Global markets began the week on a positive note after the United States and Iran announced an interim peace agreement, easing concerns over a conflict that has weighed on economic sentiment and energy markets for more than three months.
Investors welcomed indications that the Strait of Hormuz could reopen later this week, triggering gains in equity futures while oil prices retreated sharply. Gold extended its advance and the U.S. dollar weakened as traders assessed both the geopolitical implications of the agreement and its potential impact on monetary policy.
U.S. Futures Point to Stronger Open
As of 03:03 ET (07:03 GMT), Dow Jones futures were up 492 points, or 1.0%, while S&P 500 futures gained 1.2%. Nasdaq 100 futures outperformed, rising 1.9%.
Deutsche Bank analysts said, “The fizz in staying in markets this morning as after 107 days and a seemingly endless number of false dawns, we finally have a deal between the U.S. and Iran to end the war and open the Strait of Hormuz.”
The advance followed a strong finish to last week, when optimism over a possible diplomatic resolution boosted sentiment. Investor enthusiasm was also fuelled by SpaceX (NASDAQ:SPCX), whose shares remained above their $135 IPO price after a landmark public debut.
The company’s valuation has surpassed $2 trillion, while other space-related stocks, including Rocket Lab (NASDAQ:RKLB) and Planet Labs (NYSE:PL), also attracted buying interest.
Agreement Raises Hopes of Regional Stability
Although the full terms have not yet been released, both Washington and Tehran have confirmed that an agreement has been reached and is expected to be formally signed in Switzerland on Friday.
Reports indicate that the framework could include a 60-day period for negotiations over Iran’s nuclear programme. President Donald Trump told the Wall Street Journal that Iran had agreed not to pursue nuclear weapons, although this commitment was not mentioned in his public social media statements.
Pakistani Prime Minister Shehbaz Sharif, who helped mediate the talks, said the two countries had “declared the immediate and permanent termination of military operations on all fronts.”
Oil Extends Decline on Hormuz Reopening Prospects
Crude prices fell sharply after Trump announced that the Strait of Hormuz would reopen on Friday following mine-clearing operations.
Brent crude dropped 5.1% to $82.84 per barrel, while WTI crude fell 5.8% to $79.93 per barrel.
Trump also indicated that the U.S. naval blockade of Iranian ports would be lifted simultaneously, potentially restoring shipping activity through a route that previously handled around 20% of global oil and LNG trade.
Despite the sell-off, ING analysts cautioned that a lasting return to pre-war price levels is far from certain.
“Financial markets are once again excited about a potential Middle East peace deal and the possible resumption of energy flows out of the Gulf. Whether that delivers much lower energy prices is highly questionable,” they said.
Gold Advances While Dollar Retreats
Gold benefited from the weaker dollar and changing expectations for inflation and interest rates.
Spot gold climbed 2.3% to $4,315.44 per ounce, marking its highest level since 9 June, while gold futures rose to $4,336.17 per ounce.
The decline in the dollar reduced the cost of gold for international buyers and added further support to bullion prices.
Fed Decision Remains in Focus
Attention is now turning to the Federal Reserve’s policy announcement later this week.
Markets broadly expect rates to remain unchanged, although investors continue to debate the longer-term outlook for borrowing costs following recent inflation data.
Vital Knowledge analysts noted that “[I]t’s still very likely that the easing bias will be removed from the FOMC statement.”
However, they added that Fed Chair Kevin Warsh “could put his thumb on the scale during the [post-decision] press conference and tip things in a dovish direction by reiterating” comments from policymakers suggesting rate cuts could become appropriate if tensions with Iran eased.
