A US-Iran ceasefire lowers oil prices and shifts Federal Reserve rate cut odds

Traders now assign a one-in-four chance of a US interest rate cut by year-end. This shift follows a two-week ceasefire in the Iran conflict, which included the reopening of the Strait of Hormuz, a passage that handles one-fifth of global oil trade. The move reduced oil supply disruption fears and sent Brent crude prices down more than 16% to near $90 per barrel.

Inflation expectations softened as a result, reducing the likelihood of Federal Reserve interest rate increases. The US Dollar Index weakened to a nearly one-month low, making dollar-denominated gold more attractive to buyers in other currencies. Spot gold climbed 3.1% to exceed $4,850 per ounce.

Fuel costs for airlines and cruise operators decreased, driving shares of American Airlines up 7.3%, Delta Air Lines up 6.8%, Carnival up 9.4%, and Norwegian Cruise Line up 8.1%. Energy stocks declined, with Exxon Mobil falling 6.2%, Chevron falling 5.4%, and Occidental Petroleum falling 7.8%.

As safe-haven demand declined, investors shifted toward risk assets. Nasdaq 100 E-minis rose 3.16%, S&P 500 E-minis rose 2.44%, and Dow E-minis rose 2.23%.