Morning Bid: Peace now or maybe later?
By Anna Szymanski
Everything Mike Dolan and the ROI team are excited to read, watch and listen to over the weekend.
From the Editor
Hello Morning Bid readers!
We have a deal – sort of. The week kicked off with news late on Sunday that the U.S. and Iran had agreed on a memorandum of understanding that would officially end hostilities and reopen the Strait of Hormuz. Global equities cheered the news, and oil prices tumbled, with Brent slipping below $80 a barrel this week as it appeared tankers were starting to move through the critical waterway.
Even a hawkish shift from the Federal Reserve during Kevin Warsh's debut policy meeting on Wednesday was not enough to sideline stocks for long, as the prospect of lower energy prices buoyed investors globally. But now that the initial U.S.-Iran peace talks have been cancelled, this optimism looks like it may have been premature.
The MoU was signed by U.S. President Donald Trump and Iranian President Masoud Pezeshkian on Wednesday. The 14-point plan outlines an end to hostilities on all fronts and the resumption of toll-free traffic through Hormuz for 60 days, during which the more complex issues under discussion, like the future of Iran's nuclear program, will be hammered out.
Negotiations were set to begin today in Switzerland, but those talks were cancelled, raising questions about how quickly this conflict can be resolved.
While no one knows exactly what the final deal will look like – or even if we'll get a final deal – the preliminary agreement appears to leave Iran in a relatively strong position. That could mean more volatility ahead for oil prices.
Why? For starters, because Iran may maintain some control over Hormuz, in coordination with Oman, after the 60-day period ends, which could put upward pressure on prices over time. A deal that leaves Iran emboldened could also create problems for America's Gulf partners – meaning the deal might not be durable – giving shippers one more reason to remain cautious about returning to the narrow waterway.
At the same time, if the deal holds, Iranian oil could come back onto the open market just as Gulf producers are racing to restart facilities and ramp up production. That raises the possibility of an oil glut moving forward, which, of course, would put downward pressure on prices.
While crude prices rose early on Friday following news that the peace talks in Switzerland had been scrapped, traders are apt to wager that Trump will not backtrack on this deal. They made a similar wager about Trump's motivations during the war – and were proven right.
Looking forward, one of the key lessons for Gulf producers from the conflict is that they must diversify – or else. Overreliance on a single choke point will no longer be tenable, and we're already seeing a race to create or expand alternative export routes. The political, economic and strategic implications of this could reshape the region for decades to come.
Another lesson will be the benefit of having large reserves. China is a case in point. Its massive stockpiles enabled it to play a key role in keeping energy markets from truly entering crisis mode during the Hormuz shock, as it was able to reduce imports significantly. (Interestingly, it doesn't appear to have drawn down inventories as much as its drop in imports last month would suggest.)
Away from the Middle East, the other big event this week was Kevin Warsh's first policy meeting at the helm of the Federal Reserve. The interest rate decision surprised no one – the target range remained unchanged at 3.50-3.75% – but the messaging out of the meeting had a notable hawkish tilt. Almost half the members indicated that they expected a hike moving forward, and Warsh – who eschewed a dot-plot projection of his own – used his press conference to echo the policy statement's emphasis on delivering price stability.
Markets initially responded negatively to the announcement, with equities falling and Treasury yields rising. But that was quickly tempered on Thursday, with major U.S. indexes rebounding as the release of the MoU's terms raised the prospect of a flood of crude entering the market, weakening inflation pressures.
The other notable takeaway from Warsh's debut was the brevity of the FOMC statement. It came in at a mere 130 words and didn't include forward guidance. This suggests that we will likely have a much less chatty Fed moving forward. Will that create more or less volatility? That remains an open question, though there is an argument to be made that quality trumps quantity where central bank communication is concerned.
Warsh also announced a wide-ranging review of aspects of the Fed's operations, including its communications, data sources and inflation framework.
This was a busy week for central banks overall. The Bank of Japan on Tuesday delivered an expected quarter-point rate hike to 1%, a 31-year high. In remarks on Tuesday, BOJ Deputy Governor Shinichi Uchida highlighted the conundrum facing central bankers following the U.S.-Iran deal, welcoming the news but flagging uncertainty around the "pace of improvement" on oil flows.
Elsewhere, the Bank of England on Thursday voted 7-2 to keep rates on hold at 3.75%. Governor Andrew Bailey was also pleased to see an interim peace agreement in the Middle East but noted that there was "already some inflationary pressure in the pipeline". The BoE expects inflation to exceed 3.25% in the final quarter, up from 2.8% in May.
Meanwhile, UK markets will be closely watching the aftermath of an important by-election that returned Greater Manchester Mayor Andy Burnham to Parliament – paving the way for a bid to oust Prime Minister Keir Starmer.
Over in equities, SpaceX's torrid rise has hit a snag, with the share price of Elon Musk's company dropping by around 5% on Wednesday and 3.5% on Thursday – though it's still more than 30% higher than its IPO price.
Looking to next week, there will be more data on the inflation front, with the release on Thursday of May's U.S. personal consumption expenditures index – the Fed's preferred inflation gauge.
Ultimately though, what will matter more for the Fed is not what's in that report but what happens with the fragile peace in the Middle East.
For more data-driven insights on markets and commodities, check out Reuters Open Interest. You can learn:
• What could be next for Europe's gas market after it weathered the Hormuz shock?
• Are LLMs really that much better than smaller, cheaper models – and if not, what does that mean for the AI boom?
• What could the "Dieselgate" scandal tell us about the likely legacy of the Iran war?
• Is copper's speculative fever heating up again?
• Which industrial metal is trying to join the energy transition boom?
• Why have foreigners been fleeing Asian equities - and will they return?
• Why might the era of pure passive investing be over?
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Opinions expressed are those of the authors. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Anna Szymanski; Additional writing by Al Reed; Editing by Toby Chopra)
Copyright Reuters or USA Today Network via Reuters Connect.
This story was originally published June 19, 2026 at 6:41 AM.