A report said the US and Iran have agreed a 60-day memorandum of understanding to extend the ceasefire and begin talks on Iran’s nuclear programme, while President Donald Trump has not yet given final approval. The account cited two US officials and a regional source involved in mediation efforts.
Markets reacted quickly. The US Dollar (USD) extended its decline after the headline, while stock markets pared early losses and moved into positive territory on the day. A related currency table showed the USD was the weakest against the New Zealand Dollar, and a heat map set out percentage moves among major currency pairs based on the chosen base and quote currencies.
Implications For Oil Markets And Volatility
We see this potential US-Iran agreement as a major headwind for crude oil prices. A deal could ease sanctions and bring more Iranian supply to the market, which would likely push prices lower. Historically, the 2015 nuclear deal saw oil prices drop by over 20% in the six months following its announcement.
Given that WTI crude is currently trading around $79 per barrel, we are considering buying put options on oil futures expiring in July and August 2026. This strategy allows us to profit from a potential slide in WTI prices below the $75 mark. The uncertainty around a final sign-off makes options a better tool than shorting futures directly.
The biggest immediate impact will be on market volatility, which we expect to decline sharply if a deal is confirmed. The VIX index, currently trading near a relatively low 13, could break below 10 for the first time this year on reduced geopolitical risk. We should consider strategies that profit from this, such as selling VIX call options.
Outlook For Currencies And Equities
We also anticipate the US dollar will continue its slide as its safe-haven appeal diminishes. The Dollar Index (DXY), already down to around 104.5, could test its year-to-date lows in the coming weeks. We are looking at shorting the dollar against commodity-linked currencies like the Australian dollar, which benefits from a risk-on mood.
For equity markets, this news is decidedly bullish, providing a reason for the S&P 500 to push further into record territory. We believe sectors sensitive to energy costs and global trade, like transportation and industrials, will see the most significant upside. We are positioning by buying call options on major airline and shipping ETFs for the next quarter.
