Stocks and bonds saw a broad rally following news of de-escalating tensions between the US and Iran, which led to a significant drop in oil prices and allayed fears of accelerating inflation. S&P 500 futures increased by 0.5%, indicating a positive start to a week packed with crucial economic data and corporate earnings. Brent crude, a key global oil benchmark, tumbled as much as 7.3% to $81.55 per barrel after President Donald Trump cancelled a planned military strike on Iran to pursue a deal that could reopen the Strait of Hormuz.
Treasury yields declined across the curve, with the benchmark 10-year yield falling six basis points to 4.68%. This marks a retreat from its highest level since January. Alexandre Baradez, chief market analyst at IG in Paris, noted that the geopolitical news and falling oil prices were easing pressure on yields. However, he cautioned that underlying issues concerning bond yields, leverage, and Fed policy remain unresolved, suggesting that the stock market is not yet entirely clear of risks.
The yen surged sharply, then pared some gains, amid speculation of intervention by authorities to support the currency. This follows coordinated action between the US and Japan the previous week. Bloomberg’s dollar gauge consequently fell by 0.1%. Nick Twidale, chief market analyst at AT Global Markets, stated that a concrete peace deal or the reopening of the Strait of Hormuz could trigger strong relief rallies across markets, though he anticipates continued volatility, especially with AI trade dominating equities. Despite the recent dip, options markets still indicate greater concern for higher oil prices than lower ones, suggesting that a supply-driven price spike remains a more likely risk than a sharp decline in Brent.
