How will the U.S.-Iran memorandum reshape global asset valuations? How will core assets evolve going forward?

Islamabad Memorandum of Understanding

In the early hours of June 15, 2026, Pakistani Prime Minister Shehbaz Sharif and U.S. President Trump separately announced that the United States and Iran had reached a historic peace agreement. The Supreme National Security Council of Iran subsequently confirmed that the document, titled the 'Islamabad Memorandum of Understanding,' had been finalized and is scheduled to be formally signed in Switzerland on June 19. According to the disclosed draft memorandum, key provisions include: immediate and permanent ceasefire across all fronts (including Lebanon); full lifting by the U.S. within 30 days of its maritime blockade against Iran, with the Strait of Hormuz reopening to commercial shipping; suspension of sanctions targeting Iranian oil and petrochemical products, and unfreezing of Iran’s frozen assets—half of the USD 24 billion must be disbursed before negotiations commence; a commitment by the U.S. and its allies to submit an Iranian reconstruction package worth no less than USD 300 billion; initiation of 60-day final agreement negotiations covering nuclear issues, comprehensive sanctions relief, and economic reconstruction, with Iran reaffirming it will not develop nuclear weapons—the final agreement requires endorsement via a UN Security Council resolution.

Trump’s ‘Can’t Afford to Wait’: Inflation, Rate Hikes, and Market Pressures

The Trump administration’s urgency to finalize a deal reflects mounting economic and market pressures that are impossible to ignore. In May 2026, U.S. CPI climbed 4.2% year-over-year, returning core inflation to the '4%' range, while PPI recorded its steepest rise in three and a half years, with energy prices acting as a key driver. The ongoing U.S.-Iran conflict has not only pushed oil prices higher but also heightened expectations for Federal Reserve rate hikes—traders now assign over a 50% probability to a rate increase by year-end, while markets broadly anticipate that the upcoming Fed meeting will hold rates steady but adopt a more hawkish tone. Elevated oil prices, persistent inflation, and rising rate expectations collectively threaten U.S. equities, bonds, and the broader economy—a scenario the White House can hardly overlook. President Trump himself explicitly stated the agreement would guarantee permanent free passage through the Strait of Hormuz to ensure uninterrupted oil flows; his team even framed the deal as a 'birthday gift,' revealing a strong desire for a diplomatic breakthrough to alleviate domestic economic tensions. Additionally, persistently high U.S. Treasury yields, combined with fiscal and trade pressures, compelled Washington to make last-minute concessions—such as agreeing to lift the maritime blockade immediately rather than within 30 days—to secure the deal. These economic factors together form the practical foundation behind Trump’s stance that ‘waiting is not an option.’

Iran Does Not Want War: Trading Tactical Wins for Strategic Space

For Tehran, the memorandum is being framed as 'America’s failure and Iran’s comprehensive victory.' Iranian Deputy Foreign Minister Ali Bagheri Kani emphasized that the agreement was not based on trust in the adversary but on a risk-mitigation stance, asserting that Iran’s gains far outweigh its commitments. On core interests, Iran successfully secured the immediate lifting of the U.S. maritime blockade, unfreezing of assets, suspension of oil sanctions, and complete exclusion of its missile program and support for resistance groups from negotiations. It also compelled the U.S. to pledge non-interference in its internal affairs and withdrawal of troops from neighboring regions. Domestically, some voices argue that, under prolonged sanctions and military standoffs, avoiding all-out war and securing economic breathing room along with a more favorable external environment better serves Iran’s current national interest. Through this framework memorandum, Iran has not only stabilized the situation but also secured a clear pathway toward follow-up nuclear talks and sanctions relief—precisely reflecting its strategic calculus of 'not wanting war' while being willing to compromise.

Israel’s Intervention: Spoiler and Shadow Over the Agreement

Israel has consistently been the most prominent disruptor in the U.S.-Iran peace process. Just before the deal was finalized, Israel launched airstrikes on southern Beirut, prompting Iran to vow retaliation and pushing the talks to the brink of collapse. Trump publicly criticized Israeli Prime Minister Netanyahu for 'lacking rationality' and 'disrupting the peace process.' After the agreement was reached, Netanyahu explicitly informed Trump that Israel would not be bound by any Lebanon-related provisions in the U.S.-Iran deal, affirming that Israeli forces would not withdraw from Lebanon and would continue military operations against Hezbollah. Israeli officials further condemned the memorandum as 'endangering Israel’s security interests,' arguing that Iran gaining access to unfrozen funds and the deferral of nuclear discussions were compromises Israel could not accept. This unilateral interference and refusal to cooperate have introduced significant uncertainty into the implementation of the memorandum and the negotiation of a final agreement.

Global Capital Markets: Equities Rebound, Bonds Benefit, and Commodities Experience Sharp Volatility

The U.S.-Iran memorandum of understanding had an immediate impact on global markets. Equity markets saw Asian stocks rise first, followed by higher U.S. stock index futures, as risk appetite quickly recovered. Investors broadly expect reduced geopolitical tensions to ease energy costs and improve corporate earnings prospects. Bond markets benefited from falling inflation expectations, with analysts noting that lower energy prices could help soften inflation stickiness, creating a more favorable environment for long-duration bonds. Institutions like Bank of America recommended buying bonds on dips. Commodity markets reacted most dramatically: international oil prices plunged over 4%, with WTI briefly touching $80 per barrel—the lowest level in two months—and Brent crude falling to around $83. Meanwhile, precious metals such as gold and silver surged sharply, with COMEX gold jumping more than 2% to surpass $4,300 per ounce and COMEX silver strengthening in tandem, as the safe-haven discount accumulated during heightened geopolitical risk rapidly unwound. In foreign exchange markets, the dollar weakened while non-dollar currencies like the euro gained support, as capital rotated from safe-haven dollars into risk assets.

