[MARKET ANALYSIS] The US-Iran MoU is now in effect after a virtual signing, but key risks remain heading into the 60-day negotiation period

TLDR:

• US President Trump and Iranian President Pezeshkian electronically signed the MoU to end the war with Iran.
• As a reminder, it was previously reported that officials of both countries would convene on Friday for an in-person meeting. There does not appear to be any breakdown of relations, with Iranian Foreign Ministry spokesperson Baghaei stating that it was signed digitally, so there is no need for a physical signing ceremony.
• Following the signing, the Strait of Hormuz will immediately be opened by the Iranians, whilst the US will lift its naval blockade. The Iranians have agreed not to develop or buy a nuclear weapon.
• Focus now turns to the beginning of negotiations between the US and Iran, initially slated for Friday, 19th June. However, Iran’s Baghaei stated that Switzerland talks with the US are not yet certain.

Key risks:

There are minor differences between the published texts from the respective countries. Alongside this, commentary from US/Iranian officials have been mixed, and has not always reflected what is inside the MoU. This raises key concerns heading into the 60-day negotiations.

• Lebanon: Iran frames the Lebanon issue as a guarantee of its sovereignty, whilst the US release refers to a halt of military operations. And despite the signing, Al Jazeera reported that Israeli military operations have continued in Lebanon, whereby Israel opposes the ceasefire terms.
• Strait of Hormuz: The US states that the Strait will remain safe and toll-free, whilst the Iranians go on to write that after a 60-day period, Iran and Oman will dictate future maritime services/administration of the Strait. This has also been reflected by Iranian Parliament Speaker and top negotiator Ghalibaf, who stated that, “the Strait will not return to pre-war conditions”. He added that “payment for services through the Strait of Hormuz has been established in the MoU”.
• The USD 300bln question: US and regional partners are to provide a “performance-based” payment worth at least USD 300bln for the reconstruction of Iran; the Iranian-released text appears to suggest the negotiations of this matter will be finalised within the 60-day period. President Trump and US officials have continually pushed back on the idea that the US will pay anything to the Iranians, so it remains to be seen how/who provides the payment.

The overarching risk is that if Iran and US cannot iron out a complete day (or mutually agree to an extension), then a resumption of the conflict can be expected. "We go back to bombing”, said US President Trump on Wednesday.