strait of Hormuz remains mostly closed. This is critical. Normally, that waterway carries more than 20% of the world's oil supply. Since the war started, Brent crude has climbed from $73.21 per barrel to around $100. That is a 37% surge in energy costs hitting consumers and businesses alike.

Bond Markets Flash a Warning

Treasury yields rose across the curve on Monday. The 10-year yield (US10Y) climbed 2.9 basis points to 4.39%. The 2-year yield (US2Y) increased 3.1 basis points to 3.93%. The 30-year yield (US30Y) added 2.8 basis points to 4.96%. Rising yields reflect investor concern about inflation staying higher for longer. Citi US equity strategist Scott Chronert noted that the duration of this conflict directly influences how the Federal Reserve thinks about interest rates.

What a Deal Would Actually Do

Progress in talks, even partial progress, triggers sharp market moves. Earlier this week, when reports suggested the two sides were close to a one-page memorandum of understanding, the S&P 500 jumped 1.5%, the Nasdaq surged 2%, and the Dow gained more than 610 points in a single session. At the same time, WTI crude plunged as much as 15% and Brent fell as much as 11%.

So the upside is clear. A deal would push equities higher, pull oil lower, and give the Fed room to cut rates sooner. White House economic adviser Kevin Hassett described it as a "gusher" of oil hitting the market once Hormuz reopens. Goldman Sachs Group Inc. (GS) still expects Brent to average $90 per barrel by late 2026, even if a deal closes, because supply normalization will take time.

The Bigger Picture for Investors

Talks are fragile but not dead. Both sides continue to use Pakistan as a mediator. The proposed framework still includes a 12 to 15-year moratorium on Iranian nuclear enrichment, a gradual lifting of US sanctions, and a phased reopening of the strait. However, Iran has not moved on the nuclear issue publicly.

Economist Ed Yardeni points to history as a guide. Oil doubled during the 1956 Suez Crisis, yet stocks recovered quickly once the canal reopened. The same pattern could repeat here. Therefore, investors with a longer time horizon may want to treat current volatility as an entry opportunity rather than a reason to exit.

For now, the market waits. Every word from Washington and Tehran moves prices. Stay close to the headlines.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.