Wall Street Rises, US-Iran Deal Pressures Oil and Yields
Wall Street rallied on Monday (June 15th) after a deal to reopen the Strait of Hormuz spurred a rally in risk assets and pressured oil prices. Market sentiment improved as investors assessed that the war that has rocked energy markets for the past several months is nearing an end.
The S&P 500 rose 1.7%, while the Nasdaq 100 gained 3.1% as technology stocks found support again from falling yields. The Dow Jones Industrial Average even hit a record high. Outside of stocks, Bitcoin surpassed US$66,000, signaling a return of risk appetite to speculative assets as geopolitical tensions eased.
The main catalyst came from a memorandum of understanding between the United States and Iran. A senior US official said President Donald Trump and Vice President JD Vance had signed an electronic copy of the agreement. Trump also said the Strait of Hormuz was "partially open" and would be "fully open" on Friday.
The most immediate impact was seen on energy markets. US crude closed below US$81/barrel, alleviating inflation concerns that had previously risen due to supply disruptions. If Hormuz truly returns to normal operations, the risk of a spike in energy prices could subside and pressure on the central bank to raise interest rates would also ease.
The 2-year Treasury yield fell as market participants cut expectations for a Federal Reserve interest rate hike. This transmission is crucial for stocks: oil prices fell, inflation risks weakened, yields fell, and growth stock valuations gained room to recover. Consequently, the Nasdaq moved stronger than other indices.
However, the market has not completely eliminated risk. The US-Iran deal could still face obstacles, particularly regarding the removal of Iran's nuclear material and the technical details of Hormuz's reopening. If the implementation process stalls, volatility in oil, yields, stocks, and risk assets could rise again.
For now, the US-Iran deal provides the market with a strong reason to reduce the war risk premium. The next focus will be the full reopening of Hormuz on Friday, the final details of the deal, the direction of oil prices, and the Fed's signals on inflation and interest rates.
Source: Newsmaker.id
