The U.S.-Iran conflict, which began in late February and triggered a broad market reaction — including record-high oil prices following the closure of the Strait of Hormuz — is now paused under a two-week ceasefire. The agreement, reached with the help of Pakistan, came just in time to avert potential massive strikes Donald Trump had threatened to launch if Iran did not reopen the strait by 00:00 GMT on Wednesday.
Though the temporary ceasefire does not guarantee lasting peace, both countries are anticipated to hold talks in an attempt to reach a more durable settlement. Formerly, the U.S. proposed a 15-point plan that was rejected by Iran. Now, Donald Trump is said to have received a 10-point plan from Iran, which he described as a “workable basis”. Pakistan’s Prime Minister has proposed holding negotiations in Islamabad this Friday, with Iran reportedly confirming its participation.
According to the U.S. President, the reopening of the strait was a key condition of the agreement. The Iranian Foreign Minister stated that, during the two-week period, passage through the strait would be possible through coordination with the country’s Armed Forces. Iran and Oman are also reportedly planning to charge fees for passing vessels during this window to fund reconstruction efforts.
Following the announcement, Iran characterized the ceasefire as its victory, claiming that the U.S. had accepted its conditions. Meanwhile, the White House maintained that the agreement was the result of President Trump’s and the military’s efforts, calling it a victory for the U.S.
The ceasefire quickly triggered a market reaction. Amid improving investor sentiment, the U.S. dollar index — one of the main beneficiaries of the crisis — fell to 98.80, marking its lowest level in a month. As tensions eased, the dollar lost some of its appeal as a safe-haven currency, allowing the EUR USD exchange rate to rise to $1.17, its highest level since early March, and the British pound to reach $1.3450.
Simultaneously, oil prices fell below $100 per barrel, eliminating a major inflationary factor supporting the dollar. Easing inflation concerns also led to a shift in the Federal Reserve policy expectations, with market participants now pricing in a higher likelihood of a rate cut before the end of the year. However, whether oil prices will get back to pre-war levels remains uncertain.
Gold — a safe-haven asset that notably did not rally as expected during the geopolitical uncertainty — rose by 2.3%. Equity markets also saw relief, with Nasdaq and S&P 500 futures recording gains.
Therefore, while a lasting peace has yet to be reached, the temporary ceasefire has been met with optimism. However, the outcome of the negotiations remains the critical variable for the road ahead.
This article was written in cooperation with TRADINGVIEW