Oil Markets Rise as Trump-Xi Summit Disappoints

Stalled Negotiations Keep Supply Concerns Elevated

Negotiations between Washington and Tehran showed limited progress last week, with both sides publicly signalling frustration after weeks of indirect talks. President Trump renewed pressure on Iran over the weekend, warning of resumed military action if Tehran did not move closer to a deal. Iranian semi-official media reported that the US had set demanding conditions while offering little in return, describing talks as heading toward an impasse.

A drone attack over the weekend sparked a fire at a UAE nuclear facility, adding to concerns about the durability of the ceasefire across the Gulf region. Brent crude climbed back above $110 per barrel and WTI moved beyond $106, extending a rally that has pushed oil prices roughly 50% higher since the conflict began in late February. The Strait of Hormuz, through which around a fifth of global oil and LNG normally passes, has remained largely closed throughout the conflict.

Bond Markets Reflect Inflation Concerns

A broad selloff in global bond markets ran alongside the moves in energy last week. US Treasury yields rose across the curve, with the 30-year yield reaching its highest level in nearly three years. Japan’s 10-year yield climbed to levels last seen in the mid-1990s, and similar pressure appeared in Australian and New Zealand bonds.

The shift in rate expectations has been significant. At the start of 2026, markets were pricing two Federal Reserve rate cuts for the year. Investors are now assigning near-certain odds to a hike by March, as persistent energy price inflation continues to weigh on the outlook. Higher inflation expectations and sustained supply disruptions are contributing to concerns about a prolonged stagflationary environment across developed economies.

Trump-Xi Summit Produces No Breakthroughs

Investors had looked to last week’s Trump-Xi summit for any indication that China — the world’s largest buyer of Iranian crude — might help facilitate a resolution to the Hormuz standoff. The meeting produced no major outcomes on trade, tariffs or the Iran conflict, and China offered no clear signal that it would weigh in on the dispute.

The Chinese yuan fell to a near two-week low on Monday as investor focus shifted back to the global bond selloff and ongoing Middle East tensions. Chinese equities were broadly flat after declining more than 1% the previous Friday. Capital Economics noted that while the summit helped cement the existing trade truce and reduced near-term escalation risk, the two sides’ positions on the Iran conflict remained publicly divergent — Washington pressing for Hormuz to reopen, Beijing describing the war as one that “has no reason to continue” without committing to specific action.

Analysts at Saxo noted that without clearer follow-through on trade, Taiwan or the Iran conflict, the summit risked being seen as a non-event for markets: supportive for sentiment in the short term, but insufficient to shift the broader backdrop around oil prices, inflation and bond yields.

Energy ETF Performance

European energy ETFs posted broad gains last week, in line with the move in underlying commodity and equity markets. Diversified energy equity products tracked oil and gas producers higher, while commodity-linked instruments — directly exposed to spot crude and gas prices — recorded the largest weekly advances.

Among diversified energy equity strategies, the Xtrackers MSCI World Energy UCITS ETF (XDW0) advanced 6.88% over the week, and the iShares S&P 500 Energy Sector UCITS ETF (IUES) gained 8.48%, taking its 2026 return above 34%. The State Street SPDR S&P U.S. Energy Select Sector UCITS ETF (SXLE) also rose 8.48%, as investors continued rotating into large-cap oil and gas producers.

Commodity-linked products delivered even more pronounced moves. The WisdomTree WTI Crude Oil ETC (CRUD) rose 9.58% during the week and is now up more than 86% year-to-date. The WisdomTree Brent Crude Oil ETC (BRNT) gained 8.11% and has nearly doubled since January.

Natural gas products also posted strong gains. The WisdomTree European Natural Gas ETC (TTFW) surged 13.54% over the week — the strongest performer in the table — and is now up nearly 97% year-to-date, reflecting supply concerns around LNG infrastructure and the potential impact of a prolonged Hormuz closure on European gas markets. The iShares Oil & Gas Exploration & Production UCITS ETF (IOGP) climbed 7.28%, supported by expectations that sustained high oil prices will continue boosting upstream profitability.

Most products recorded net outflows on the week despite strong price performance. Year-to-date flows remain positive for diversified energy equity products. Crude-linked ETCs, which have seen the largest price gains, recorded net YTD outflows, indicating that the move in direct commodity exposure has been driven more by price appreciation than by net new investor capital.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.