After nearly four months of war between the United States and Iran, a deal has been announced to end it all.
Trump came out and said the agreement is “complete.” The Strait of Hormuz is reopening. And markets from Tokyo to New York surged within hours.
WHAT WAS ACTUALLY AGREED
The United States and Iran finalized a Memorandum of Understanding. A 14-point memorandum, brokered by Pakistan.
What does it say?
An immediate and permanent ceasefire across all fronts, including Lebanon. Reopening of the Strait of Hormuz without tolls. Lifting of the US naval blockade on Iranian ports. Reduction of US forces in the region. And also, lifting of sanctions on Iranian oil along with the release of frozen assets.
The announcement was made by the Pakistani Prime Minister, who acted as mediator. Immediately after, Trump confirmed that the deal is “complete,” saying the Strait would reopen upon signing.
One more thing shows how fragile this is. Just hours earlier on Sunday, the agreement nearly collapsed. Hezbollah in Lebanon fired rockets at Israel, followed by Israeli strikes on Beirut, and Trump urged both sides not to “mess it up.”
“So is it over,?” you might ask. Almost. The memorandum is locked in, but the official signing is scheduled for Friday, June 19 in Geneva. That is in a few days. And the nuclear issue remains open for negotiation over the next 60 days.
THE MARKETS GO WILD
And now the interesting part. How did markets react? In one word: chaos.
The Dow rose 468 points, up 0.92%, the S&P 500 gained 1.66%, and the Nasdaq broke records with a 3.07% gain. And it was not just the US. Japan’s Nikkei surged 5.5%. Korea’s Kospi reached up to 5.7%. The STOXX 600 in Europe rose as much as 1.9%.
And why did this happen? Very simply. All the war risk that had been priced into markets for months suddenly started to unwind.
But the most impressive move of all is oil. WTI fell about 4.77% to $80.83 per barrel. Brent lost around 4% and dropped to $83.77.
WHO WON AND WHO LOST
On days like this, not everyone rises together. Some win, some lose. And that says a lot.
On one side, banks benefited. Because bond yields fell, which supports them. Gold also gained, reaching a three-week high, along with mining stocks, some up more than 5%.
“Wait, gold went up while tensions eased?” you might ask. Yes. And it is not a contradiction. It reflects large investors reassessing risk. When the picture shifts so quickly, gold moves.
On the other side, energy lost. Oil companies dropped more than 6%. Defense stocks also fell after rallying during the war. Now that tensions are easing, they are pulling back.
WHY THE STRAIT OF HORMUZ MATTERS SO MUCH
You might wonder, why does a narrow passage in the middle of the desert move the entire world?
We have covered this before, but here it is again.
Around 13 million barrels of oil pass through the Strait of Hormuz every day. That is roughly one fifth of global consumption. When it was effectively blocked, a massive supply gap formed and many countries faced fuel shortages.
So yes, reopening it is a huge relief. But not everything normalizes overnight. Shipping insurance premiums had skyrocketed from 0.25% of a ship’s value to between 3% and 8%. And insurers need months of stability before lowering them again. So normalization takes time.
Hey, thanks for the really clear explanation of how geopolitical risks can spread across the market so quickly. What impressed me most was how investors immediately started reassessing risk just because there were signs of reliable stabilization. This proves that uncertainty was already priced into prices
I also thought it was good that you clearly distinguished between physical reopening and real normalization
Everyone likes to assume that everything will return to normal overnight, but reality is not that simple.
By the way, aren't the markets a little too optimistic?
Or do you think there is still upside potential if an agreement is really reached?
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