Markets react to US-Iran ceasefire MOU, with oil down 4% and gold hitting $4,300. BOJ rate hike path remains intact amid geopolitical developments.
US-Iran MOU Sparks Risk-On Sentiment
The US and Iran agreed to a 14-point memorandum of understanding (MOU) on Monday, with formal signing scheduled for Friday in Switzerland. The deal, announced by Pakistan’s PM Shehbaz Sharif, includes an immediate ceasefire across all fronts, suspension of oil sanctions, and unfreezing of $12bn in assets. However, critics argue the terms favor Tehran, excluding missile programs and proxy networks from negotiations while demanding a $300bn reconstruction fund from Western allies.
Market Reaction: Oil Down, Gold Up, Dollar Weakens
Risk assets rallied on the news. Oil prices fell 4% as the Strait of Hormuz reopening signal eased supply concerns. Gold surged above $4,300, buoyed by Singapore’s removal of a 5% cap on physical precious metals investment for funds and family offices. The USD weakened in early Asia trade, while the Nikkei hit a record high and South Korean equities jumped 5%.
BOJ Rate Hike Path Intact Despite Geopolitical Developments
A former Bank of Japan (BOJ) economist noted the Iran deal would not derail the central bank’s planned rate hike to a 31-year high on Tuesday. The BOJ’s policy decision remains the week’s key focus, with Governor Ueda’s press briefing pending amid hospitalization reports.
Geopolitical Risks Persist
Israeli PM Netanyahu stated Israel would not comply with Lebanon ceasefire provisions, signaling potential conflicts with the MOU’s framework. This raises doubts over the deal’s durability ahead of Friday’s signing. Meanwhile, PBOC set the USD/CNY reference rate at 6.8088, slightly above estimates.
Implications for Traders
The DXY faces downward pressure amid improved risk sentiment, though volatility may persist if the Iran deal unravels. Gold’s rally highlights structural demand from regulatory changes, while oil’s pullback reflects easing Middle East tensions. Traders should monitor BOJ policy signals and geopolitical developments in Lebanon for near-term cues.
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