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You have to wonder, what was the past three weeks all for then? US president Trump is now saying that they’ve had “very good and productive” talks with Iran to put an end to all hostilities in the Middle East. And that there will be a ceasefire of sorts now for a period of five days as negotiations continue during this time period.It is pretty clear that we’ve reached a threshold where Trump no longer has the appetite to keep the war going. Right from the start, it already led to all the things he did not like whatsoever in markets. As mentioned at the time, it had everything on the list:Higher oil prices âś”Lower stock market âś”Weaker conviction by the Fed to cut rates amid inflation fears âś”Higher bond yields/rates âś”Stronger US dollar (to some extent) as the trade war rages on too âś”So, what’s next?I don’t want to say that this will be the end of all hostilities in the region. It is quite clear at this stage that Iran still holds significant leverage in being able to place a blockade on the Strait of Hormuz. And that means at any time that the conflict begins to escalate again, they can play this card.And even during this supposed ceasefire period, I doubt we will see commercial vessels take the risk to transit through the strait. There might be some willing enough to take up that risk and that could lead to more ships passing through. But on any restart of shipments, I would expect things to be slow. Think of it as a slow trickle back to normality rather than an immediate zero to one hundred.In any case, emotions are running high across markets and we’re risk appetite return with a bang.S&P 500 futures were down by as much as 1% earlier in the day but are now up 1.8% currently. That after having been on the verge of an even bigger meltdown as indicated by the charts here. If you think Trump is not watching the stock market closely, this is another clear indication that he definitely does pay attention.
This article was written by Justin Low at investinglive.com.
đź’ˇ DMK Insight
Trump’s claims of productive talks with Iran could shift market sentiment dramatically. If a ceasefire materializes, expect volatility in oil prices and related assets, as geopolitical tensions often drive crude futures. Traders should keep an eye on WTI crude, which has been sensitive to Middle Eastern developments. A significant drop in tensions could push oil prices down, impacting energy stocks and ETFs. Conversely, if skepticism grows around the sincerity of these talks, we might see a spike in volatility, especially in the forex market where safe-haven currencies like the USD and JPY could strengthen. Watch for key resistance levels in oil around recent highs, as any failure to break through could signal a bearish reversal. Here’s the thing: while optimism is good, history shows that such announcements can often be overhyped. Traders should remain cautious and monitor the actual developments closely, especially any official agreements or actions taken in the coming days.
đź“® Takeaway
Keep an eye on WTI crude prices; a confirmed ceasefire could lead to a significant drop, while skepticism might spike volatility in safe-haven currencies.
