Expectations for a US-Iran agreement heat up; crude oil plunges by more than 5% as risk assets strengthen

On May 25, global financial markets saw clear shifts, driven by optimistic expectations regarding a US-Iran agreement. The market is upbeat that an agreement to restart the Strait of Hormuz shipping route and resume crude oil transport is close at hand, which has also supported a rebound in risk-asset preference.

Under the influence of these expectations, a series of notable changes emerged in financial markets. In early Asian trading, WTI crude oil prices fell sharply, dropping by more than 5%. At the same time, the U.S. Dollar Index (DXY) weakened in tandem.

Meanwhile, risk-sensitive currencies performed strongly. Among them, the Australian dollar and the South African rand led the gains against the U.S. dollar, suggesting a shift in market risk appetite.

This change also spilled over into the stock market. U.S. S&P 500 index futures rose, extending the strong momentum that nearly reached record highs last Friday, further underscoring the market’s optimistic sentiment.

Regarding progress on the US-Iran agreement, a senior U.S. official said on Sunday that the two sides are close to reaching an agreement to restart the Strait of Hormuz, but they are still negotiating key wording. Final approval may still take a few more days.

However, Iran’s semi-official Tasnim News Agency issued a warning, saying there is a risk that the draft agreement could fall apart. The main obstacle is the U.S. position on certain key clauses, particularly Iran’s demand to unfreeze its assets.

IG’s Sydney analyst Tony Sicamore said in a client report that the upward momentum in the market last Friday is expected to continue. Although the agreement still faces a possibility of collapse, for now, financial markets appear more inclined to believe the positive signals from related reports.

#美伊协议 # Market sentiment