Markets started the week with noticeable relief. The trigger was news that the US and Iran had agreed on a declaration of intent that could be formalized in Geneva on Friday. The core of the draft is reportedly a 60-day window for further negotiations—flanked by a ceasefire and the prospect of reopening the Strait of Hormuz. Although similar reports in the past were ultimately not implemented, markets reacted strongly to the announcement: Brent fell by more than 4% at the start of the week to around USD 83 per barrel, and equity markets rose sharply. At the same time, yields in bond markets declined: With energy prices falling, inflationary pressure should also ease, which could leave central banks under less pressure to raise policy rates.
So far, so good—but hope is not certainty. No treaty text has been published so far, and it is unclear how much agreement there is between the warring parties on the key points of dispute. This raises several questions: How durable is the de-escalation? Which sanctions could actually be eased? Which frozen assets will Iran receive back, and when? And how robust is an agreement if the most difficult issues—from Iran’s nuclear program to the regional security order—are to be negotiated only over the coming 60 days? These uncertainties partly explain why gold traded higher alongside equities: Markets are pricing in better prospects, but not yet lasting peace.
What does all this mean for investors? In the short term, there are several reasons to expect the rally to continue: Falling oil prices ease inflation expectations, reduce pressure on central banks, and support risky assets. This could also broaden the equity rally through year-end; alongside technology stocks, more cyclical market segments could increasingly benefit from still-robust growth, fiscal policy stimulus, and less restrictive monetary policy prospects. For bonds, however, the picture is more mixed: Lower inflation fears help, but concerns about the sustainability of government debt are likely to continue preoccupying markets.
Energy supply is likely to remain a strategically interesting theme. Even if the Strait of Hormuz stays open to shipping this time, the crisis has again shown how fragile supply chains are today. As a result, the focus in many places is likely to remain on expanding energy and supply security—with investments in infrastructure, grids, storage, and resilient supply chains.
For investors, this means more short-term tailwinds for risk assets, but over the medium term, it still points to an environment in which quality, diversification, and real sources of income remain crucial. Investments in alternative assets, such as the expansion of strategic infrastructure, could offer attractive opportunities for investors with room in their portfolios for illiquid investments. Regardless of whether we see a brief pause or a longer ceasefire in the Middle East, such assets should continue to benefit from the expansion of strategically important infrastructure.
