The US and Iran have agreed to a framework peace deal intended to end the war that began earlier in 2026, with the official signing scheduled for Friday in Switzerland [1][2]. The initial memorandum of understanding (MOU) establishes a 60-day ceasefire, the reopening of the Strait of Hormuz, and sets the stage for technical negotiations over Iran's nuclear program [1][2]. According to Source 2, the agreement would grant Tehran broad economic incentives and allow the immediate resumption of Iranian oil exports, with international tankers expected to resume safe transit through the Strait of Hormuz once the pact takes effect [2].
This development has had notable effects on global markets. The Euro (EUR/USD) trades with a positive bias above 1.1600 for the third consecutive day, supported by optimism over the interim peace deal, which has kept the safe-haven US Dollar on the defensive [1]. The European Central Bank's recent interest rate hike—the first in three years—and an upward revision of its 2026 inflation projections to 3% have also bolstered the Euro [1]. Traders are still pricing in roughly 40 basis points in additional ECB hikes for 2026, despite the de-escalation of Middle East tensions [1].
In India, the Rupee (USD/INR) steadied after two days of gains, with its upside potential capped as downward pressure eases due to declining global oil prices [2]. West Texas Intermediate (WTI) oil prices have extended losses for the fifth consecutive day, trading around $75.20 per barrel, as anticipation of the US-Iran deal grows and expectations of increased global supply weigh on prices [2]. Economists have upgraded India's balance of payments forecasts, now anticipating a small surplus instead of a substantial deficit, partly due to recent Reserve Bank of India interventions and the improved outlook for oil imports [2].
Market participants are closely watching the upcoming US Federal Reserve policy decision. The Fed is widely expected to keep benchmark interest rates steady within the 3.50% to 3.75% range, but traders are attentive to potential hawkish signals from new Fed Chair Kevin Warsh during his first post-meeting press conference [1][2]. The outcome of the Fed meeting, along with its economic projections and the so-called dot plot, is expected to provide further cues for currency and equity markets [1][2].
Despite the positive momentum from the peace deal, broader market sentiment remains cautious due to lingering geopolitical risks. According to Source 2, the Iran-backed group Hezbollah stated that Iran would likely refuse a final nuclear agreement unless Israel withdraws from Lebanese territory, adding uncertainty to the outlook [2]. Industry experts also warn that shipping and energy exports could take several weeks to fully recover from recent disruptions [2].
CONCLUSION
The imminent US-Iran interim peace deal has already influenced currency and commodity markets, supporting the Euro and Indian Rupee while pressuring oil prices. However, market sentiment remains cautious ahead of the US Federal Reserve's rate decision and ongoing geopolitical uncertainties. Investors are expected to closely monitor further developments for additional market direction.