Key facts
- A US-Iran peace deal has been announced, leading to the reopening of the Strait of Hormuz.
- Oil prices fell significantly, with Brent and WTI experiencing drops of over 4%.
- Bitcoin surged past $63,000 following the announcement.
- Gold prices rose over 1%, reaching their highest level since June 9.
- The US dollar weakened to a 10-day low against major currencies.
- Global stock markets and bonds rallied on the news.
Global markets rallied on Monday following the announcement of a US-Iran peace deal aimed at ending hostilities and reopening the Strait of Hormuz. The agreement led to a significant drop in oil prices, with U.S. crude futures falling over 4%. Conversely, gold prices surged more than 1% to their highest level since June 9, and Bitcoin climbed past $63,000. The U.S. dollar weakened broadly, hitting a 10-day low against a basket of major currencies, while S&P 500 futures rose approximately 0.8%. Analysts, however, cautioned that the full impact on oil prices might be tempered by the gradual nature of restoring supply flows. The market awaits the formal signing of the deal on Friday, with attention on the specifics of sanctions relief and nuclear concessions, as well as Israel's adherence to a halt in hostilities. Market strategists noted that while the peace framework is a positive sign, it is not a final agreement. Concerns remain about the timeline for sanctions relief, potential damage to infrastructure, and the pace at which oil production and shipping can return to normal levels, which is expected to take months rather than weeks. Some analysts believe that while the immediate reaction is positive for risk assets, inflation may linger due to supply chain issues and the slow restart of oil flows. For central banks, the easing of oil price pressures could simplify monetary policy decisions. While the Federal Reserve is still expected to remove its easing bias, the likelihood of a hiking bias has diminished. The market anticipates a potential further decline in long-end bond yields, which would be beneficial for equities, and a general move towards reduced volatility.