Expectations of a framework agreement between the US and Iran aimed at ending the Middle East conflict continued to drive a wave of gains in the markets. The Dow index in New York reached record levels, technology stocks surged sharply, and the Nasdaq posted its strongest daily performance since late March.
Optimism in the markets pushed oil prices down and led to a retreat in bond yields. This early-week sentiment raised questions about how much war-driven inflationary pressures will influence central banks' agendas.
Trump Says Agreement Has Been Signed
Donald Trump stated at the G7 Summit in Évian-les-Bains, during a meeting with French President Emmanuel Macron, that the agreement had been signed. Trump mentioned that the strait was partially opened and ships had begun to pass through, with full passage expected by Friday.
The official signing is anticipated to take place on Friday in Geneva. Trump said he was unsure if he would attend the ceremony, adding that US Vice President J. D. Vance would represent the US instead.
Vance noted that many details still need to be clarified in the agreement but expects the Strait of Hormuz to remain open long-term without transit fees. He also stated that if Iran does not provide the desired long-term commitments on its nuclear program, they are under no obligation to offer anything.
The full details of the agreement are expected to be announced following the official signing on Friday.
Oil Prices Fall, Markets Breathe a Sigh of Relief
Crude oil prices dropped about 5% on Monday in New York. In Asian trading, prices began to stabilize on Tuesday morning.
The decline in yields was linked to easing concerns over the economic impact of the war. However, investors are also monitoring the possibility that monetary policy decisions may not become easier due to the delayed effects of inflation.
Central Banks Face a Busy Week
This environment has made a series of central bank decisions later in the week even more critical. The Bank of Japan is expected to raise interest rates to a 30-year high.
BOJ Deputy Governor Shinichi Uchida will lead the post-decision press conference due to Governor Kazuo Ueda's illness. The Reserve Bank of Australia is expected to pause after three consecutive rate hikes.
In the US, new Fed Chair Kevin Warsh will preside over his first meeting. No interest rate changes are expected, but the guidance provided will be closely watched.
Major Moves in Technology and Media Sectors
The easing rally also impacted the technology sector. SpaceX shares rose another 20% on their first full trading day, with the overallotment option from the IPO being exercised.
This move increased the company's IPO proceeds to $85.7 billion and pushed its market value above $2.5 trillion. Meanwhile, Nvidia is reportedly preparing a bond issuance of at least $20 billion, marking its first entry into the debt market since 2021.
In media, Fox Corp. agreed to acquire Roku for about $22 billion. The company plans to finance the cash portion of the purchase with its own funds and new debt; a $12 billion loan has been secured for the deal.
