Markets are feeling relief as the US and Iran agree to a ceasefire in their growing ‘deterrence’.
Stock futures rallied on Sunday evening after the US and Iran appeared to be backing away from a weekend of heightened tensions in the Persian Gulf.
Futures tied to the Dow Jones industrial average rose 128 points, or 0.25%. S&P 500 futures rose 0.38%, while Nasdaq futures added 0.35%.
But the energy markets were still slightly disturbed as the mere threat of continued fighting near the Strait of Hormuz threatened the stability of shipping through the critical chokepoint.
US oil futures rose 0.33% to $69.46 a barrel, while Brent crude was down 1.1% to $71.97.
Sources told Axios that the two sides agreed to cease hostilities and meet in Qatar on Tuesday to resolve the dispute over the Strait of Hormuz.
Earlier on Sunday, Iran launched new attacks on Kuwait and Bahrain, while threatening to “completely halt” peace talks. It continued a tit-for-tat cycle of retaliation after US airstrikes punished the regime for targeting commercial ships with drones.
The renewed hostilities came as Iran seeks to block another route through the US-protected waterway and bypass a Tehran-backed channel aimed at normalizing its control over the narrow waterway.
President Donald Trump has accused Iran of violating a two-week-old ceasefire agreement and reiterated many of his threats, although he has also expressed reluctance to resume hostilities.
“It may come to a point where we can no longer think, and we will be forced to finish militarily the work we have successfully started,” he wrote on Truth Social. “If that happens, the Islamic Republic of Iran will cease to exist!”
Meanwhile, the US Navy seems to be making a point of showing that the alternative route is still safe, as Gulf traffic data on Sunday revealed dozens of tankers crossing the road with their transponders on.
But Iranian observers noted that the regime was forcing the US into an escalating trap over the Strait of Hormuz that could lead to more wars.
“For the US, the fact that the Oman route could be blocked brings a big conclusion: either the US escalates or gives the IRGC control of the Strait of Hormuz. The logic is that there is no way that will happen, so the escalation will continue,” HFI Research wrote in X.
On the other hand, Tehran does not budge from its position that border control rests with Iran. Earlier this month, it created the Persian Gulf Strait Authority and suggested that ships would have to pay a fee to enter Hormuz.
Foreign Minister Abbas Araghchi said on Sunday that a memorandum of understanding signed by the US and Iran gives the regime the exclusive right to operate vehicles.
“The management and full recovery of marine vehicles in the Strait of Hormuz is the responsibility of Iran,” he said, according to state media. “No other country or organization has responsibility or authority in this matter.”
Meanwhile, investors are looking for a rebound in the holiday-shortened week after tech stocks led to deep selling last week.
As the US celebrates Independence Day on Friday July 3, the Labor Department’s monthly jobs report will come out on Thursday, a day earlier than usual.
Wall Street expects June payrolls to rise by 118,000, down from May’s gain of 172,000, and the unemployment rate to remain steady at 4.3%.
