A landmark peace agreement between the United States and Iran was announced on Sunday, with the deal set to be signed on Friday in Switzerland, following the G7 meetings. US President Donald Trump declared the immediate reopening of the Strait of Hormuz and the removal of the US naval blockade, a move that has been welcomed by world leaders including the UK, France, Germany, and Italy, who are prepared to lift sanctions on Iran in response to verifiable steps regarding its nuclear program [1][4][6]. Iran reaffirmed its commitment not to procure or develop nuclear weapons, and hostilities across the region, including Lebanon, are set to halt immediately [3][6].
The announcement triggered a global relief rally in financial markets. US stock futures surged, Asian stock markets rallied with the Nikkei leading gains, and the S&P 500 futures rose over 1% [5][6]. The US Dollar weakened against major currencies, including the Swiss Franc, Japanese Yen, New Zealand Dollar, and British Pound, as improved risk sentiment led investors to move away from safe-haven assets [2][3][5][6]. The USD/CHF pair dropped to near 0.7930, its lowest since June 5, while GBP/USD advanced 0.35% to around 1.3460, and NZD/USD extended gains past 0.5850 [2][3][5].
Oil prices plunged, with West Texas Intermediate (WTI) futures falling over 4% to near $79.50, the lowest since March 10, as the reopening of the Strait of Hormuz eased supply concerns for nearly 20% of global energy flows [1][4][6]. However, there is some discrepancy regarding the timeline: while President Trump authorized immediate reopening, Iranian sources report the reopening and lifting of the blockade will occur within 30 days under Iranian arrangements [4]. Analysts at ANZ cautioned that oil prices may remain elevated due to damage to Middle East energy infrastructure, despite the initial drop [4].
Forward-looking statements indicate that the Federal Reserve is expected to keep interest rates unchanged at its Wednesday meeting, with the CME FedWatch tool showing a 47% probability of rates being held in December, up from 28% last week [1]. Markets have priced in a 64% chance of a Fed rate hike in December, down from 69% last week, reflecting shifting expectations post-deal [3]. The new Fed chair, Kevin Warsh, and the end of the conflict are seen as key factors for upcoming monetary policy decisions [2][3][5].
Technical analysis across currency pairs shows bullish momentum for GBP/USD and NZD/USD, with both pairs breaking above key moving averages and resistance levels. The USD/JPY remains supported by the wide US-Japan interest rate differential, though the Yen may gain further if the Bank of Japan hikes rates on Tuesday [1][2][5].
CONCLUSION
The US-Iran peace deal has sparked a global rally in equities and currencies, while oil prices have tumbled on the reopening of the Strait of Hormuz. Market sentiment is strongly positive, with investors anticipating further stability and potential shifts in central bank policies. However, some uncertainty remains regarding the timeline for the reopening and the lasting impact on oil prices.