US-Iran Peace Agreement Prompts Stock Rally, Leaves Some Investors Skeptical and Questions on Speed of Resuming Oil Production

"Asian stocks rallied Monday while oil prices tumbled," reports CNBC, "after the U.S. and Iran agreed to a peace deal aimed at ending nearly four months of conflict..." The strongest reaction was seen in energy markets. U.S. crude oil futures for July delivery were down 4.77% to $80.83 per barrel by 8:27 p.m. ET. Brent futures, the international benchmark, for August delivery traded about 4% lower to $83.77 per barrel. Asian equities surged. South Korea's Kospi jumped 5.1%, Japan's Nikkei 225 climbed 3.6%, and the broader Topix advanced 2.6%... The U.S. dollar index weakened 0.32% to 99.483, while the yield on the benchmark 10-year Treasury note fell 5 basis points to 4.423%, suggesting that investors were dialing back inflation concerns on easing energy prices. "The most immediate implication is a repricing of the inflation risk premium that markets have been carrying since the Strait closed," said Billy Leung, investment strategist at Global X ETFs... Besides safe-haven Treasurys, gold also rose. "Gold is the interesting outlier here," Leung said. "In a clean risk-on trade, gold should be selling off as the geopolitical premium unwinds, but it is holding bid around $4,300, which tells you the market is not fully trusting the deal yet." Spot gold prices were up almost 2% at $4,302.19 per ounce. That skepticism reflects lingering uncertainty around the agreement, which remains unsigned and subject to implementation risks. [Josh Gilbert, lead Asia Pacific analyst at trading platform eToro] cautioned that "the deal isn't actually signed until June 19th, the details are still thin, and this conflict has shown more than once that headlines can turn on a dime." Analysts at Commonwealth Bank of Australia also stressed that the oil outlook hinges on how quickly shipping and production can normalize. Vivek Dhar, head of commodities and sustainability research at CBA, expects Brent to fall to around $80 a barrel by year-end, assuming the Strait remains open and exports recover. However, he warned that damage to refining infrastructure, the presence of sea mines and uncertainty over tanker traffic could slow the return to normal operations. Even so, he said markets are likely to take comfort from the prospect that oil flows need only recover to around 60%-70% of pre-war levels to restore expectations of a global supply surplus. For investors, the biggest implication will likely be what cheaper energy means for inflation and central banks. Lower oil prices ease pressure on households and businesses while reducing the risk of a broader inflation resurgence just as major central banks enter a busy week of policy meetings. UPDATE: "A US official is rejecting Iran's assertion that it will receive billions of dollars in frozen funds before a planned 60-day negotiating period begins following Friday's signing of an agreement," reports CNN: The pushback came after Iran's deputy foreign minister, Kazem Gharibabadi, said the next phase of talks would depend on Washington first fulfilling several obligations, including releasing Iranian funds frozen abroad. The differing accounts underscore a significant gap between how the United States and Iran are describing what must happen before the next round of negotiations can move forward.

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