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• Brent crude dropped to its lowest level since early March at approximately $83/barrel, with oil prices declining as the strait is set to reopen toll-free and the U.S. naval blockade will be removed
• The easing energy squeeze could influence this week's central bank decisions, including the Fed meeting on Wednesday where new Chair Kevin Warsh will lead his first rate decision, with rates expected to hold at 3.50%-3.75%
• Key uncertainties remain as thornier issues like Iran's nuclear program are deferred to a 60-day ceasefire period, and physical reopening of facilities and tanker reorientation will take time despite market optimism

Market Summary: U.S.-Iran Deal Drives Oil and Equity Rally

Key Development:

The United States and Iran reached a memorandum of understanding to reopen the Strait of Hormuz after more than three months of near-total disruption. The agreement is scheduled to be signed Friday in Switzerland, with a 60-day ceasefire period for further negotiations on issues including Iran's nuclear program.

Market Reaction:

• Oil: Brent crude fell over 4% to approximately $83 per barrel, its lowest level since early March
• Equities: Global stocks rallied, with Japan's Nikkei and South Korea's KOSPI both gaining. Europe's STOXX 600 hit a record high
• Bonds: U.S. Treasury yields declined, with the 10-year yield touching a one-month low
• Wall Street: Futures pointed higher before the opening bell

Market Implications:

The strait's reopening is expected to ease inflation pressures and reduce expectations for interest rate hikes. U.S. headline CPI accelerated in May due to energy-driven price increases during the conflict. However, uncertainty remains about how quickly oil traffic will normalize, as restarting facilities and reorienting tankers will take time.

Upcoming Events:

• Federal Reserve meets Wednesday; expected to hold rates at 3.50%-3.75% in new Chair Kevin Warsh's first decision meeting
• Bank of Japan meets Tuesday; expected to raise rates to 1%, a 31-year high
• Bank of England meets Thursday; expected to hold rates steady
• G7 summit begins in France
• SpaceX trading activity following Friday's IPO

Markets remain cautiously optimistic, though many deal details remain unclear and implementation challenges persist.