The prospect of an imminent peace deal between Iran and the US, alongside easing oil prices, is poised to drive global equity markets higher today and alleviate pressure on central banks regarding interest rate hikes this week. While US President Donald Trump claimed an interim accord would be signed, Iran maintained that key points regarding the Strait of Hormuz, crucial for global energy supply, remain unresolved. Despite the optimistic headlines, markets show caution, with US futures pointing to modest gains and Australia’s ASX expected to open 0.4 per cent higher at 8853.
Oil markets have reacted more strongly, with Brent futures trading at their lowest levels since the conflict’s early days. Brent futures dropped over 3 per cent to settle at US$87.33 on Friday, and European gas prices slumped by as much as 8 per cent. Stephen Miller, an investment strategy consultant at GSFM, cautioned that expecting all headwinds from the Iran conflict to suddenly disappear is “way too optimistic,” noting that market pricing likely already reflects an eventual peace deal. Signs of increased shipping through the Strait of Hormuz have also contributed to the decline in oil prices.
The welcome easing of oil prices, having dropped approximately 30 per cent from their wartime peak, influences upcoming policy meetings at the US Federal Reserve and the Reserve Bank of Australia. The RBA is widely anticipated to keep the cash rate steady at 4.35 per cent on Tuesday, following recent hikes to curb inflation. While NAB, ANZ, and HSBC suggest the RBA’s tightening cycle is complete, Westpac still predicts further rate increases. Similarly, the US Fed is expected to maintain steady borrowing costs later this week.
Beyond monetary policy, investors are also monitoring SpaceX, which debuted triumphantly on the Nasdaq, closing up 19.2 per cent. SpaceX is a rocket, satellite, and artificial intelligence company. It designs, manufactures, and launches advanced rockets and spacecraft. The company is now valued at a substantial US$2.1 trillion. Mr Miller highlighted SpaceX as an indication of how structural themes like artificial intelligence contribute to overall market strength.
