US and Iran announce agreement, markets react
US and Iran announce deal
Pakistan Prime Minister Shehbaz Sharif, who has acted as mediator in the negotiations, said the US and Iran have agreed to a peace deal to be officially signed on Friday 19 June. Under the deal, the two sides have declared the "immediate and permanent termination" of military operations, "including in Lebanon" [1]. President Trump said that a deal is "now complete" and that the Strait of Hormuz will reopen "toll free" [2] once the official signing takes place [3]. Iran Deputy Foreign Minister Kazem Gharibabadi confirmed that the agreement has been finalized, according to local media. [4]
The Middle East conflict, which has lasted nearly four months, has disrupted energy flows and pushed prices higher, stoking inflation, creating economic headwinds and pushing central banks around the world toward a more hawkish stance, exacerbating growth risks. Last week the European Central Bank raised rates for the first time since 2023 [5] and markets anticipate another hike by the BoJ on Tuesday, ahead of more pivotal central bank decisions this month. US CPI jumped to 4.2% y/y in May, the highest in three years, while Eurozone inflation accelerated to 3.2%, the fastest pace in more than two years. The World Bank expects global inflation to pick up to 4% in 2026 while GDP grows by a "meager" 2.5%, underscoring the challenging environment. [6]
Today's announcement creates optimism for a resumption of energy flows, which could in turn ease inflationary pressures, growth headwinds and pressure on central banks for monetary tightening.
Oil and dollar retreat on de-escalation hopes
Oil prices drop today in reaction to the US-Iran announcement, on hopes that supply will be restored. Frontline CEO told CNBC last week that he expects transit to resume "pretty quickly" after the Hormuz reopening [7]. Meanwhile, the prolonged spike in crude is weighing on demand, with the International Energy Agency (IEA) expecting consumption to decline this year. [8]
The USDOLLAR is also on the back foot, as a resolution could deprive it of two key tailwinds. The greenback has benefited from risk-off flows since the start of the conflict and higher-for-longer Fed expectations. A decline in oil prices could allow the Fed more time to assess the situation and prevent the rate hike that some market participants have come to expect.
Metals gain on weaker dollar and structural tailwinds
The slide in the dollar is assisting a jump in XAU/USD. Gold stands to benefit from reduced geopolitical uncertainty and a potential containment of inflationary pressures that could allow the Fed to hold rates and perhaps even maintain its easing bias.
XAG/USD and copper also gain as a resolution dampens stagflation risks that can weigh on economic activity and consumption of these critical minerals. Their strategic role in the AI boom, the clean energy transition and the defence industry creates structural demand that could continue to push prices higher.Global equities launch risk-on rally
Global equities launch risk-on rally
Asian stock markets are rising as the announcement sparks a risk-on mood, with the Nikkei hitting new all-time highs. The Japanese economy is heavily reliant on Middle East oil, so a resolution could remove a key overhang just as Japan's crucial position in the global semiconductor supply chain amid the AI boom creates long-term tailwinds.
European markets are also on track to open higher as a resumption of energy flows could help the region's key industries and ease pressure on the ECB for further tightening after last week's pivot. Wall Street could extend its rally to new records if this headwind is removed, amid blockbuster IPOs spearheaded by SpaceX and the proliferation of AI.
The reality check: execution risks still loom
Despite the diplomatic breakthrough, the US-Iran agreement will not be signed for another few days, the exact text has not been made public and the devil is often in the details. What emerges for now is that this is a Memorandum of Understanding that will give the two sides more time to negotiate on stickier issues like the nuclear programme. This looks more like another ceasefire than a lasting peace, and the road to a final resolution may prove bumpy, creating scope for continued uncertainty and market volatility. Meanwhile, Israel and Hezbollah continued to strike each other just hours before the deal announcement, underscoring the challenges ahead. [9]
Moreover, the prolonged supply disruptions have tightened the oil market, with the IEA projecting a deficit this year, while restoring capacity will likely take time. Damage has been done to oil facilities and confidence in safe passage will be needed before transit resumes. Exxon Mobil's CEO said markets would need one to two months to normalise during the May 1 earnings call [10], while the CEO of Saudi Aramco said rebalancing could potentially extend into 2027. [11]
While global markets are eagerly pricing in a best-case scenario today, asset prices may remain highly sensitive to any friction ahead of Friday's formal signing and subsequent negotiations.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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