It all comes down to this. After agreeing on a two-week ceasefire, it now boils down to negotiations between the US and Iran to see what becomes of this temporary truce. There have been a lot of mixed messages since the start of the week but all of that won’t matter if we get positive news from talks in Pakistan today or during the weekend.
For now, markets are keeping calmer still but very much on edge amid the fragile truce ahead of talks. Let’s take stock of the situation as we look to what we can expect when the two sides sit down.
- Trump announced a two-week ceasefire, conditional on talks and Iran reopening the Strait of Hormuz
- Iran confirms the ceasefire, reaffirming that they have put forward a 10-point proposal
- The US says that they are negotiating based on a 15-point proposal instead, with “many terms already accepted”
- Iran refutes that and says that three terms of the ceasefire agreement have already been violated
- That especially when it comes to Lebanon, with Israel having its own agenda despite US promises
- Trump threatens Iran with more military strikes if there is no deal and if the Strait of Hormuz remains closed
- Iran then denies wanting to send a delegation to Islamabad for talks
- The US camp continues to reaffirm that talks will go ahead and are expecting further developments
If you look past all the noise, there is one thing that is clear. US president Trump wants to de-escalate here and he really wants to tone down tensions so as to pull back from the conflict. That as he wants to find a way to allow for the Strait of Hormuz to reopen most importantly. And for broader markets as well, that is the most pertinent issue in this whole war.
Trump already is needing to face everything he hates in markets due to the conflict. If not for his ceasefire declaration, we’re seeing higher oil prices, a falling stock market, a stronger dollar, higher bond yields, and more conviction for the Fed to not cut interest rates. Those are all the things he loathes, and they are all happening all at once.
To rub salt in the wound, surging energy prices is making it tough for the US consumer – not least with tariffs – and that is affecting his voting support ahead of the US midterms later this year.
So, there is a lot at stake here for Trump.
As such, there is a strong likelihood that we can expect the US to want to find some ground to work with to bring this over the line. The only issue is how can Trump angle that to sell a “total and complete” victory back home? Knowing him, he will definitely find a way regardless.
And that leaves us with two main questions after that. The first being will Israel be willing to just let the conflict die off? After all, they have their own agenda to push and have been seizing the opportunity to do so in recent weeks. The second and perhaps most importantly, will Iran continue to run a tight ship on control over the Strait of Hormuz? No pun intended there.
The latter is arguably the most important thing for markets. And it is also Iran’s trump card in negotiating with the US this weekend. Again, no pun intended (okay, maybe). If there is only to be a more limited reopening of the strait, that will be a problem for markets still.
And I can imagine that to be the case unless the US does give in to some terms to appease Iran. The big sticking point is on uranium
