Equities Face Fed, AI Trade, and Supply After Iran Peace Deal

The equity market is navigating a complex landscape following an interim peace agreement between the US and Iran, scheduled for signing on June 19. This accord is expected to facilitate the reopening of the Strait of Hormuz, a critical global shipping lane, and has already led to a significant reversal in Brent crude oil prices, which have fallen approximately 80% from their peak since the conflict began.

However, market participants view this truce as a temporary de-escalation rather than a lasting resolution. The relief rally observed in global markets was largely attributed to the rapid unwinding of hedges and speculative positioning rather than a fundamental shift in the conflict's underlying risks. Concerns persist regarding the durability of the ceasefire and the potential for only partial normalization of traffic through the Strait of Hormuz, which could keep energy prices elevated.

Beyond geopolitical easing, equities face several other significant headwinds. These include the prospect of a hawkish new Federal Reserve chair, disruptive US intervention in the artificial intelligence trade, and the anticipation of the largest wave of stock supply in market history. These factors suggest that while immediate war risks have diminished, the path forward for equities remains challenging.