Diplomacy push provides brief respite for markets

Despite signs of de-escalation and Oman’s proposal for a regional non-aggression pact, the Houthis continued drone strikes in Saudi Arabia overnight. Stocks are up, oil is down. By US President Donald Trump’s oft-repeated measure of success, Monday’s meeting between Saudi, Pakistani, and Turkish security officials and Iranian leaders in Tehran delivered results. Saudi stocks rose 3.4%, their biggest gain in 13 months, while oil fell about 1% Tuesday. While markets relaxed on signs of de-escalation, support for Pakistani and Qatari mediation, and Oman’s proposal for a regional non-aggression pact, Yemen’s Houthis didn’t get the memo: Saudi Arabia reported intercepting ballistic missiles and drones overnight. Still, diplomacy is gaining momentum. Qatar’s emir and Iran’s president are meeting Russian President Vladimir Putin in Moscow today, while Israeli media reported that military leaders resisted Prime Minister Benjamin Netanyahu’s plans to strike Iran before today’s election. Meanwhile, defenses are being reinforced. Egypt’s parliament authorized plans to provide military support to help Saudi Arabia defend itself against the Houthis.