[MARKET ANALYSIS] US-Iran agree a framework deal to end the war; Strait to be reopened, but risks remain ahead of the signing on 19 June

TLDR:

• The US and Iran have reached a framework peace agreement; the US will lift its naval blockade, Iran will reopen the Strait of Hormuz. However, a full text has not yet been released, which has stemmed some uncertainty on a few key points.
• The final agreement is expected to be signed off on Friday, 19th June 2026, in Switzerland.
• Markets are risk-on following the initial reports of the deal; Equities firmer, yields, DXY and crude lower.

What we know so far:

• US and Iran will meet a number of times this week; AFP reported that the pair will hold preparatory talks in Doha.
• As it stands, there is no official text release from either side. However, Iran’s semi-official Mehr News reported the details of the 14-article draft agreement. Click here for details. As a reminder, last week, Mehr News reported the previous draft agreement, which was heavily pushed back by President Trump. As such, markets will be attentive to any Western/official Iranian updates.
• Both sides have declared an immediate and permanent termination of military operations on all fronts, including in Lebanon.
• The Strait of Hormuz will be reopened immediately, whilst the US will dismantle its naval blockade of Iranian ports within 30 days.
• US will commit to discussing the release of frozen Iranian funds; a US official suggested that any release of Iranian funds is tied to a pay-for-performance deal.

What remains uncertain:

• The nuclear issue has been pushed back into the upcoming 60-day negotiating process. Trump said they are going to get Iran’s nuclear dust, which could be over a 1-2 month period. He warned that if they cannot reach a nuclear accord, then the US would resume strikes on the region. The Mehr News draft appears to only reiterate that Iran will not produce nuclear weapons.
• Trump claimed that passage through the Strait would be “toll-free”, whilst Iran’s Mehr News suggested it would be under “Iranian arrangements”.
• Iran noted that the cessation of military operations includes Lebanon. It has been reported that PM Netanyahu told President Trump that Israel is not bound by the US-Iran deal, and will not withdraw from the region. Other senior officials have also echoed this.
• Iran’s Deputy FM said that negotiations will begin after the US releases frozen Iranian funds; though, this was pushed back by a US official who stated it was a pay-for-performance deal.

Market Reaction:

• Equities: APAC stocks rallied following the agreement; Nikkei +5%. The positivity has also filtered through into European and US equity futures (STOXX 600 +1% / NQ +2%)
• FX: G10s broadly firmer against the softer USD; Antipodeans and CHF lead. Interestingly, USD/JPY sank beneath the 160.00 mark, to trough at 159.73, before gradually reclaiming that level. Senior strategist at Daiwa Securities said, “given the drop in oil prices, the risk for accelerating inflation may weaken”.
• Fixed: Yields are lower across the curve, dragged by lower energy prices; there is a clear bull steepening.
• Commodities: WTI and Brent slumped, with the latter now -4.5% and trading just above the USD 83/bbl mark. ING noted that infrastructure/logistics flow could take some time to restart. The firm also added that inventories and stockpiles will take time to rebuild, “which should keep prices supported even as flows gradually resume”.