How Will Core Assets Evolve Going Forward?

Crude oil:

In the early hours today, the U.S. and Iran announced a memorandum of understanding, with Iran releasing a 14-point summary of the agreement covering regional ceasefire arrangements, freedom of navigation through the Strait of Hormuz, and asset unfreezing. Crude oil markets opened sharply lower by 4% in response. However, the removal of this overhang does not equate to full reconciliation, and close monitoring remains essential. First, geopolitically, attention should focus on how both sides implement the agreement. Over the weekend, the U.S. and Iran offered divergent interpretations of key terms, raising the likelihood of disputes during execution—such as one side claiming compliance while the other alleges breach. Additionally, it is crucial to watch whether Israel undertakes actions that could derail the agreement’s progress. Second, on fundamentals, the key focus will be the supply-demand rebalancing dynamic. Per the agreement, Iran will arrange for the Strait’s reopening within 30 days, but after roughly 100 days of blockade, restoring transit through the Strait—and subsequently Middle Eastern production capacity—will take time. Meanwhile, the Northern Hemisphere is approaching peak summer demand. Since rumors of U.S.-Iran talks emerged, spot markets have shown strong caution, with buyers adopting a wait-and-see stance. If the agreement is successfully formalized and Strait navigation resumes, purchasing activity is expected to gradually recover. In summary, during the upcoming U.S.-Iran nuclear negotiations, friction between the two sides may continue to cause market volatility, and we must also closely track fundamental developments, particularly how summer demand supports near-term prices.

Precious metals:

On Monday’s Asian session, precious metals rallied strongly, primarily boosted by market expectations of a provisional U.S.-Iran agreement. After more than two months of negotiations, the U.S. and Iran announced on June 14 an accord on ceasefire and free passage through the Strait of Hormuz. The memorandum of understanding is scheduled to be signed in Switzerland on June 19, with a 60-day window set for nuclear talks. The retreat in geopolitical risk premium pushed Brent crude below $85 per barrel. Falling oil prices dampened inflation expectations and reduced the perceived need for Fed tightening. Federal funds futures now price in 0.635 rate hikes for the year, down from one hike last week. Both the U.S. Dollar Index and Treasury yields declined, with lower real rates supporting valuation recovery in precious metals.

However, uncertainties persist in U.S.-Iran relations, which may cap short-term upside potential. According to Iran’s disclosed 14-point memorandum, the U.S. pledged to lift its maritime blockade, suspend oil sanctions, and withdraw troops. Yet both sides remain inconsistent on key details such as the amount of funds to be unfrozen and specifics of troop withdrawal. Final terms will only become clear upon signing on June 19. In the near term, gold faces resistance in the $4,400–$4,500 range.

Overall, the most challenging phase for precious metals in the macro environment may have passed. With geopolitical tensions between the U.S. and Iran easing marginally and the liquidity shock triggered by SpaceX’s listing dissipating, the allocation appeal of precious metals is rebounding. Precious metals could bottom out and stage a recovery; investors should closely watch the Federal Reserve’s interest rate decision early Thursday for forward guidance on monetary policy.

Equity Indexes:

Since mid-May, recurring geopolitical tensions and rising U.S. Treasury yields have drawn increasing market attention, causing inflation expectations to exert broader influence across asset classes. Against this backdrop, China’s domestic fundamentals have shown marginal weakening, making the tech sector’s supportive role for equity indexes increasingly evident and further reinforcing structural market dynamics. Subsequently, robust U.S. employment data prompted several Fed officials to adopt a hawkish tone, stoking market expectations of additional rate hikes. Under valuation pressure, these structural trends face challenges, and equity indexes are under significant correction pressure. However, with geopolitical tensions temporarily easing and last week’s U.S. inflation data coming in as expected—effectively exhausting bearish catalysts while risk appetite improves—equity indexes are poised for a rebound.

Investors should remain attentive to two key uncertainties:

1) At this week’s FOMC meeting, close attention should be paid to incoming Chair Warsh’s policy stance, communication approach, and the previously mentioned policy framework. Liquidity expectations will remain subject to change until the meeting concludes.

2) Last week, after consecutive sessions of declining trading volumes and adjustments in A-shares, the market showed signs of rotation from high-valuation to low-valuation stocks. Accompanied by a sharp surge in volume and basis repair, these structural features indicate that market participants have expressed a clear desire for portfolio rebalancing. However, with inflationary pressures significantly easing, growth-oriented and small/mid-cap stocks—which are more sensitive to liquidity conditions and were previously under pressure—could become active again.

The above commentary is provided by analysts Bian Shuyang (License No. Z0012647), Xia Yingying (Z0016569), Gao Xiang (Z0016413), and Assistant Analyst Shen Weiwei (F03140197). The views expressed are for reference only and do not constitute investment advice. The market involves risks; please invest prudently.

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