Rise and fall

Daily update

The announcement of an Iran-US deal (to be signed on Friday) has supported risk markets and allowed oil prices to fall moderately. The deal comes before strategic petroleum reserves were exhausted, limiting the economic damage from the war. Iran will not toll shipping through Hormuz for 60 days—after that it is not clear, but tolls are not likely to be a major economic cost.
Hormuz is likely to reopen slowly, and ships (and their insurers) may not be rushing to sail through. The extent of war damage to oil infrastructure is unclear. However, without returning to pre-war price levels, the inflation impulse from oil should fade. Without second-round effects having emerged, this emphasizes the benign underlying inflation position (and stresses the extent of the ECB’s recent policy error).
The regional status of Iran has risen, and of the US has fallen. That is relevant when considering post-war spending. Fiscal economic support, reconstruction, and rearmament are all required. Money will come from petrodollars and sovereign wealth funds. Where it is spent is more interesting (it may skew away from the US, toward goods and equipment from Europe and Asia).
The calendar is quite uninteresting. Lagarde and Nagel of the ECB both speak. German wholesale price data is due.